Will Boston’s mayor kill the city’s golden goose? That’s the question on the lips of many in the development community as Michelle Wu lays out her proposals to increase development fees and affordable housing requirements.
With public hearings coming in January, expect a flood of comments from the real estate industry about how the proposals, will impact development. But the bottom line is: development of all stripes will be getting more expensive.
The mayor’s argument is that the city desperately needs more affordable units – no argument there – and requiring developers to build more in their projects and pay more into a trust fund that bankrolls primarily-affordable units is the best tool in her arsenal.
Much more analysis of Wu’s proposals will be needed before judgement can be passed on them. It’s a mark in their favor that Boston Planning & Development Agency Director Arthur Jemison and Chief of Housing Sheila Dillon crafted the plans only after consulting many in the industry.
And some aspects are impressively creative, like leaning on federal and state housing vouchers to fund most of the increase in the share of affordable units a development must create. Not two, but three birds are killed with one stone. Voucher-holders – illegally discriminated against by some landlords – get a reliable pool of units to rent. Developers still get to earn more-or-less market rents on these units without having to go through the sometimes-absurd hoops needed to secure financing for affordable housing construction. And Wu’s team gets to chalk up a political win. A proposal unveiled by housing advocates this month could boost this idea even further.
But several market risks could mean Wu’s proposals wind up making projects unaffordable and pushing development to the suburbs when the climate emergency demands more densification in place of sprawl.
First, much of the city’s life science boom was fueled, in effect, by “funny money” from investors searching desperately for yields in an unusually low interest-rate environment. That money is now drying up and it’s an open question whether it can be relied on to make projects pencil going forward.
Second, construction materials supply chains are in turmoil and could wind up with too much unsold product after years of shortages. The last housing crash forced many firms in this space out of business, letting the remainder hike prices.
Lastly and most intangibly will these moves, plus Wu’s declared intent to bring a rent control measure forward next year, irredeemably tarnish Boston’s brand among the investors whose money is needed to get developments off the ground in the first place?
We hope the city councilors who will ultimately need to vote pay close attention to the real estate industry’s reaction and not, as some in Boston seem want to do, reject these statements as mere lies from latter-day J.P. Morgans.
Letters to the editor of 350 words or less may be submitted via email at firstname.lastname@example.org with the subject line “Letter to the Editor,” or mailed to the offices of The Warren Group. Submission is not a guarantee of publication.