New housing in Boston

Sadly, this is the type of housing being built in Boston:

The penthouse in Millennium Tower Boston just went on the market for $37.5 million, among the priciest properties in the state. Due to open in summer 2016, the 625-foot skyscraper will be the first ultra luxury high-rise to be constructed amid a building boom that is attracting an influx of wealthy international buyers and billions of dollars of investment.

The claim is that somehow this housing will trickle down to the rest of us, but this is one reason it probably won’t:

“The wind is at their back,” said Blair, the firm’s president. In addition to local residents, she said, luxury units in Boston and other US cities have become a popular investment for international buyers looking for a place to store their cash.

With real estate prices rising, Boston is seen as a safe haven for those buyers, as well as an increasingly attractive place to own a slice of the skyline.

Mayor Walsh has said some good things:

Boston needs to build 53,000 housing units by 2030 to keep pace with rapid population growth that is already increasing prices and squeezing out low- and middle-income residents, according to a city report.

The report by Mayor Martin J. Walsh’s administration, previewed by city officials on Wednesday, calls for $21 billion in private and public construction that would increase Boston’s overall housing stock by 20 percent over the next two decades.

Walsh wants to limit further real estate price inflation by creating 20,000 units for middle-income residents, largely built by private developers. His plan would loosen zoning restrictions and provide financial incentives to encourage construction of taller buildings in outlying neighborhoods. It would offer developers tax incentives and other assistance to help reach that goal.

He also wants to increase annual city funding for low-income housing by 65 percent, to $51 million, and require developers of downtown luxury complexes to pay more and build affordable units at other locations.

Sounds ok, but there are some problems–one note the amount targeted for low-income housing and notice it’s not much more than the one condo for sale at the new luxury place. You can see the full report is here. In it we get:

The City is defining its middle class as households with incomes between $50,000 and $125,000. The range begins at $50,000, reflecting Boston’s median income of $53,000. Household income of $50,000 is also the level where eligibility for most government-assisted housing ends, so market-based solutions become critical.
Boston still has a sizable middle class, representing 34 percent of its households. Compared to the region, however, Boston’s middle class is smaller, younger, and has a lower homeownership rate (43 percent) compared to the region (69 percent).
Middle class households face unprecedented difficulties in accessing the market. Today, a household with an income at the midpoint of middle class range ($80,000) can only afford the bottom 23 percent of the homeownership market in Boston, and is priced out of seven of Boston’s 15 neighborhoods. That same $80,000 income is currently enough to afford 51 percent of the rental market; however, rents are rising at five times the rate of income, making the rental market increasingly unaffordable as well.

So, they are defining middle class as households that make more than the median–seems a funny way to define it. In any case, remember that when you see tables such as:

Production Source New Units
City Assisted Low-Income: Non-Senior 6,500
City Assisted Low-Income: Senior 1,500
Middle-Income Inclusionary/Assisted 4,000
Middle-Income Unassisted: Non-Senior 11,000
Middle-Income Unassisted: Senior 2,500
Middle-Income Units Released via Dorm Production 5,000
Market-Rate Unassisted: Senior & Non-Senior 18,500
Market-Rate Units to Support Market-Stabilizing Vacancy Rate 4,000
Total 53,000

You might notice that 8000 are for ‘low-income’ households which make up about 50% of households in Boston right now. Compare that to the 22,500 for market-rate (read luxury) units.

That’s better than what we’ve been getting:

Without financial incentive, the mayor’s report concludes, developers will continue to focus on building luxury complexes that command the highest rents and offer the best returns. More than 8,000 new apartments are expected to be completed in Boston during the next three years, but the vast majority are expected to rent for $3,500 a month or more.

but still not good enough. And now let’s look at the mayor’s comments to another luxury building:

In a statement, Walsh praised AvalonBay’s project. “We are getting the mix of housing that we really need, and it’s coming in the form of a signature high-rise that will be a great addition to the area’s historic buildings and all of our new parks,” he said.

Yeah, I’m not holding my breath that Walsh will actually follow through on his plan. If you go to the BRA’s page listing affordable units available you will find there are none.

‘Affordable’

I’m on the BRA’s affordable housing email list. Here’s the latest:

Unit Size: Three studios, three one-bedrooms.
Price: $1,724/month for studios, $2,008 per month for one bedrooms.
Maximum Household Income: One person HH: 120% at $79,300; two person HH, 120% at $90,600; three person HH, 120% at $101,950.

That’s right, a studio that costs $1724 is listed as ‘affordable’. I guess I won’t be living in Boston in the near future.

Boston celebrates having less affordable housing

I’m always mixed about projects like this:

The Old Colony public housing development, an icon of the old South Boston, is undergoing a dramatic facelift, and officials celebrated completion Tuesday of the first phase of the redevelopment, including a large new apartment building, a learning center with a library branch, and rows of three-story townhouses that Councilor Bill Linehan said “look like they should be in a seaside resort.’’

On the one hand, public housing has been a mess for a long time and anything that improves its conditions is a good thing. Also, mixed housing is better than a concentration of poverty. On the other hand, these redevelopments always seem to have a common denominator–they have less affordable housing:

“But times are changing for the better,’’ said Nick Collins, a state representative from the neighborhood. “It’s less dense, there’s more space, and the quality of life is going to drastically improve on day one.’’

Phase one includes 116 new affordable rental units, which replace 164 distressed units that were leveled along Columbia Road and Old Colony Avenue.

I’m sure this is great for the people who get the new units, but what happens to all the others who are trying to get into housing they can actually afford?

Boston housing

The Boston Globe has an article about all the new rental units being built in Boston. This is a great thing according to them, of course:

The heightened demand for rentals goes beyond downtown Boston, with large new complexes also going up in Somerville, Cambridge, Cohasset, Weymouth, Andover, and other municipalities. Real estate specialists said the increasing supply will eventually help to moderate prices.

“If I’m a renter, I’m encouraged by this,’’ said Gregory Vasil, chief executive of the Greater Boston Real Estate Board. “It’s been a very long time since we’ve really produced a lot of apartments like this, and the increased supply will help address the problem’’ of ever-rising rents.

Real estate specialists said the current market is particularly unusual because it is fueling rental construction at all price points, from luxury units in the Back Bay and downtown, to mid-priced apartments in the suburbs, to scores of affordable homes being built in Chinatown and at the Charlesview Residences in Cambridge.

There are two problems. First, developers have been saying that new construction will bring prices down for 20 years (ever since statewide voters decided that Boston, Cambridge, and Brookline shouldn’t have rent control) and it hasn’t happened yet:

In the quarter that ended Sept. 30, average asking rents in Boston climbed to $1,773, making the city the fourth most expensive rental market in the country, according to Reis Inc., a real estate research firm.

That is putting more pressure on the apartment market, causing average rents to increase by $124 per month, or 7.5 percent, since 2007, according to Reis.

Second, the reason the developers have to say that the new construction will eventually bring down rents is that almost all of it is either ‘market rate’ or ‘luxury’, in other words expensive. Even the affordable housing is problematic, it can apply to units that are directed to people making up to 120% of the median income of the Boston area and a 1 bedroom unit in that group is $2093 a month–I don’t think many people would consider that affordable.

In some sense, this is an update of this earlier post. I tried to give a new breakdown of affordable housing by income limit, but there is no affordable housing rentals available at either the BRA or the DND. Yeah, the city of Boston is doing a great job keeping Boston affordable.

Affordable housing and investing

This is interesting:

However, Google and other  companies know something that others don’t: Rental and low-income housing projects are now among the most lucrative investments available, with  businesses from Apple Inc. to Sherwin-Williams Co. buying millions in government tax credits used to finance affordable homes in Massachusetts and other states. These companies use the credits to significantly reduce their tax bills, while builders get desperately needed funds to provide affordable housing to low- and middle-income families.

I support anything that increases the amount of affordable housing in the area, but doesn’t this seem a roundabout way of doing it? The fact that this money is in the form of tax credits, doesn’t change the fact that the government is giving a lot of money to corporations. If Google and the other companies are making so much money from this, that probably means it would be cheaper for the government to build themselves. That no longer seems to be an option though–you know, governments are bad.

Affordable housing

Since I started receiving emails from the BRA about affordable housing opportunities in Boston, I think about it more. I have concluded that the current set up will lead to less affordable housing. Under Mayor Menino the city pushes for projects to have 10 or 20% affordable units which sounds good until you look into it and think about it.

  1. There is a wide range of affordable housing, rated by the percent of the area’s median income of potential renters/buyers: some is directed to people who make up to 50% of Boston’s median income; some 60%; all the way up to 120%. Each of these limits has a different maximum rental/sales price (the numbers are here). It’s then all lumped together as affordable. This means a unit directed towards a person/family up to 120% of the median income is included as affordable even though it’s directed at people who make up to $75,750 (or $108,250 for a family of 4). This leads to crazy things: a 1 bedroom apartment that rents for $2058 can be considered ‘affordable’. Given that, I think the number of affordable units as counted by the city is greatly exaggerated.
  2. The policy is designed to make things worse, because the percent of new units designed for most of the population (since ‘affordable’ housing is directed to people making up to 120% of the median income) is at most 20%. This means that most of the new housing is being occupied by people making more than 120% of the median income which means the median income in Boston will increase. As the median income increases, the maximum price for ‘affordable’ income will also increase and an increasing price loop ensues (you’ll notice that all the affordable housing is usually at the maximum price allowed under the given guidelines).

One thing that could help is rent control (obviously not for sales), but people in the state decided it wasn’t an option in 1994. I found this to be very annoying: three communities had rent control at the time (Boston, Cambridge, and Brookline) and all three voted to keep rent control.

To get an idea of the breakdown, here are the numbers for all 19 current opportunities:

Rental:

50%: 2 studios, 20 1 bed, 6 2 bed (these are all in one complex)

80%, 90%, 100%: 1 1 bed in each class

Sales:

80%: 2 studios, 15 1 bed, 9 2 bed, 1 4 bed

90%: 4 2 bed, 1 4 bed

100%: 1 studios, 9 1 bed, 7 2 bed, 4 3 bed, 1 4 bed

110%:  1 2 bed, 1 3 bed, 1 4 bed

120%:  2 2 bed, 3 3 bed

Affordable? For Whom?

I’m a little confused. I’m on a email list to get affordable housing opportunities in Boston. Here’s a link to one. Notice this bit:

1. Up to 80% of Median Income
 
Maximum Household Income: $48,050.00 for one person
  $54,900.00 for two people
  $61,800.00 for three people
  $68,650.00 for four people
Two Bedrooms: 1 Unit
Price: $1,545/mo.

Affordable housing is defined to be housing that costs at most 30% of your income which means two people would have to earn $51,500 for this two bedroom to be considered affordable. Not a lot of leeway is there (and the 30% is supposed to include all costs that go with housing not just the rent)?

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