February 10 - 17, 2000
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Easing the housing crunch
The mayor, the city council, housing advocates, and developers are all pushing their own solutions to the housing crisis. Can they find common ground?
by Ben Geman
NASA could probably land a person on Mars before local politicians, housing activists, and developers figure out what to do about Greater Boston's horrific housing crunch. The city's vacancy rate is minuscule, somewhere between one and two percent. The median advertised rent for two-bedroom apartments in Boston is about $1550, nearly twice what some of the same units were going for five years ago. Home prices are soaring too -- so high that even families earning more than the area's median income ($62,700 for a family of four) can't afford to buy.
Big solutions to the housing problem -- rent control, massive federal or state commitments -- aren't on the table. That means a multilayered approach offers the best hope. "I think to help solve the crisis there needs to be a multitude of strategies from the local, state, and federal government combined with the private sector," says Aaron Gornstein, executive director of the Citizens' Housing and Planning Association, an affordable-housing research and advocacy group. "Those strategies have to include production of housing for families with a variety of incomes, and they need to include the preservation of existing housing, and they need to include homeownership opportunities for first-time buyers."
Politicians, activists, and developers have different ideas about what specific steps to take. Boston mayor Tom Menino has announced some initiatives that would extract concessions from developers and invest city funds in new housing. Individual Boston city councilors have proposed some measures that would go further -- for example, offering tax breaks to small property owners in return for not raising rents. Grassroots housing activists, who have rallied with a fervor unseen in years, support tighter regulation and increased government commitment. And the Greater Boston Real Estate Board, which speaks for property owners and developers, argues for regulatory and tax relief.
Clearly, no one has a magic bullet, but these competing voices can find issues to agree on. City and state policymakers could ease the crunch through a combination of small steps such as increased housing funding, new regulations, and tax incentives for housing developers. Here's a road map to this increasingly vocal debate.
Menino announced last month that he would soon issue an executive order requiring developers to make at least 10 percent of units in new buildings affordable to middle- and lower-income renters and buyers. That now-ubiquitous term "affordable," by the way, is shorthand for what households can pay without spending more than 30 percent of their gross income: if you make $25,000 a year, for example, you shouldn't spend more than $625 a month on rent. Which means an affordable two-bedroom apartment for your average twentysomething roommates getting paid in the mid $20,000s would cost about $1250 a month -- about $300 less than the median rent citywide. Menino's order would require the set-aside units to be affordable to a mix of middle-income households (making 80 percent to 120 percent of the area's median income) and low- to moderate-income households (making less than 80 percent of the median income, or about $50,000 a year).
For all the housing-policy ideas being thrown about City Hall these days, Mayor Thomas Menino's ability to temper Boston's housing crisis may have as much to do with flesh and blood as with any new proposal or ordinance. Improvements at the BRA
In a few weeks, Mark Maloney, currently head of Maloney Properties, an affordable-housing-management firm, will begin his new job as director of the Boston Redevelopment Authority. He replaces Tom O'Brien, whom Menino ousted last year for allowing a well-paid subordinate to buy a low-priced waterfront condo supposedly earmarked for income-eligible families.
Can Maloney's stewardship of the agency, with its 100 staff members and $10 million budget, make a difference? Though other city agencies deal with housing policy, it's the BRA that negotiates large-scale development. Both city officials and housing advocates say they're hopeful Maloney's appointment will help the city encourage developers to create more housing that's affordable for the poor and working class. That's especially important these days, with Menino being faulted for failing to extract more from developers.
"I think his presence elevates the consciousness of the housing issue [at the BRA], and particularly affordable-housing issues," says one high-level Menino aide of Maloney, who through city officials has declined comment until he starts working. "It was not necessarily in the culture of the organization." Housing advocates inside the BRA were "the exception rather than the rule," adds the official. "With someone at the top with a background in affordable housing, that changes the culture so that everyone knows it's on the director's agenda and the mayor's agenda."
Indeed, even people who have called the mayor's housing agenda too tentative say they're optimistic that the new BRA head will have an effect. "For better or worse, they [the BRA] are very linked to housing policy in the city, and hopefully with Mark there it will be for the better," says Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance. "We give the mayor a lot of credit for that appointment."
The appointment represents a reunion of sorts for two of the people heading Menino's housing team. Sandra Henriquez, head of the Boston Housing Authority, was a partner at Maloney's firm before Menino tapped her for the BHA in 1996. Now, she says Maloney's ability to "bring different voices to the table" will help the city steer affordable-housing policy at a time when the absence of major new funding or government programs means officials have to be creative to get new units built. "He will help us figure out how to put all the disparate pieces together," she says.
With Maloney joining Charlotte Golar Richie, who was brought on early last year as the city's chief of housing, Menino has a team with the potential to make significant change. And now that he's in the second year of his enhanced effort to tame the housing crunch, he's out of excuses if his administration doesn't make a difference.
-- BG
Menino has also pledged $13 million in new city funds, in addition to the money raised from the sale of the old Berkeley Street police headquarters, to pay for a mix of housing initiatives, including new construction and efforts to preserve affordability in buildings that lose federal subsidies. In addition, he's offering tax incentives to developers of more than 25 units who agree to provide more than the 10 percent set-aside that will be mandated by his executive order.
Still, some observers charge that the mayor hasn't gone far enough. "What he announced was horribly weak," says Tom Callahan, director of the Massachusetts Affordable Housing Alliance, of Menino's proposed executive order. "Half the city earns less than $45,000 per year."
Callahan argues that instead of issuing an executive order, Menino should aim for a change in city zoning codes, so that future administrations would be bound by the set-aside policy. He also says the set-aside should be increased to 15 percent and that those apartments should be reserved exclusively for families earning less than 80 percent of the area's median income. This group badly needs relief: the Boston Housing Authority, which owns large housing developments for low-income families, has a waiting list that's 14,000 families long.
Menino, though, stands by his pledge to devote resources to middle-class residents as well. "We have to provide all types of housing -- low, middle-income, and market [rate]," he says. "You have to have all three types. You can't just have luxury and low-income. What about the working guy, the guy who goes to work at Edison and comes home to two kids? They are the ones feeling the hardest pinch. They can't buy and they can't rent."
At any rate, beyond just changing the set-aside requirements, advocates have their own ideas about what the mayor should do. The Greater Boston Interfaith Organization, for example, is knee-deep in a drive to increase the state and city funding for housing. The group agrees with Callahan on set-asides, and it wants tax incentives offered to small property owners who promise not to increase rents. The GBIO also supports an increase in the "linkage" payments that the city requires commercial developers to pay into a fund for affordable-housing development.
In addition, the Boston Tenant Coalition recently launched an initiative called the 10,000 Homes Campaign, which would create or preserve 10,000 units over the next five years for poor and working-class residents to rent or buy. The tenant coalition supports both increased government funding for housing and more-aggressive regulation of the private market. "Five years after rent control, the reality of what is out there is that unless you already own your home, you are in a tenuous position," says the coalition's Kathy Brown.
Housing advocates who want more from City Hall have some friends on the city council. Councilors have pitched several plans recently, with Roxbury's newly elected Chuck Turner leading the charge. Turner, along with councilors Mike Ross, Maura Hennigan, and Francis "Mickey" Roache, has urged the city to ensure that one-third of any housing on city-owned land will go to low-income tenants and one-third to moderate-income tenants.
At a time when city officials are offering dueling plans to tackle the area's housing crunch, there are a few things that most everyone at City Hall can agree upon. The "state needs to get off its ass" lobby is about as united a group as you'll find among city pols and activists. Where the state stands
Even some legislators agree: "The state . . . has not stepped up to the plate," says Cambridge state representative Jarrett Barrios, a member of the legislature's committee on housing and urban development. "We have not taken seriously the housing needs of our constituents and come up with the ideas and put forward the funding necessary to realize those ideas. It's time we took that seriously."
Governor Paul Cellucci infamously declared last year that the "free market" would solve the housing crisis, and even though he called housing a priority in his recent State of the State speech, housing advocates say his proposal is weak and disappointing: Cellucci has promised to earmark $47 million in funds for housing, but the money has merely been redirected from existing local-aid accounts. And the state's housing budget, which has tumbled by $80 million over the past decade, would again be reduced according to Cellucci's plan for fiscal year 2001.
"They couldn't find any new money for housing initiatives?" says Howard Leibowitz, Menino's director of intergovernmental relations. "They had to take it out of an existing account? It's disappointing, to say the least, and it's cynical at a time when hundreds of millions are being added to next year's budget."
Yet progress does remain possible on Beacon Hill, where the Democrat-dominated legislature could try to beef up the housing budget. And there are a number of pending bills that housing advocates are watching closely, such as the Community Preservation Act. This measure would allow cities and towns to raise new monies for affordable housing, open space, and historic preservation; competing versions in the House and Senate would have them accomplish this either through new taxes on real-estate transfers (the Senate version), or through new property taxes and a state matching fund (the House version). Housing advocates believe that a transfer tax would be a stronger way to ensure revenues. For now, legislators are duking it out in conference committee.
Elsewhere, Allston-Brighton state senator Steven Tolman is pushing legislation that would increase the state's commitment to housing preservation, and advocates and legislators are discussing creating an affordable-housing trust fund.
A bill is also being considered that would give cities and towns the right to hold referendums on the regulation of "expiring use" units. In the 1960s and '70s, the US Department of Housing and Urban Development (HUD) offered a deal to private owners of some large apartment buildings and complexes: they could have very low-rate 40-year mortgages, backed by HUD in some cases and the state in others, if they would promise to keep the units affordable for low-income tenants until the mortgage was paid off. Owners had the option, however, of prepaying the mortgages after 20 years, thus freeing themselves from the rent caps. Many are now choosing that option. Similarly, owners of Section 8 property in formerly affordable areas, now able to command high rents for those units, are deciding not to renew their Section 8 subsidy contracts with HUD.
Cellucci has already vetoed the expiring-use bill once, but the need for it is growing. In Boston alone, according to the Citizens' Housing and Planning Association, more than 5500 units are at risk of subsidy loss in the next five years. Although vouchers are offered to tenants of such units -- something HUD is increasing funding for -- they come with rent ceilings well below the actual cost of rent in the Boston area. These vouchers also allow tenants to remain in their apartments, but when they eventually leave, the apartments they vacate are no longer designated affordable housing and are frequently rented out at market rates.
-- BG
Turner, Roache, Hennigan, Ross, and Charles Yancey have also floated a plan similar to the GBIO's tax-break proposal for landlords who agree to freeze rents. Still another plan of Turner's would devote 2.5 percent of city tax revenues to affordable-housing programs.
But Menino-administration officials question whether a wholesale commitment to regulating city-owned land or setting aside tax revenue is affordable without new funding commitments from the state and federal government. And even as activists and ambitious city councilors try to push the mayor in one direction, property owners are trying to push him in the other. Developers say it's counterproductive to legislate affordable housing at their expense. "A more effective policy for this [mayor's] administration would be to encourage new housing creation without economic penalties," wrote developer David Epstein, president of the Abbey Group, in a letter to the Boston Globe last week that called the housing crunch a simple issue of supply and demand.
A recent report by the Rental Housing Authority, an arm of the real-estate board, asserts that developers would build more units affordable to the middle class if the government removed regulatory hurdles, streamlined the approval process, and created new tax breaks. The last item, tax breaks, is where Greater Boston Real Estate Board CEO Edwin Shanahan says he agrees with the mayor most. "[Menino's State of the City speech said], `We will bring you tax relief [if] you build the housing,' " he says. "That was a strong and eloquent statement by the mayor."
Developers and the mayor also agree on the need to make the permitting process more efficient. Menino is pleased with what his administration has already done. For example, the city now puts projects that conform to existing zoning and building codes on a faster track, and promises to issue the building permits within seven days. ("Before, it was a shotgun approach," says Kevin Joyce, commissioner of the city's inspectional-services department, noting that projects in need of zoning variances were not separated from those conforming to existing codes.) And the city now allows the Boston Redevelopment Authority to review projects even while requests for zoning relief are pending, which speeds things up in those cases.
Developers have common ground with activists on some issues, too. The Greater Boston Interfaith Organization's Lew Finfer agrees with the real-estate board that it's a good idea to build housing over one-story storefronts, although city regulations make that difficult right now. The Boston Society of Architects has also proposed allowing more residential development in business districts. City officials, though, would rather examine individual cases than loosen restrictions in entire business districts, according to Tom Philbin, a spokesman for the department of neighborhood development. "The residents have to live with these structures once they are built," he says, "and we want residents to have a say in what should be in their neighborhoods."
The Kathy Browns and the Edwin Shanahans may not disagree on everything, but don't expect to see them linking hands and singing "Kumbaya" anytime soon. Indeed, it was the downtown office of the real-estate board that the Boston Tenant Coalition chose as the site of an angry demonstration launching the 10,000 Homes Campaign on January 10. Although many of the coalition's goals put the onus of change on policymakers, demonstrators at last month's event wanted to make the point that the board contributed to the housing crisis by failing to create affordable housing after rent control's demise. "We wanted to say front and center that the private market is not working," Brown says.
The crunch does, in fact, demand more regulation than the development lobby is willing to admit. Menino is justifiably proud of the more than 2000 new housing units that got started in Boston last year, yet the bulk of these will not be affordable to lower-income residents. And that illustrates a key fault line in the debate. Although it's true that increasing the housing supply is probably good for the city, there's something, well, supply-side about that argument. It's basically Reaganomics applied to housing. Activists say that even with less red tape, developers probably won't be able to build enough units to lower prices across the board, especially in a city as dense as Boston. "We are not going to build our way out of this," says Michael Stone, a professor of community planning and public policy at UMass Boston. He says that the city needs to protect the existing subsidized stock and regulate the market to keep other rents from climbing too high.
The stakes here are tremendous. Already, rising rents and home prices have fundamentally changed neighborhoods such as Jamaica Plain. For all the talk of making Boston into a "world-class city" through waterfront development, a new convention center, and the Big Dig, it's the success or failure in curbing housing costs that will shape the city in coming years.
As bad as the problem is, there is potential for real progress in the next year or two. Politicians can't solve the housing crisis, but both the city councilors and the mayor seem to be on the right track. Baby steps such as the executive order could be turned into longer strides to make developers keep the best interests of the city at heart. And Menino did the right thing by promising to spend some of the surplus property fund on housing and unloading the old Berkeley Street police building to fund housing programs.
Nonetheless, advocates say that given the economic boom, the city should devote more of its yearly operating budget to housing. "It's true that Boston may be doing more than other cities," says Steve Meacham, a housing organizer with City Life/Vida Urbana, a community-development corporation in Jamaica Plain that's part of the Boston Tenant Coalition. "[But] the increase in [property tax] revenues that Boston is getting as a direct result of the end of rent control enables the city to put higher levels of resources into affordable housing than it is."
If he's right, it's likely that the city could afford the proposals by Turner and other councilors to divert tax revenues into housing and offer small property owners relief in exchange for capping rents. And the Menino administration could consider increasing linkage fees for commercial developers, which have not been raised since the program began in the 1980s. The real-estate board hates regulation, but they and developers don't oppose new funding and subsidies.
In other words, there's hope. If advocates can muster enough strength to pressure state and city policymakers to get more aggressive -- and if they can work with the property-owner lobby to spur sound development while fighting efforts to block much-needed regulation -- the housing outlook could brighten over the next year.
But don't bet the rent money on it.
Ben Geman can be reached at bgeman[a]phx.com.
