Taxing dilemma

Boston's boom means more tax revenue for the city's coffers. Should Mayor Menino put these dollars to work on affordable-housing initiatives?

by Ben Geman

MAYOR MENINO says money for affordable housing needs to come from sources other than new-growth tax revenue.

When it comes to affordable housing, Mayor Tom Menino isn't quite the tax-and-spend liberal that some housing advocates would like him to be. This became clear last week, when the mayor objected to an idea proposed by the Boston Tenant Coalition in a new report titled "Turning New Growth into Affordable Housing." At a time when economic growth is spurring a rise in city revenue, the BTC asked, why not pump Boston tax dollars into initiatives that would help tame the city's housing crunch?

The city currently doesn't spend any tax revenue on affordable housing; it spends money that comes from federal and state sources, as well as cash that the mayor raises elsewhere -- such as from the sale of the old Boston Police headquarters, which is raising $12 million for housing. Menino has also pledged $13 million in new funds, to come from a city surplus-property fund. Boston also generates affordable housing by requiring developers of luxury buildings to include affordable units or pay to develop them off-site, and by demanding that commercial developers pay "linkage" funds: for every square foot more than 100,000, a developer is required to give $5 to an affordable-housing fund (Menino recently announced plans to boost that to $7.18, the first increase since 1987) and $1 for job-training and employment programs.

The BTC would like to see housing, like the police department and the school system, funded yearly through property taxes. According to the BTC report, the city raised $26 million in "new growth revenues" (tax on properties whose values have increased thanks to new construction, building improvements, or other factors) in fiscal year 2000. That money could be put toward housing, the tenants' group suggests, either as a direct allocation each year or as principal and interest payments on a housing bond (something for which the city would probably need legislative approval). If the money were applied to the bond, for example, the BTC says the city could create more than 4000 newly affordable units over the next five years by using bond proceeds for building new rental and cooperative housing, helping nonprofits acquire buildings to be used as affordable housing, and other such initiatives.

Using municipal tax money for housing is not the norm in the state or nationwide, but it's not without precedent either. "It's not something you would find widespread across the country, but Boston is facing one of the most serious problems in the country," notes Aaron Gornstein, executive director of the Citizens' Housing and Planning Association. Cambridge devotes about $2.5 million in tax money to affordable housing each year (plus more from its free cash funds), and other cities grappling with housing crunches, including New York City and San Francisco, use municipal bonds supported by tax revenue.

CHUCK TURNER, Roxbury's city councilor, says it makes sense for some of the revenue from new development to go toward easing the housing crunch.

Roxbury city councilor Chuck Turner, a progressive who's made housing a signature issue, proposed legislation this year calling for the city to set aside 2.5 percent of its yearly tax haul for housing. Both Turner's proposal and the BTC plan were discussed April 4, the day after the group's report was issued, at a packed city-council hearing on affordable housing.

The BTC says that renters and house buyers -- who are feeling the squeeze from rising rents and housing prices -- should benefit from the city's recent prosperity. "There's been this incredible commercial boom, and there is a nexus between that boom and people being driven out of the neighborhoods," says Margaret Turner of Greater Boston Legal Services, counsel to the BTC. "There is a real solid justification for the city to take some of that wealth and channel it back into affordable housing."

Adds Turner: "It is appropriate to use a significant portion of the new growth money to make new affordable housing a reality, particularly since the new growth is one of the problems that is creating a difficult situation for many families in Boston."

Surprisingly, support for the BTC's concept isn't limited to lefty tenant activists and city councilors. Samuel Tyler, executive director of the Boston Municipal Research Bureau, a business-funded watchdog group that oversees city finances, says the amount called for by activists may be out of reach, but he does suggest that Menino may want to consider devoting some tax revenue to affordable housing. "I don't think that it should be summarily dismissed," Tyler says. "I would not agree with the premise that the city is providing services as efficiently as it could. There are possibilities for improved efficiency, and that would free up money for housing."

For the most part, though, the Menino administration remains opposed to the idea of using any tax revenue for affordable housing. It might turn out to be a zero-sum game, officials say: yes, the administration could pour money directly into housing, but that would mean a drain elsewhere, and other departments -- such as the school department, which consumes nearly half the budget -- can't afford to take the hit.

"I wish I could say it is a great idea and that I could support it 100 percent, but I have to look at the big picture ," Menino says. "Tell me where I get the money from. What account do I take it from? Schools? Police? The fire department? Public works?" He also notes that several city union contracts are up for renegotiation, which will no doubt soak up some of the increase in city tax dollars. There is not a large surplus in the city budget, Menino points out; if there were, he says, he could support the idea of using tax revenue for housing. (According to the city's chief financial officer, the city's surplus at the end of fiscal year 2000 will probably be somewhere between $2 million and $5 million.)

Menino-administration officials say the discussion shouldn't focus on things the administration can't do now, but instead on what it has already accomplished. At last week's council hearing, Charlotte Golar Richie, Menino's housing secretary, pointed out that the city initiated construction of more than 2000 housing units last year, a big increase from previous years. "It's not always covered in the press, but we here in city government do care, and we are committed to making things happen," she says.

Menino announced his plans for the increase in linkage-fund fees on the same day that the Boston Tenant Coalition released its report. That increase, of course, will complement other pieces of the mayor's housing agenda, including the police-headquarters sale and the surplus-property fund. The city expects to commit these funds to initiatives including first-time-homebuyer assistance, construction of new affordable housing, and preservation of affordable rental units that are losing their state or federal subsidies.

"I think we have shown a willingness to do what's necessary to generate revenues for housing," adds a Menino aide. "I don't think that people care where the revenues come from as long as they produce housing. We'll see what these new initiatives produce."

Affordable-housing advocates point out that the city has to play the hand it's been dealt, and that means plowing ahead despite diminished federal housing resources and the lack of a strong state commitment (see "Easing the Housing Crunch," News and Features, February 11). Using tax revenue would be a bold step, but it would probably not be enough to reverse the damage. As outlined in the BTC report, rents citywide soared 77 percent between 1992 and 1999. The median rent on a two-bedroom unit in Boston is now more than $1500.

Even so, the tax revenue would help. And even among those who share Menino's concerns, the direness of the situation is beginning to bring about support for applying that money to housing initiatives. Rookie city councilor Mike Ross, for example, agrees with the mayor that using tax revenue could mean "robbing Peter to pay Paul." Nevertheless, the councilor believes that with the housing crisis raging, it may be a necessary evil. "Their [the BTC's] claims do have merit, and they should be part of the formula," Ross says. "It should be part of the package that gets us where we need to be."

Ben Geman can be reached at bgeman[a]phx.com.