Will More Housing Really Lower Rents? Prove It, Mr. Mayor

File photo: Olmsted Place Apartments under construction on Nov. 19, 2014 at the site of the Home for Little Wanderers.

Richard Heath

File photo: Olmsted Place Apartments under construction on Nov. 19, 2014 at the site of the Home for Little Wanderers.

Earlier this year, Mayor Marty Walsh told Jamaica Plain News and other community newspapers how he plans to keep people from being forced out of Boston by the high costs of rent and sales prices: “The key is to increase the supply of housing.”

Last October, the mayor released his housing committee report which stated Boston needs to build 53,000 housing units by 2030 to keep pace with increasing prices that are squeezing out low- and middle-income residents.

The construction of new housing is booming; from Northern Avenue to North Station there are either completed or under construction thirteen towers with total of 3,268 units of rental or condo homes.

In Forest Hills alone, there are either under construction or approved three developments with a total of 536 rental or ownership units; combine that with Olmsted Place at 161 S. Huntington Avenue and the number jumps to 731 units.

Can We Build Out of The Affordability Crisis?

A recent policy briefing from the business school at Ivy League University of Pennsylvania concludes it won’t: “a one-time policy of increasing low-income housing supply is unlikely to be more effective than sticking a finger in one hole of many in a leaky dike.”

Can we build out of the affordability crisis? That’s the question the mayor and others who advocate this theory need to prove. Show us the evidence that increased housing supply will lower the rents for those who earn $20,000 to $40,000 a year.

These are the residents who can’t afford to live in Boston. These are the residents who live in the margins and on the fringes of our city; in the edge city within our city.

For years, the city has had an affordability index with which developers had to comply in order to obtain permits to build. Depending on who you talk to, that is 80 percent or 70 percent or area median income (AMI). Based on recently-released 2015 figures, 80 percent for a single person is $55,150; for a household of two, it’s $63,050.  That is not by any means affordable to someone who works in a hotel or a hospital or a restaurant or a retail store in our minimum wage service economy.

What is is termed “affordable” for a family of two is a rent of $1,628 a month or  $19,536  a year for housing alone. Health care, food, clothing transportation, utilities, transportation, day care are not included. The rule of thumb is you should not pay more than 30 percent of your annual income on housing.

Developers are required to dedicate a percentage of their units to this “affordable” range,  usually it’s 10 percent or 20 percent. Sometimes the units are in the same building. Sometimes they’re on the other side of town. These “affordable” units are broken down into one, two or occasionally three bedroom units based on 80 percent Boston AMI.

But wait; there’s even more fun: to qualify for those “affordable” units, one must enter a lottery and wait to learn if your name has been selected based upon your housing need and income.

None of this is well understood or even explained in any public meeting for a new housing development. This is deliberate. Neither the Boston Redevelopment Authority, much less the developers, want people to be informed about this process.

Housing, But For Whom?

But the vast majority of those who attend those meetings don’t care anyway.  They have a home.  They’re not thinking about those who need homes. They’re more concerned about their own property values, density, parking and the color of the bricks. No one ever asks what a unit will cost to rent or to buy and that information is never included in any project notification form  which goes to enormous lengths to tells us how much wind velocity their building will generate or how many shadows it will cast).  But the cost of buying or renting speaks volumes about for whom that development is being built and  more importantly how that will change the community in which it is being built.

The private developer drives the cost of housing in Boston, not city government.

The city of Boston is thrilled with the cost of condominiums, towers and townhouses growing up out of the metropolis today.  Boston has only two sources of revenue: the property tax and state aid.  It is not in the city’s best interest at all to obstruct the development of  luxury housing or housing aimed at 100 percent of AMI.  The BRA  gives the public an opportunity to vent and the developers might make a few concessions — like two or three parking spaces or the size of the dormers — rarely anything more substantial. And then they go and get their zoning approval.

The “affordability” requirement comes out of the developer’s pocket. He or she adjusts the cost of the other units to make up for those losses.

The only way to build and preserve housing for those working families in the $20,000 to $40,000 income range is subsidies. That’s to say, income-based housing.

A very dirty word in the minds of homeowners.

If a developer of 76 units set aside one third for low- and moderate-income families in the above income range he would require either federal project-based Section 8 subsidies or state funded rental vouchers for 25 units. Both of these subsidies are extremely difficult to get. Congress has since the Reagan administration refused to adequately fund the Section 8 program. The state assists cities and towns through state aid and this competes with the housing voucher program.

It’s also politically safe not to increase housing subsidies at the federal level because it’s not the will of the public. The vast majority of the electorate believes that families who require housing vouchers are morally irresponsible failures.

Show Me How This Works

Let us assume that one third of the 53,000 new homes proposed by the mayor — about 18,00o homes — had project-based subsidies.  Ignore the fact that there are 40,000 families on the Boston Public Housing Authority wait list for subsidized housing; also  ignore the fact that 18,000 project-based subsidized apartments would  be vociferously opposed by every homeowner within miles of the new homes. This formula would provide stable income-based homes for 18,000 low- and moderate-income families.

But if the mayor and others who agree with the theory that more housing decreases the costs of rents for those earning $20,000-$40,000,  then they must show me the evidence.  What other cities have achieved this and how did they do it?

Show me how this works. Better still, make it work. Otherwise it’s just another glib talk-show response to the biggest problem in the history of Boston: who can now live in this city?

  • OhPatrick

    Perhaps Richard Heath should finish the paragraph he cited in the study above. Yes, a “one-time” increase in affordable housing is only a temporary fix, but “To ameliorate this pattern, policy would have to increase the long-run growth rate of low-income housing supply in the cities where historically it has been difficult to build.”

    How can we increase the long-run growth rate of low-income housing supply? Perhaps by giving developers density *bonuses* for building affordable units. Offer a developers a one bonus market rate unit for each affordable unit built, and watch supply increase (and prices fall!) across all income segments.

    We have a middle-class affordability problem in Boston too. Let’s look for solutions that help everyone, not just those who could qualify for vouchers.

    • Lisa Marie Garver

      Not everyone qualifies for vouchers and I CAN PROMISE YOU even iF they DO its not a walk in the park. This is the problem with middle class saying “middle class can’t afford!!” guess what?? If there was affordability for those beneath you, YOU WOULD BE ABLE TO AFFORD IT.

  • Richard, again great article on a very important topic.

    2 points I wanted to address:

    1) The market determines the price of a unit, which is why it often isn’t discussed by the developer. Developers will and should get whatever the market will bear, it is the city and neighborhoods job that a development reasonably works for the neighborhood. (side note: requiring more parking will only increase the amount charged per unit)

    2) You have pointed out a big problem with our current development policies that leaves many residents with the short end of the stick, but what is the alternative? HUD funding is being gutted, state funding is limited, so where is the funding for affordable housing going to come from? Requiring developers to put in more affordable housing would be nice, but at some point the economics won’t work. Yet, the housing market continues to go up and up. While new development may or may not be responsible for pricing current residents out of their neighborhood, doing nothing will only make the existing property more valuable and will guarantee that those same residents are priced out.

  • Seth

    Couple of points:

    1) Increased supply is not going to *lower* anyone’s rent. At this point nothing is going to lower anyone’s rent, except perhaps winning a BHA lottery. Boston is too a desirable place to live and there just isn’t enough empty space to build the massive number of units that would be required to outstrip demand. All increased supply can do is to slow down the rate of increase.

    2) However, this will only really help the middle class with affordability. Developers will still charge whatever the market will bear, and there aren’t enough incentives in the world to get them to build enough income-restricted units to house, say, all 18,000 people on the BHA waiting list.

    3) Something important to remember is that a family making $20-40K doesn’t really have an affordable housing problem. They have an affordable *everything* problem. They are, in other words, poor. My favored solution to this is to just give them money, but that faces extreme political hurdles just like anything else.

  • Lisa Marie Garver

    Section 8 is not just hard to get. It’s impossible. I was homeless for months at a time twice and I’ve been on a list for housing help since the first time. Thank YOU for writing this!!

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