Hub housing scarce for middle-income families

Boston’s middle class is growing and if more housing does not become available, it also may be leaving. The latest report on the mayor’s housing plan — released last month — found the city building middle income housing at 85 percent of the speed needed to reach its 2030 goals.

“The challenge really is, [in Roxbury] we’re not getting middle-income housing because developers can’t make any money producing it, yet that’s by and large what we need the most,” said Roxbury resident Rodney Singleton.

The city defines middle class as households earning $50,000-125,000. As housing prices soar and wages stagnate, middle income families face the risk of being forced out of their neighborhoods or the city entirely. Between 2011-2012, the city’s median rent rose by 13 percent, wrote David Price, executive director of Nuestra Comunidad, on the community development corporation’s website.

The city aims to create 20,000 new units by 2030, with a fifth of them deed-restricted. The remaining 16,000 units are for placement on the open market in areas deemed middle-income affordable.

Homes evade the middle class

In many neighborhoods, rents are out of reach.

Only 9 percent of 2013 rental listings were affordable to families making $50,000. Even for families making $90,000 that number rose to only 65 percent, according to Boston 2030’s Oct. 2014 report.

Roxbury residents seeking to buy homes in their neighborhood face unattainable prices, with market price homes at $400,000 and up, Singleton said.

He anticipated an increase in gentrification and a squeeze-out of the middle class.

“Folks who are in the middle aren’t going to be able to qualify for subsidized units and they won’t be able to afford the market rate units,” Singleton said.

Why the shortage?

Building housing is expensive. The two ways developers combat this are to sell units for as much as possible to reap the highest profit, or offer them at low-income affordable prices and recoup their losses by taking government subsidies.

Middle-class housing often falls into the gap in between.

Most funds Boston gets from the federal government are designated for housing that serves people making up to 80 percent of the Area Media Income, according to Price.

There are other subsidies that could be leveraged to maintain and promote middle-class housing. But with limited resources at its disposal, the city often focuses those dollars toward subsidizing low-income affordable housing.

“One challenge is, do you use those subsidies and public endowments only for low-income or to support middle income as well?” said Joe Kriesberg, president and CEO of Massachusetts Association of Community Development Corporations.

Offering subsidies also often entails additional administrative costs, such as monitoring to ensure subsidized rents stay at the proper level, Kriesberg added.

A well-stocked market

With limited funds for subsidies, city officials hope that increasing market supply will reduce demand enough to keep housing prices relatively stable.

“There’s some thought that if we produce enough of it, it softens demand enough to moderate future increases. But it’s hard to predict housing markets very far into the future,” said Kriesberg.

To cool the market the new units will need to roll out quickly or the competition among home-seekers for limited stock will continue to push prices up.

“If we get enough new supply online quickly enough, that could keep the inflation down,” said Kriesberg.

The mayor’s plans calls for permitting 200 private market units per quarter and 50 deed-restricted units.

Last quarter, the city exceeded both its quarterly and units-to-date permitting goals for deed-restricted units. It created 1,237 such units between 2014 and Sept. 30, 2015. For private market units, the city met its quarterly goal but fell short of its overall goal of 3,800 permitted by Sept. 30, making only 2,772 by that date.

Not everyone agrees that more housing would bring affordability within middle-class reach.

“The idea that building more housing is going to reduce the rents on existing housing stock seems like wishful thinking in my mind,” Richard Thal, executive director of Jamaica Plain Neighborhood Development Corporation.

Thal said that unless the units are retained with permanent middle-income affordability, he expects prices to continue rising.

Price’s view was that while increasing the number of units on the market might help alleviate housing pressure in the city, it is unlikely to stop gentrification in affected neighborhoods.

“There is a valid argument for building unrestricted housing across the city, but in neighborhoods that are seeing escalating home prices like Roxbury and along the Orange Line the risk is you might displace local folks by building just market rate housing,” he said.

Build low, sell low

There may be alternative methods for containing prices.

Marc Draisen, executive director of the Metropolitan Area Planning Council, said one way to keep housing prices down is to reduce construction costs. This would give the city space to discuss lowering sales prices with the developers.

“If developers can keep prices down, a lot will be willing to reduce sales price of the rent,” Draisen said.

Ways this can be done include cutting frills: making less-intensively designed units, smaller units, slightly cheaper materials and few to no parking spaces.

“It costs a lot of money to build parking spaces, especially to build structured parking and even more for structured, underground parking.”

Draisen added that for construction located near transport hubs, parking may be unnecessary.

Price said Nuestra Comunidad is exploring a new funding model with its co-development of Bartlett Place. Incorporating a grocery store on the residency’s ground floor qualified the project for the New Markets Tax Credit, something typically used for commercial developments but available to any mixed-used development with a commercial component, he said.

A critical solution, Draisen said, is increasing density.

“When you build more units, you achieve economies of scale,” he said. “Sometimes the only way to keep [unavoidable construction] costs low is to build more units.”

While many residents call for single-family units or townhouses, the solution lies in big buildings with multi-family housing, said Draisen. He added that residents who object to the idea of density often appreciate the end-result, if the building is designed and maintained well.

“They complain about the plan, they don’t usually complain about the result,” he said. “We have to have some bigger buildings or we are never going to get to the total [units in the mayor’s housing plan].”

Employment angle

The housing market drama comes from prices rising far faster than wages. Louis Elisa, executive secretary and director of port development at Seaport Advisory Council, said another way to tackle the housing issue was to put focus on increasing access to good wages so that families could afford even those high prices.

“If people have access to jobs of a well-paying nature, the issue of middle class housing becomes moot,” he said.

Innovation

In October, Mayor Martin Walsh’s administration launched its Housing Innovation Lab, charged with finding creative solutions for meeting the demand for middle class housing. The Lab’s managers are in an information-gathering stage, after which they plan to run small scale tests for reducing home construction, purchase and maintenance costs.

“No city in the United States has solved the middle income housing challenge yet,” Walsh said in a press release. “I want Boston to be the first.”