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City increases developers’ affordability requirements

Jule Pattison-Gordon

As luxury condo buildings rise across Boston, accompanied by increases in both housing prices and demand, city officials hope updates to Boston’s Inclusionary Development Policy will keep a place in the city for low- and middle-income families.

Developers affected by the policy now will have to construct a greater number of affordable units or pay more to opt out of the on-site affordable requirement when building in many neighborhoods, particularly downtown and waterfront areas.

Many community groups praised the increased payouts, while warning that any new construction of luxury housing risk driving up rents. They called for affordability measures and housing protections to go further.

“It’s a good reform but there have to be other ways to address housing crisis as well,” said Lydia Lowe, co-director of the Chinese Progressive Association.

Members of the Department of Neighborhood Development, the Boston Redevelopment Authority and the rest of the IDP team said they faced a difficult balancing act, said Sheila Dillon, chief and director of the Department of Neighborhood Development. They seek to modify policy to squeeze as much affordable housing as possible out of developers without discouraging them from constructing in the city.

The question, Dillon said, was “Can we extract more [affordability] from private developers without chilling the real estate market?”

Policy changes

Under the existing IDP, developers who construct ten or more residential units and need zoning relief or will build on city land are required to build a certain number of affordable units on-site or at a nearby off-site location, pay into an affordable housing fund or carry out a blend of these options.

New changes to the IDP clarify requirements, divide the city into three zones and tailor unit amounts and cashout prices to each zone. The updates go into effect in Jan. 2016.

The last substantial updates to the policy were in 2007, Dillon said.

Zone-based system

The IDP team shifts from implementing one consistent Inclusionary Development Policy across the city to a zone-by-zone approach in order to adjust for different markets and needs.

Zone C comprises Roxbury, Dorchester, East Boston, Hyde Park, Mattapan, Roslindale and West Roxbury. The IDP team aims to encourage construction here, especially of middle class housing, said Phil Cohen, project manager at the Boston Redevelopment Authority.

“It’s difficult to develop in that area right now,” he said.

The team did not increase requirements for developers building in Zone C, but they did raise the off-site and payout requirements everywhere else.

Zone A encompasses the downtown neighborhoods and waterfront areas, the places where median sales prices were the highest in the city during Fiscal Year 2013-2015. Developers in this area will experience the greatest increase in requirements: the number of affordable off-site units they must construct rises from 15 percent of total units to 18 percent. To cash out, developers must put enough into a housing fund to build 18 percent of units, assuming each one costs $380,000.

Zone B neighborhoods are Allston, Brighton, Charlestown, Jamaica Plain, Mission Hill and the waterfront part of South Boston. These areas experienced sales prices averaging in the middle third of city prices during FY 2013-2015 and Zone C prices were in the lowest third.

In Zone B, the number of off-site units also rises to 18 percent of total units and for cashing out, per-unit prices are assumed to be $300,000.

The number of on-site affordable units developers must build, should they chose that option, remains at 13 percent of total units in all zones. This is both to encourage on-site development and because the team considered it too great a burden on developers to raise this, Cohen said.

Praise for payouts

Several representatives of housing and activist groups said the increased payout in Zone A was the highlight of the policy updates. This money goes into an Inclusionary Development Fund, managed by the Department of Neighborhood Development, for the creation of affordable housing.

“We are very happy about the increased payout in the high-end areas, area A,” said Kathy Brown, coordinator at Boston Tenant Coalition. She said it would both provide more money for affordable housing and likely encourage more accessible housing to be built in areas like Fenway, where little of the construction has been affordable.

“The most significant thing about the changes are the big increase in the payouts required for developers,” Lowe said. “This is a reform we’ve been looking for, for quite a while.”

Juan Leyton, executive director of Dudley Street Neighborhood Initiative, and Darnell Johnson, coordinator of Right to the City Boston, also voiced approval of this increase.

Only the per-unit price used in Zone A reflects actual costs to build in Boston. Cohen said this price — $380,000 — reflects the average development cost for a unit in the city. Members of community development corporations and neighborhood development corporations have pegged unit construction costs at $350,000-$400,000.

Unit counts

Any affordable units brought in under the IDP come only because luxury units are being created as well, Lowe said. While new housing built under the IDP is kept affordable through deed restriction, members of community organizations said that the market-rate housing is likely to raise rents on existing housing stock in the area. They questioned if the number of affordable units required was enough to counteract displacement that such rent increases may cause.

“We’re really concerned about the percentage of units,” Brown said. “A lot of this development increases rents across the city and encourages displacement and gentrification.”

A statement by the Mass Alliance of HUD Tenants called for the 13 percent on-site affordability requirement to grow to 25 percent or higher, matching New York’s system. The statement said that current percentages would not neutralize the effects of new luxury housing.

Setting affordability

Currently, rental units must be affordable to those making up to 70 percent of area median income, or earning $62,000 for a family of three.

In Zone C, the BRA will now be open to letting developers provide units at levels affordable to those making 100 percent AMI — $88,650 for a family of three — if they can make a compelling case that the project would not be feasible otherwise.

This move brought concern from members of community organizations who believe that it would be out of the reach to residents in the neighborhood.

DSNI’s Leyton said that the current 70 percent AMI affordability level already is steep for many in the area. Units priced for those earning 100 percent AMI are more likely to serve middle class renters and buyers who come in from outside the community than current residents, he said.

“[Allowing housing be priced for those earning 100 percent AMI] doesn’t help this community, that tends to be below 70 percent of the median income,” he said. “The effect it might have is opening up doors to more people from outside to have access to this housing. “

Dillon said demanding greater affordability would be too discouraging to developers.

“If we lowered the AMI for this project, we would have gotten substantially fewer units,” Dillon said.

It is especially hard to ask developers to offer any deeper affordability in Roxbury and Dorchester, Dillon said. Market-rate units tend to fetch lower sale prices and rents in these areas meaning developers make less profit after development costs. Demanding developers offer units for even less may mean few are willing to build there, she said.

Other options

Members of community groups said other measures need to be paired with the IDP changes to meet affordable housing needs. This could include no-fault eviction laws to protect tenants from displacement as rents in the neighborhood rise, Lowe said. Brown said additional options are higher linkage fees, community preservation acts and bonuses provided for building a greater density of units.