Luxury-Home Lottos Reconsidered in Boston Housing Squeeze

By Prashant Gopal | Bloomberg Business | July 14, 2015

Carolyn Lane, on a salary of less than $50,000 a year, moved in May into one of Boston’s most luxurious new rental complexes. She has access to a rooftop pool, two gyms and an indoor dog-relieving station — and pays a third of what it costs her neighbors for the same one-bedroom layout.

“It’s a slice of heaven,” said Lane, who has a monthly rent of $1,190 after winning an affordable-housing lottery at the 315-unit Ink Block apartments. The administrative assistant was one of 544 entrants for just 41 discounted residences.

The Boston policy requiring developers to accommodate lower-income residents in even the most expensive buildings is being scrutinized as cities struggle to provide affordable housing. Helping lottery winners such as Lane live in swanky digs limits the construction of properties elsewhere that can accommodate more people, said Barry Bluestone, an economist at Northeastern University.

“It’s a nice gesture but it does virtually nothing to solve the housing crisis,” said Bluestone, founding director of Northeastern’s Dukakis Center for Urban and Regional Policy in Boston. “There are a lot of areas where it would be cheaper to build middle-income housing.”

Boston Mayor Marty Walsh is considering changes to the city’s policy requiring that 13 percent of units in new rental and condominium buildings be for moderate-income residents. The city is trying to determine under what circumstances developers may be allowed to build affordable properties elsewhere or pay into a housing fund instead of including the cheaper units onsite, said Sheila Dillon, Boston’s housing chief.

For Boston, in the midst of one of the biggest luxury-construction booms since the Back Bay was built in the 1800s, the question is whether the inclusionary zoning program designed to widen housing opportunities is helping as many people as it could.

“If you’re looking at the numbers, it makes more financial sense to build more units on cheaper land,” said Rachel Meltzer, an assistant professor of urban policy at the New School in New York. “But that undermines one of the goals of inclusionary zoning, which is economic inclusion — to counter the concentration of poverty.”

‘Broad Middle’

Almost 500 U.S. municipalities have inclusionary zoning policies, which began in the suburbs and migrated in the 2000s to costly urban areas, where they’ve were adopted in place of vanishing federal housing subsidies, said Robert Hickey, senior research associate at the nonprofit National Housing Conference in Washington. Smaller cities such as Pittsburgh and Nashville, Tennessee, are now considering proposals as housing costs soar.

“The goal is to harness this new growth in luxury housing to build in some affordability for the broad middle that earns too much to qualify for federal housing assistance but too little to afford what’s available,” Hickey said.

In New York, which offers construction tax abatements and density bonuses to encourage mixed-income housing, a luxury project on the Upper West Side gained attention last year for having an income-restricted rental component with a second entrance that became known as a “poor door.” Almost 89,000 people applied for just 55 affordable units at the Extell Development Co. property.

Mayor Bill de Blasio — who is banning poor doors under new regulations — is aiming for 80,000 new low-cost units within a decade, in part by following Boston’s model of requiring builders to include affordable housing in market-rate projects. New York’s policy is now voluntary, allowing larger buildings in exchange for keeping 20 percent of the apartments affordable.

Faster Pace

In Boston, an average of about 1,957 units a year were built since 2010, three times the average annual pace of the previous 50 years, data from the Boston Redevelopment Authority show. Most of the newly-built apartments are too expensive for the average resident, according to the city.

Boston’s average apartment rent has jumped 13 percent in the past three years as employment grows and much of the new building has focused on the high end, according to Reis Inc. The city in 2013 had the nation’s third-highest median rent, behind San Francisco and Washington, according to an analysis of census data by the Furman Center for Real Estate and Urban Policy at New York University.

“There is a lot of luxury housing being built,” said Dillon, the housing chief. “We want to create economically diverse neighborhoods and at the same time be efficient and build as many affordable housing units as possible. Therein lies the tension.”

Boston developer John Hynes, the 57-year-old grandson of a former mayor, said his buildings are the least-efficient place for below-market housing.

In the Seaport, where Hynes has a $4 billion mixed-use project, land prices are so high that expensive homes are the only feasible option for developers, he said. About 1,000 luxury rental apartments are already under construction in Hynes’s Seaport Square development, and another 2,000 approved.

Housing Fund

Hynes said he could fund at least twice as many affordable units in cheaper places like Allston or Dorchester if he’s given the option of donating to a housing fund. While the Boston Redevelopment Authority does allow such payouts on a case-by-case basis, exceptions are meant to be rare, said Nick Martin, an authority spokesman.

“I get it — a lot of workers we have in the city can’t afford $2,500- to $5,000-a-month units,” Hynes said. “But I’ve spoken to people fortunate enough to win the lottery. They got nice new apartments at discounted rates in fashionable new projects, and there’s a discomfort that comes with it. It’s like, well, it’s nice but I can’t even afford to shop here.’”

Joe Kriesberg, president of the Massachusetts Association of Community Development Corporations, which represents the neighborhood revitalization groups, said requiring larger payments from developers who opt not to include the units in their buildings may be a smart tradeoff.

“You’re getting more housing but you’re losing something,” Kriesberg said. “That’s the nature of a trade. Reasonable people can disagree.”

Lane, who is in her 40s, said living among people of diverse backgrounds benefits everybody in a mixed-income building. She hopes to network there and reach her dream of switching to a career in film.

“That’s how we become full people by meeting different people from different backgrounds,” she said. “It’s also a reflection of the world we live in. Who wants to be on an island with everybody that’s the same?”

MyNEUFind Faculty & StaffFind A-ZEmergency InformationSearch

360 Huntington Ave., Boston, Massachusetts 02115 • 617.373.2000 • TTY 617.373.3768
© 2013 Northeastern University