IS THERE AN ANSWER TO THE “AFFORDABLE HOUSING” CONUNDRUM ?

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^ four candidates spoke and answered questions at last night’s District Five candidate forum

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Last night, at a forum for candidates seeking District Five’s City Council seat, the question of “affordable housing” came up, as it always does these days in Boston policy discussions. Amid the standard answers given by most of the candidates, that affordability should be a priority — though no one proposed a means for achieving it — one candidate vowed to impose a “20 percent minimum” on Boston developers seeking City permissions. Such an imposition is self-defeating, as I shall show, and that it can be seriously suggested at a forum makes clear just how useless, even damaging, is today’s conventional wisdom about house pricing.

Currently, Boston development rules require large projects — those taking charge of 50,000 square feet of living space or more — to offer 13 percent of proposed units under criteria of affordability : some at a price that people making 30 percent of City median income can pay, some at 50 percent. Most electeds whose views I am aware of think the 13 percent rule is quite okay. A few, like the candidate at last night’s forum, think it should be raised to the 20 percent figure. I find both rules self-defeating :

Developers begin with acquisition cost for the land on which they intend to build. The cost of buildable land in Boston has risen almost beyond the markets’ reach. Tom O’Brien of HYM asserts that it will cost $ 500,000 per unit to build his immense Suffolk Downs project. I think he is underestimating, but even if he isn’t — if he is right about the $ 500,000 — the result is that, having to offer 13 percent of his 2200 for saleĀ  units at an “affordable” price means that he must jack Up the price of the remaining 87 percent of units in order to “make theĀ  numbers work,” i.e., to not lose money. I think this result is universal in the world of the 13 percent rule : imposing it may sweeten the price for 13 percenters, but it lifts the price for everybody else.

The 13 percent rule raises the market price of Boston housing by 13 percent.

Because developers are willing to pay acquisition prices that require that 13 percent sale price boost, the 13 percent rule also raises the prices that owners ask when they are looking to sell.

The candidate who proposed lifting Boston’s development rule to 20 percent “affordable” thereby commits to raising the market price of Boston housing by 20 percent — a price lift which will put even more Boston housing out of reach of most Bostonians. In actual life, the 20 percent figure cannot happen. The city of Cambridge imposed a 20 percent rule,. and according to HYM’s Tom O’Brien, development immediately stopped. Perhaps that is the actual objective of proposing a 20 percent affordability rule, though no matter what the objective, no affordable housing is enabled thereby, except by making the market condition even more unaffordable.

Nor has the City administration helped the situation by calling for 69,000 units of new housing by year 2030 and then opening the floodgates of zoning variance to assure the goal is reached in time. The magnitude of the plan, and the hurried time limit, has generated a buying frenzy price war whose results we see all over the neighborhoods close to Downtown. Perhaps it would have been wiser to let the market figure out how to time demand and size it ?

Nowhere in any discussion that i have heard about house affordability is there mention of the real difficulty : that Boston’s median household income is too low. Wage earners, who are the most impacted by the price boom, must find a way to earn more — much more. There are only two ways : raise the minimum wage, as the State has done and will probably do again, or support unions at every turn as they fight to win better wages and benefits for their thousands of workers. Well led contract efforts by Local 26, SEIU”s locals, the Stop & Shop workers, utility workers, and others have brought better times to thousands, and more money, which means more ability to pay today’s high rents or buy prices. The union labor push is, I hope, far from finished. People who already live in Boston must take charge of the market, and they can only do that if they earn much higher wages.

Higher wages also benefit the economy generally, but the City cannot merely stand aside as it happens. City administrators should rethink having an “affordability percentage” rule at all. It doesn’t work, any more than any other attempt to circumvent the ironclad laws of numbers. Hopefully candidates running for open Council seats in Districts 5, 8, and 9 — and for Althea Garrison’s fill-in at-large seat — will begin to offer smart answers to the affordability challenge instead of surface responses that sound good but can’t survive fiscal analysis.

—- Mike Freedberg / Here and Sphere