Two nights ago, after seven hours of “public comment,” the Boston Planning and Development Agency’s Board voted — after two years and more of meetings between developer and neighborhood groups — to approve the massive — 10,000 housing units — project proposed for the Suffolk Downs site.
What, then, did the BPDA approve ? Subject to what conditions and provisos ? I give you now a list thereof, as set forth by District Councilor Lydia Edwards in her report on the details :
An increase from 13% to 20% in the total affordable housing
A $5 million housing stabilization fund independently controlled by East Boston with continued funding over the course of the project
A wider range of incomes and more family sized units
Immediate rent relief for East Boston families up to $800,000, with $400,000 coming immediately after the vote
The site will be held to the standards of the upcoming fair housing amendment to the zoning code which will ensure housing for seniors, working families, and people with disabilities at the site for generations
Publicly owned streets and sidewalks. Park space deeded to the city. First amendment protections on privately owned publicly accessible space.
A Carbon Net Zero feasibility study with a commitment to pursue funding to implement the results of the study
Updates to city zoning regarding environmental standards will apply to the site
A Belle Isle Marsh visitor impact study and funding for an additional ranger at the marsh
A Project Labor Agreement to guarantee union jobs for the construction
$1 million for workforce development and and ESL classes for East Boston families
$1 million for apprenticeship programs to get East Boston residents into the trades
Expanded vocational education for East Boston residents and priority in the hiring process
Daycare facilities on-site to support our families
$200,000 for a learn-to-swim program for East Boston children
An Implementation IAG to ensure compliance with agreements
Continuous review to ensure commitments are being met before new buildings can be built
It’s an impressive list of add-ons, and Edwards rightfully defends it as a significant achievement for what is expected these days from “community engagement.”
Yet if the objective of all this engagement is to enhance the project’;s economic end housing cost effects on East Boston, the list fails, indeed aggravates the situation.
To begin at the beginning : requiring that 20 percent of the units — 2,000 houses — be “affordable” pursuant to Boston’s “affordability covenant,” means that the buy price, or rent amount, of the other 8,000 units will have to RISE by five percent, or the investor risks a loss. That would be the case anyway, but as Tom O’Brien, the project manager, has stated that the syndicate of investors was looking for a bare FIVE (5) percent return, any pricing concessions make the investment very chancy. Granted that with interest rates at near zero, parked money earns practically nothing, a five percent, or even a four percent return looks pretty good: yet historically, real estate investors have wanted a much larger expectation because real estate is always highly leveraged. It doesn’t take a very great default rate for leveraged real estate to be a loser; and once real estate falls into the red,. its redness accelerates, sometimes to the point of bankruptcy. Thus the price jack-up to compensate for the price loss.
O’Brien told a meeting about a year ago that it costs $ 500,000 a unit to build a house in Boston. Add union labor to that cost — an add-on which I approve, for reasons I’ll give later — and the price becomes $ 550,000. Now add on the jack-up and the sale price of a market rate house starts at $ 582,500. Now add on advertising,. brokerage, and closing costs, and the sale cost rises to about $ 625,000.00. Add a five percent return, and w’re at $ 656,500. But that’s not all the costs that the compromised Suffolk project has now agreed to. What do you suppose the cost to Suffolk will be of the Belle Isle marsh impact study ? The “carbon net zero feasibility study ? Expanded vocational education for East Boston residents ? Daycare facilities on site ? Continuous review ? It won;’t be cheap. Then there’s the $ 5,000,000 housing stabilization” fund, $ 1,000,000 for “workforce development” and another one mil for “apprenticeship programs.” Add about an additional $ 30,000 to the asking price of those 8,000 market-rate houses.
Banker and Tradesman estimates that the sale price of the market rate houses will top $ 1,00,000. On what basis can I disagree ?
Doubtless that figure arises from the vast costs of lawyers, engineers, environmental consultants and more that Suffolk’s builder will have to hire to get utility lines laid, sewers installed, roads built, and landscaping scaped to the satisfaction of at least three government oversight administrators.
Nor are these the only costs that the project imposes. How about the costs to the Boston (and Revere) taxpayer ? Consider the army of bureaucrats who will have to assess the thousands of applications for purchase of those 2,000 “affordable” units. Also their supervisors. The salaries of these all are going to be paid by YOU.
Even at $ 686,000 per house — not to mention $ 1,000,000 — the 8,000 market rate homes –which are not going to be free standing but townhouse style, and maybe condominium, Suffolk’s market-rate houses will jack up the entire price spectrum of homes in a neighborhood where home prices are already much too high — after all, why the outcry for “affordable” homes if the home price was not now too high ?
Would it not have been much smarter to scrap the absurd “affordability” covenant entirely, and some of the items that really have nothing to do with housing (Belle Isle Marsh ? Apprentice programs ? Vocational ed ?), set the entire project at market rate, then use the market power of 10,000 market-rate houses to peak our already overpriced real estate and perhaps lower it by five to ten percent ? At an asking price of $ 595,000 per house, 10,000 market rate houses offered would absorb more than all of current demand and might bring some market sense to what is asked. That would be an actual affordability move, rather than the government -manufactured, ersatz affordability being imposed.
Why we in our capitalist economy do not trust the market to do its work, I cannot tell. Market prices are the sum of everyone’s opinion. No method of pricing is more democratic than the market method. Yet our City’s wise ones see fit to substitute concocted detours which only add to inequities, choking off the democracy of a market, in the most important purchase most people will ever make.
Above, I stated approval of the project’s use of union labor even though it increases the cost basis of house prices. Why do I approve this cost ? Simple : it puts more money in workers’ wallets. And they will spend it into the economy. Anything that puts more money into consumers’ wallets is good — for the economy, for equity, even for the affordability of homes, obviously. But as for the rest of Councillor Edwards’s long list, I favor ripping it up and starting all over again with market embrace as the primary and absolutely vital goal.
— Mikke Freedberg / Here and Sphere