Housing USA: Boston
By Scott Beyer
6 min read
A Workforce Unicorn
If you’re a renter who’s managed to secure a spot in The Beverly, you’re living the life right now. The 14-story project sits right near the Lovejoy Wharf in Boston’s fashionable North End. It’s within walking distance of the city’s Little Italy, the robust marketplaces, major train stations and TD Garden arena, where the Celtics and Bruins play. Depending on where you’re situated in the building, you’ll have views of the waterfront or the Rose Kennedy Greenway. Inside the building, you’ll have access to a fitness center, outdoor terrace with grills, children’s room, entertainment room, pet spa and bike storage facility. For all this, you’ll pay well below market rates.
If all that sounds too good to be true, that’s because it is for everyone besides the lucky few who live there. The project may well be an affordable housing unicorn—a beautiful building that was complex and expensive and took great skill and savvy to fund and construct—but is not scalable enough as a general model to be replicated and meet metro Boston’s immense housing needs.
Despite being a hub for affordable housing development and expertise, Boston is in a chronic housing shortage, and needs more units built rapidly and cost-effectively, for all income levels. The metro permits about 11,000 units annually, which is miniscule compared to other large, in-demand metros. New York City, Houston and Dallas permit between 40 to 50 thousand units; while Los Angeles, Atlanta, Phoenix, Washington, D.C. and Seattle generally permit between 20 to 40 thousand units annually.
In October, 15 area mayors, led by Boston mayor Marty Walsh, announced an “emergency” housing plan to add 185,000 units across the region by 2030. That’s about 15,000 per year—not much different than the rate getting built throughout Boston now. The mayor’s affordable housing program, launched in 2016, will spend $28 million to preserve or produce 837 units—which, again, is helpful, but hardly going to put a dent in regional housing demand.
The Beverly is a 239-unit building, consisting of mostly studios and one- and two-bedroom rental apartments, and developed by Related Beal. It opened this past July, following a highly-publicized lottery that attracted over 6,000 applicants. Every unit is income-restricted, making it the first project of this kind to get built in downtown Boston in 25 years. Forty-eight of the units qualify as “affordable housing” for people earning annual incomes between $17,578 and $60,000. The other 191 units are “workforce housing,” and available to those making between $64,650 and $198,000. Depending on who the tenant is, rents for studios are between $480 and $2,900; and rents for three-bedroom units are between $1,200 and $4,300. With local businesses hoping to keep graduates of Boston’s celebrated educational institutions in the community, a high-quality of housing that is also affordable is an attractive local benefit.
As high as these rents may sound, they’re not close to the market rates for the area. The average rents for all apartments in downtown Boston are $3,555. In the residential development across the street (which Related Beal also built), purchase prices start at $750,000 – for a studio. While “luxury” may be the prevailing aesthetic for this new housing around the neighborhood, the units in The Beverly won’t have the same flourishes.
Rather, there was a complex financial arrangement, which allowed The Beverly to charge lower rents, involving a coordinated effort between 25 local, state, federal and private stakeholders. Total project costs were $230 million, and financing came from various sources. Mass-Development, the state’s economic development and finance agency, issued $86 million in bond financing, with Wells Fargo facilitating the purchase of the bonds. Related Beal invested $52 million. Related also found $14.6 million in State and Federal Low Income Housing Tax Credits. MassHousing, an independent, quasi-public agency that finances affordable housing statewide, added $3 million from the state’s Affordable Housing Trust Fund. The Boston Planning & Development Agency contributed $11 million through its inclusionary development policy, which lets developers pay into a fund rather than adding affordable units to their projects.
Another complication within the deal involved the land. The Beverly sits over a freeway tunnel, and the land is owned by the state Department of Transportation. The plot was leased to Related Beal for $12.3 million over 99 years.
To generate additional revenue, Related Beal built multiple other uses into the structure. There is a 220-room Courtyard Marriot on the western end of the building. There is 10,000 square feet of retail on the ground floor. And there is a parking garage that the city is allowing Related Beal to charge market rates for, rather than offering the spaces for free to tenants.
The actual housing units, however, will remain income-restricted for 50 years, helping to preserve a small bit of affordability in an expensive area.
“The Beverly marks the successful creation of new affordable housing opportunities for individuals and families in downtown Boston,” said Mayor Walsh, at the project’s opening. “It continues to be my priority to expand access to affordable housing in the city and I am excited to welcome the hundreds of residents who will be fully moved into their new homes this summer.”
What The Beverly does not represent, however, is a particularly economical or scalable way to provide widespread affordable housing. It was built on prime downtown land, featured vertical construction and involved legal and political complexity. As a result, the units themselves were bound to be expensive to produce – in this case, $400,000/unit. By comparison, median home prices in the U.S. are $221,500, according to Zillow. In metro Boston they are $459,600, but that’s factoring in all the luxury condos, historic renovations and large, single-family homes in the suburbs. In many areas close to downtown, home price medians hover well below $400,000.
The Beverly will house several hundred people, adding a small number of units to help alleviate the backlog in Boston and may well keep skilled workers in town. But it does this in an expensive way and it involved a complex political process that can’t be replicated quickly, en masse. The Beverly is one small step, but it’s still just a unicorn.
