PSNA April 2019

Thursday, April 18, 2019 - 7:00pm

PSNA, Agassiz Baldwin Neighborhood Community and the Association of Cambridge Neighborhoods co‐sponsored an informational presentation of the zoning, financing, and policy factors that affect the construction and rental of affordable housing. The objective was to provide residents with more information on this issue to support an informed review of a proposed zoning ordinance to create a citywide overlay that would allow affordable housing to be built as of right. This ordinance has not been drafted, but CDD has posted

https://www.cambridgema.gov/CDD/Projects/Housing/affordablehousingoverlay

Larry Field, Deputy Director of the Massachusetts Smart Growth Alliance, moderated the program and updated us on the various real estate transfer fee proposals being considered on Beacon Hill.

Affordable Housing Financing 101

James Stockard, an expert in affordable housing and community development who served on the Cambridge Housing Authority for 30 years, walked us through the factors that affect the cost of building affordable housing and the rents that tenants pay.

Stockard began by explaining the impact of the relationship between cost and price. The price of housing for rent or sale needs to be higher than the cost of building it so that developers will build more. The problem in Cambridge is the substantial difference between the two.

Any rental project built in Cambridge has to cover its development costs and its operating costs. Development costs include the purchase of land, services of an architect, construction materials used, and the wages paid to construction workers. The funds to cover these costs come from the equity (how much the developer invests) and the debt (how much the developer needs to borrow) required to finance the project.

When the building is completed, its operations costs include the utilities, maintenance, real estate taxes, and the mortgage payments.

To cover these costs, market‐rate developers rely solely on the revenues generated by the rents.

To lower the rent charged to tenants, affordable housing developers seek various types of grants and subsidies that lower their costs. These developers also bear an additional cost: compliance with governmental policies and goals. Examples include accessibility, energy conservation, preferences for renting to current residents of a city or town.

 

To receive funding, developers need to participate in more review processes, which, in turn, introduce delays along the way, which in turn affect project costs.

The common cost‐reduction methods include cheap land, tax credits, and project‐based Section 8 vouchers. In addition, Section 8 mobile vouchers are awarded to renters to apply to market rents. Stockman noted that most of these vouchers granted to Cambridge residents are used outside Cambridge because rents are so high.

In response to a question about other methods that could be used to make more housing available, Stockman suggested the city could purchase current housing stock, which would not have development costs. He was, however, not expecting the city would do this.

Use-based vs form-based zoning

John Tittmann, a partner at Albert, Righter & Tittmann Architects in Boston, and past president/former board member of the Congress for New Urbanism/New England Chapter, described two approaches to zoning and how they influence the way that buildings and streets look.

The first approach, use‐based zoning, is the one we are most familiar with. Based on approaches developed during WWII, it favors placing buildings with similar uses together. The development of most of the United States reflect this separation of residential and commercial areas.

As it evolved, the focus has been on what can be built on a lot; little to no attention is given to what the street looks like afterward. To illustrate this point, Tittman presented sketches of three structures that could be built by right on adjacent lots of equal size in an area that has a floor area ratio (FAR) of 1:

  1. A one‐story building that extends to the boundaries of the lot
  2. A small, one‐story building that represents a FAR of .05, placed in the center of the lot surrounded by a large lawn or a parking lot
  3. A two‐story building set back 10 feet from the sidewalk.

The result is an ugly street.

 

The second approach, form‐based zoning, controls important aspects of the form of the structure to be built. It is gaining favor because it provides a mechanism for establishing an architectural harmony of buildings with streets. Its principles are being incorporated into the proposed affordable housing overlay.

To illustrate how form‐based zoning can work, Tittman considered three common types of city streets:

 

  1. Residential
  2. Commercial
  3. Urban avenue (e.g., Mass Ave.)

 

A form‐based code would require all buildings along each type of street to be the same height or within a narrow range of minimum and maximum heights, and that the wall that faces the street be built along the same line (for example, 15 feet or 25 from the sidewalk) and include a specified percentage of fenestration. The uses of these buildings could be commercial or residential, yet the street itself would look better. One of the best‐known examples of this approach is Paris.

Tittman made two other observations:

 

  1. Open space requirements are meaningless without controlling the form of the built environment.
  2. With respect to density, the two‐story structure in the by‐right example above could be a large house for one person or three condos. Density is perceived to be a problem largely when the number of cars increases, not the number of people.

 

Real Estate Transfer Tax

There are multiple proposals on Beacon Hill to increase the state deeds excise tax applicable to most real estate sales, allow cities and towns to enact their own real estate transfer tax, and/or increase the fees on certain documents filed at the county registry of deeds.   Right now, the current deeds excise tax rate is $4.56 per $1000 and is levied across the state; proceeds go to the general fund. Rates in neighboring states are considerably higher: $15 in New Hampshire, $12.50 in New York, $12 in Connecticut.  The registry fees—on documents like a mortgage, deed or municipal lien--are modest and split between county costs and supplying most of the state match for the community preservation act (CPA). 

The Governor has proposed raising the deeds excise tax by 50% to fund climate adaptation/mitigation projects.  Three proposals would enable cities and towns to enact a real estate tax up to 2% of the purchase price to fund affordable housing; details vary.  The House budget raised the registry fees to support CPA; the Senate budget process is still underway.  Finally, a coalition of organizations are urging a hybrid—raise the deeds excise tax by 100% and split the proceeds 40% for climate, 40% for affordable housing and 20% for CPA.