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A Compendium of Property & Capital News

Public-Private Partnerships Can Help Greater Boston’s Housing Shortage

December 04, 2020 - By Contributed by John Pugh
Rendering: Town of Holbrook Housing Project

BOSTON–It’s hardly a secret that Greater Boston is experiencing a shortage of housing, particularly homes that are affordable to working-class individuals and families. There are a number of factors cited for the lack of affordable housing development, including skyrocketing land and construction costs - but much of the recent research indicates that the difficulty of building multifamily housing in Boston’s suburbs lies with the lack of inclusionary zoning in many municipalities.

A recently released report by the Brookings Institution is the latest to draw attention to this stark truth. “High housing costs and inadequate supply (in Greater Boston) are not a natural outcome of market forces; they are the result of policy choices,” the report bluntly states. “Too many of the cities and towns in the Boston area and places like it have used zoning and other regulations to limit new housing development.”

While multifamily developers doing business in the cities of Boston and Cambridge have a more clearly defined pathway to getting their projects approved and permitted, that is typically not the case in Greater Boston’s suburbs. There are 351 municipalities in Massachusetts, each with their own zoning ordinances and bylaws, and as researcher Amy Dain concluded in her comprehensive 2019 study of the zoning regulations for multifamily development in 100 cities and towns in the Boston metro region, “The prescribed permitting processes are often time-consuming, risky, and highly political.” As a result, many developers are hesitant to get involved in suburban development.

One of the options for developers to sidestep a town’s prohibitive zoning is the 40B, viewed by some as the “nuclear option”. Chapter 40B (also known as the Comprehensive Permit Law) is a state statute which allows developers to override local zoning bylaws in municipalities where less than 10% of the housing stock is defined as affordable (Subsidized Housing Inventory or SHI) – providing that at least 25% of the units being built have long-term affordability restrictions, typically reserved for households earning less than 80 percent of AMI (area median income).

The law has been successful in creating over 60,000 sorely needed affordable units in the Commonwealth since its inception in 1969, but also has its detractors. Although many towns have clearly used exclusionary zoning practices to discourage multifamily development for less-than-principled reasons, there are also some developers who are driven primarily by profit and are not necessarily looking out for the best interests of the town. Poor quality construction, projects built with excessive density and heights that do not consider the character of the community, and a lack of concern for the environment are often listed by communities as byproducts of 40B development.

As inviting as the use of 40B may sound to developers, it is no panacea for those wishing to develop projects in less-than-friendly environments, as even well-credentialed local developers have found. Steve Zieff, president of Waltham-based development firm Eden Management (who previously worked with Baystone Development during the permitting phase of the 725-acre Legacy Farms development in Hopkinton), has been embroiled in legal clashes with the Wayland ZBA to gain approval for Cascade, his proposed 60 unit apartment complex, for nearly four years. Oaktree Development in Cambridge has faced similar struggles in their four-plus year effort to develop the Mugar property in East Arlington, despite the state Housing Appeals Committee (HAC) ruling against the town in October of 2019.

A study authored by Lynn Fisher of the MIT Center for Real Estate in 2007 found that from 1995 to 2007, 90 percent of comprehensive permit applications denied by local zoning boards were appealed by developers, and the average time from 40B application submission to receipt of the building permit was nearly two years. With margins already being so thin due to escalating land and construction costs, additional soft costs often deter developers from pursuing suburban multifamily development.

While a number of suburban cities and towns will continue to try to stall 40B development and affordable housing in general, there are a number of municipalities with forward-thinking leadership that not only want to get out in front of 40B requirements but provide affordable housing for the good of their community. It is that suburban market that presents opportunities for developers seeking reasonable risk-adjusted returns while helping to alleviate the Commonwealth’s affordable housing crisis.

Pugh Management recently partnered with Civico Development to deliver Oriole Landing, a 60-unit, sustainable, mixed-income (25% affordable) apartment community in Lincoln that was built on the site of the former Oriole Farm. During the course of the development process, it became clear that a replicable model for getting responsible development done in the Greater Boston suburbs while helping municipalities meet their affordable housing goals – and avoiding unwanted 40B development – could be devised.

The success of the Oriole Landing project was driven by three key elements which – not surprisingly – are cornerstones of a number of successful public-private partnerships involving affordable housing. The three components were an intensified due diligence process, a shared vision between the developer and the municipality, and a proactive and sustained community engagement process – something that has become increasingly important with the growing influence of social media.

Know Your Town

First, there has to be an interest on the part of the city or town leadership to address their affordable housing requirements. Developers need to have some degree of assurance that they will not waste their time, capital and reputation on a project that has no chance of ever happening. The challenge is to determine which of the municipalities will be supportive of responsible development that provides a mutual benefit for both the town and the developer.

In the case of Oriole Landing, the avoidance of 40B was a motivating factor, but Lincoln had long been proactive in meeting its affordable housing goals through strategic planning and zoning changes implemented at town meeting. However, Lincoln’s Subsidized Housing Inventory (SHI) would fall below 10% by 2020, making the town vulnerable to 40B development.

The town had already been approached by multiple 40B developers as early as 2016 regarding the Oriole Farm site, and each proposed high-density projects ranging from 125 to 250 units needed to ensure profitability on the six-acre property, according to the developers. The town was interested in preserving its small-town character, open space and conservation land, and had time to consider their options, so the “friendly 40B” proposals were declined.

In 2017, the Civico development team approached the town with their own proposal of 60 units and 12 townhouses, and were also rebuffed, but received feedback on density, height, building and property design, and went back to the drawing board.

Affordable Housing Development is a Collaborative Effort

Although some municipalities will resort to whatever is in their power to thwart 40B projects, those with a legitimate interest in addressing affordable housing development realize that it involves give and take with reputable developers. A willingness on the part of both the municipality and the developer to compromise to achieve a common goal is essential, and developers who understand this collaborative process are more likely to be successful in getting their projects approved.

“Developers should come in with a clear picture of design and what is appropriate for the community, making sure it’s contextual not only within the neighborhood but also the town. Just looking at the numbers to determine what is a feasible project is limiting, because once you start talking with the town you can see that there are a lot of options,” says Civico founder and architect Andrew Consigli. “When a developer comes in and they’re following a 40B, aren’t willing to listen or hear any suggestions, and are just trying to railroad a project through, they may not realize that projects can actually get better with a collaborative effort.”

After their original proposal was rejected by the Town of Lincoln, Civico returned with a plan that eliminated the townhouses, reduced height and density, and incorporated significant design changes. With 25% of the units (15 total) designated as affordable in perpetuity, the Town of Lincoln was able to include all 60 units in its SHI, thus ensuring they would remain under the 10% affordability threshold for decades to come. In exchange for the concessions, the town’s Affordable Housing Trust and Housing Commission agreed to grant the development team a $1 million interest-free loan to assure the economic feasibility of the project.

This was not a trivial decision. Following a series of meetings with a wide-ranging group of constituencies from the Historic Commission to the Conservation Commission, the town administrator and planning board understood that this would be the best option to solve the affordable housing issue. The decision was also reinforced by citizens of the town who were involved in commercial real estate and real estate finance who vetted the development proposals and numbers. In addition, the development team was bound by a Special Permit that guaranteed that all as-built plans had to align with the completed project or the certificate of occupancy would be withheld.

Engage the Community in the Process

An increasingly important ingredient for gaining approval for affordable housing proposals is public engagement. Affordable housing efforts are often hampered by vocal opposition that does not necessarily represent the majority of the residents or the goals of municipalities. Engaging the community via a coordinated plan or utilizing a community engagement platform helps to dispel misinformation that is sometimes is used to reinforce common NIMBY themes that obstruct the development of affordable housing.

In March of 2020, civic engagement platform coUrbanize conducted a national survey on the attitudes of residents towards real estate development in their communities. One finding was that 55% of respondents perceived affordable housing solutions as a “welcomed, attractive addition to their community.” In the introduction to the study, Karin Brandt, the company’s CEO and founder asserted, “Fear is at the root of the NIMBY movement. And NIMBYism has stemmed an inverse fear in developers – that communities fundamentally oppose new development. In my experience, NIMBYs may be the most vocal faction of the community, but they aren’t necessarily the majority.”

Early on in the process, Civico was strongly encouraged by the town to get in front of the townspeople, conduct open public meetings, and to be fully transparent on why the loan from the housing trust was needed to make the project possible. Since the town backed the project, they contributed by educating the residents on why Oriole Landing made sense for Lincoln and what the potential consequences could be if the town did not stay ahead of the 40B requirement.

The Town of Lincoln had already been working with coUrbanize to gather input from the residents on the development of a master plan, so having the social media platform in place provided a way for Civico to share their plans directly with the community in a medium that was familiar to residents. It allowed the developer to manage the conversation by fielding questions, concerns, and comments from the citizenry and respond to them in real-time. So when it came time for the approval process at the town meeting, the main issues and concerns had largely been addressed and the project was swiftly approved.

“There was a tremendous amount of public outreach by the Civico Team, the Housing Commission, and the Planning Department to answer any questions or concerns raised by Town residents regarding Oriole Landing,” said Paula Vaughn-Mackenzie, assistant director of planning and land use for the Town of Lincoln. “This is what allowed the project to gain broad-based support and ultimately approval at Town Meeting.”

Replicability

While much of this report focuses on the approval process for Oriole Landing in Lincoln, the principles used in securing Town approval for the project can serve as a blueprint for developers seeking meaningful risk-adjusted returns in the suburbs. While Civico has used the formula successfully to gain approvals for affordable housing development in the communities of Lincoln, Reading, and most recently, Winchester, since 2017, the components of the model are being successfully deployed by multiple developers interested in working with municipalities to solve their affordable housing issues.

More recently, Pugh Management has partnered with Mullins Management and the Town of Holbrook to build an 80-acre mixed-income, mixed-use community at the site of a former dairy farm which is currently home to a bowling alley. The project required rezoning to allow for the construction of 215 units of new housing (including 50 affordable senior housing units) and will bring 60,000 square feet of commercial/retail options (including a renovated bowling alley), to an area that has been underserved by retail, and will include a much-needed market/fresh food element for a town which currently has none. The partners are also working with an impact investment fund dedicated to building healthy neighborhoods to help finance the project.

(John Pugh is the founder of Pugh Management, which serves as a development operating partner with family offices, developers, and ultra-high-net-worth investors.)

John Pugh