THE ROAD to Boston’s current housing crisis was paved with good intentions. The Menino-era policy regarding affordable housing set-asides in residential developments is a prime example of a well-intentioned program that has backfired in some respects, and it’s good news the Walsh administration is considering sweeping changes that could reduce some of the obstacles that policy poses to housing construction.
Boston needs developers to build about 53,000 new units of housing by 2030 to get the city out of its hole, according to the administration. The consequences of failure would be grim. Without adequate housing supply, neighborhoods are already experiencing a wave of instability; as the Globe reported recently, East Boston seems to be the latest , as students move in and start squeezing out longtime residents.
There are many factors at play in Boston’s tepid housing growth, but one directly under City Hall’s control is the inclusionary development policy, which requires developers to discount 13 percent of the units in large residential developments so that they’ll be affordable to low-income families. Developers also may be allowed to “cash out,” or pay a fee that goes to support affordable units elsewhere in the city.
Those requirements inevitably raise the cost of building new apartments or condos, which is already daunting in Boston because of high land and labor costs. But it works in downtown locations where the market will support such steep prices that developers can recover their costs anyway. Since its adoption, according to data from the Boston Municipal Research Bureau, the inclusionary development policy has led to the creation of 2,950 new affordable units. The city could probably even raise requirements in its wealthiest sections without taking the steam out of development.
The problem is that in other neighborhoods — just the places where pressures on existing housing are felt most keenly — the rules can help make it impractical to develop new housing at all. A developer must be able to pass along the costs of affordable units to market-rate tenants — which is only possible if the market will accommodate those higher rents. An investment banker in Back Bay might shrug off a few hundred dollars extra a month, but that cost would be prohibitive for a medical researcher in Mission Hill.
Those scenarios aren’t just theoretical possibilities: They reflect the reality the city is now seeing on its skyline. Cranes have sprouted up all over downtown, and the development pipeline is full of new luxury units. But progress on nonluxury housing is still slow. Meanwhile, those medical researchers are crowding into housing in Brighton and Jamaica Plain that once housed working-class families.
The Walsh administration is close to unveiling a new inclusionary development policy that will, hopefully, take into account the dramatic differences in the real estate market across the city. It’s understandable that advocates for affordable housing want more revenue, but to the greatest extent possible it should come at high-end developments, and not hamper developers who want to build much-needed housing in places like Mission Hill or Mattapan.
Specifically, developers in those neighborhoods should have no or reduced requirements to include affordable housing, and reduced “cash out” charges. Reducing affordability requirements may seem like a counterintuitive way to fight displacement. But every resident moving into a newly created unit is one fewer apartment-hunter answering a Craigslist ad for a room in a three-decker. Like it or not, the “gentry” are coming: The question is whether the city allows the private sector to produce housing to accommodate them, or just lets them continue to crowd out families and low-income residents. Nor would reducing the affordability requirements necessarily take much funding away from affordable housing; when the requirements are too high, affordable housing just gets 13 percent of zero.
Inclusionary development has a successful record in Boston, and the criticism that it kills development is clearly contradicted by the spate of new luxury construction. But right now, the city’s tool is too blunt, and it’s contributing to the difficulty of building middle-class housing. The most important reform to come out of the administration’s review should be the simple recognition that different neighborhoods need different policies.