The Boston City Council on Wednesday approved changes to the city’s inclusionary development policy, which requires developers set aside a certain percentage of space in new buildings at affordable rents.
The current IDP requires developers to carve out 13 percent of new rental buildings at income-restricted affordable rents; the new proposal would increase to 17 percent, with an additional 3 percent set aside for Section 8 voucher holders.
“Boston continues to take every action to urgently tackle the housing crisis displacing families and threatening the future of our community and economy,” Boston Mayor Michelle Wu said in a statement. “(Wednesday’s) approval of a new inclusionary development policy is an important step for Boston’s growth to sustain the affordability needed for future generations to call our city home.”
Real estate groups and the Greater Boston Chamber of Commerce have strenuously objected to the change, contending it will further depress housing production by adding on costs to projects that are already difficult to finance.
“Increasing the supply of housing is paramount to solving the region’s housing shortage,” Boston Chamber chief executive Jim Rooney wrote in a letter to City Council. “Even modest changes to the IDP requirements negatively impact project feasibility. The higher the standards, the more difficult it becomes to build more housing.”
In the first eight months of the year, Boston issued 1,534 building permits for privately owned housing units. That’s down 47 percent from the first eight months of last year and the lowest number for that time period since 2016, according to census data.
At a Tuesday hearing on the policy, City Councilor Frank Baker laid out several expensive changes that have hit the real estate development industry in recent years, including high materials and construction costs and a sharp increase in interest rates, along with increasing linkage fees on commercial developments. Baker asked whether it was the right time to pursue an IDP change.
An analysis by Boston Planning and Development Agency staff shows, of late, developers have been proposing new housing projects with an average of 17 percent IDP units, said BPDA Director James Arthur Jemison. At the Tuesday hearing, Jemison and Boston Chief of Housing Sheila Dillon stressed a feasibility study completed by RKG Associates shows developers can financially manage an IDP increase.
The study examines Cambridge and Somerville, which have both increased their own versions of inclusionary zoning to 20 percent in the past few years. Both cities have seen declines in overall production since the change, though that’s partially due to the COVID-19 pandemic, the report states.
Jemison also mentioned Wu’s speech to the Greater Boston Chamber this month, where she announced she is “strongly considering a time-limited tax incentive program for housing creation” to propel projects that have been approved and permitted, but not yet built, to start construction.
“We are similarly concerned about the production of already approved development, and so that’s why an incentive is being considered right now,” Jemison said at Tuesday’s council hearing.
Baker was the lone nay vote at Wednesday’s council meeting. The IDP policy now heads to the city Zoning Commission for final approval.