Cambridge seeks to tie building boom to affordable housing
Cambridge is poised to triple the fees that developers must pay into its affordable housing fund, hoping to harness the building boom underway in Kendall Square to raise millions of dollars for more lower-priced apartments across the city.
City leaders are betting that the world's capital of biotech is such an attractive address that developers will pay more for the right to build properties there. And they say the proceeds raised from the fees will help keep low-income residents from being priced out of town.
"We're in this development boom," said Councilor Denise Simmons. "We want to take advantage of it as much as possible."
The Cambridge proposal is part of a broader effort by advocates and public officials in the Boston area to have the linkage payments by developers keep pace with the soaring costs of housing. In Boston, Mayor Martin J. Walsh is studying an increase in its linkage fee after a lobbying effort this year by housing advocates. Somerville increased its fees for developers two years ago.
In Cambridge the fees are assessed only on commercial properties and are based on the amount of square footage proposed by a developer. The fees are paid into a city fund that finances new construction or keeps existing subsidized properties affordable. Developers of residential complexes are required to include affordable apartment or condo units within their buildings.
In Cambridge, the fee was originally set in 1988 at $3.28 a square foot but has increased over time to its current rate of $4.58 to account for inflation. Now several City Council members have proposed a much bigger jump — to $12 immediately, and then in steps to $15 by 2018. And for the first time, institutions such as the Massachusetts Institute of Technology would have to pay the fee for certain projects.
With other adjustments to the formula, a developer of a 100,000 square-foot building would pay a fee of $1.2 million, instead of $476,775 under the current rate. Cambridge officials estimate the higher fee would raise an additional $10 million over the next few years.
The measure won the blessing of a key council committee earlier in July and is expected to get a final vote Aug. 10. City officials and Cambridge business leaders both expect it will pass.
That could give a boost to efforts in Boston, where housing advocates have been urging Walsh to increase the city's $8.34-per-square-foot housing fee to $12. The fee was last raised in 2013, from $7.87.
A Walsh spokeswoman said city officials are in the "final stages" of reviewing revisions to Boston's linkage fees but declined to provide details. And Councilor Michael Flaherty this week requested the Boston City Council schedule a hearing on the matter.
"We're experiencing unprecedented growth and development in our city," said Flaherty. "It's time to take a look at linkage fees, to see if they're working and how they might be tweaked." He suggested Boston could extend the fee to smaller developments; currently only buildings larger than 100,000 square feet pay the fees.
One of the advocates lobbying Boston is Joseph Kriesberg, executive director of the Massachusetts Association of Community Development Corporations, who represents nonprofits that build affordable housing. He said Boston should follow Cambridge's lead on raising the fee to $12.
"It shows that this is not an unreasonable request," Kriesberg said. "The development community can sustain it. We ought to keep up with Cambridge at least."
But others say Cambridge may be a special situation.
The volume of development coming to Cambridge is staggering: some 4.6 million square feet of office, lab, hotel, and related buildings are projected to be built over the next decade, according to a consultant hired by the city. Much of that is in Kendall Square, where the Massachusetts Institute of Technology alone is planning six buildings.
The proximity to MIT and Harvard — and to other life sciences companies — has made Kendall Square such a biotech hub that businesses are willing to pay the highest office rents in Greater Boston.
"Cambridge is a unique market, really a boutique market," said Greg Vasil, chief executive of the Greater Boston Real Estate Board, which represents property owners and developers. "You're talking about biotech-driven development, which is very well financed and better able to absorb the extra cost than across the river in Boston."
But even Cambridge has limits. A city consultant estimated that $24 per square foot would be needed to meet the demand for affordable housing. But he also acknowledged that such a high fee would drive office tenants out of Cambridge.
At $12, though, there was no big pushback as the measure moved through City Council hearings this spring. Developers, MIT, and the Cambridge Chamber of Commerce all eventually signed on.
"We're comfortable with it," said Sarah Kennedy, director of government affairs at the Cambridge Chamber. "We think it's reasonable and we think it helps Cambridge meet its current and future needs for housing."
Still, in a city that mandates not just linkage fees but other contributions from developers, such as street improvements, some question whether there is a limit to what Cambridge can demand.
"There's all these things," said Sarah Gallop, codirector of government and community relations at MIT. "They're all good ideas. But there's a question about what's the tipping point."
Cambridge Housing Director Chris Cotter expects the city will use some of the additional money to continue subsidizing existing properties. A survey Cambridge conducted several years ago of its stock of subsidized apartments found roughly 1,100 units in which federal subsidies were due to expire by 2021, a step that would allow their owners to charge higher market rents.
Since then, Cambridge has used city funds to help extend the subsidies at eight of the 11 complexes — covering about half the units. The higher linkage fee could help the city support the biggest, the 504-unit Rindge Towers, where subsidies are due to expire in 2020.
"It's a win for the property," Cotter said. "It's a win for the residents, too."
The linkage fees are largely used to benefit low-income residents. But Jesse Kanson-Benanav, chairman of the civic group A Better Cambridge, said even two-income professional couples are finding it difficult to pay Cambridge's pricey housing costs.
"People of low income are in a particularly bad situation. But pressure has begun to ratchet up the income ladder," he said. "We need to make sure we can reach the middle incomes as well."