Today’s mayor’s newsletter reports that the West Newton Armory project, to build 43 units of affordable housing, just secured a commitment for state funding …
Gov. Maura Healey this afternoon announced that the West Newton Armory will receive state and federal housing tax credits and other state financial assistance. This is especially sweet news as our project received funding in the first round which is rare. Read the press announcement here.
The mood was exciting in Lowell. Along with Newton’s Planning Director Barney Heath, Governor Healey and Lt. Governor Kim Driscoll, the brand new Secretary of Housing and Livable Communities Ed Augustus and Undersecretary of DHCD Jennifer Maddox, there were housing experts from 20 communities across the Commonwealth who also received funding.
Winning this award during the Armory’s first year of eligibility is a credit to the Metro-West/Civico team for their well-conceived plan to transform the long vacant Washington Street building just west of West Newton Square into 43 apartments, all of which will be affordable. More detailed information about the project can be found here.
A lot has transpired since I recommended Newton acquire the armory for $1 from the State for affordable housing in April 2019. I want to especially recognize the efforts of Sue Parsons and Ted Hess-Mahan, co-chairs of the Joint Advisory Planning Group, City Councilors, as well as the Planning Department’s Amanda Berman and Eamon Bencivengo for setting this project up for success.
With hard work and some luck, construction on the Armory will begin next year and new residents will be living there in 2026, according to MetroWest Executive Director Caitlin Madden.
This is an exciting day for affordable housing and for our City.
This is very exciting news. The ZBA approved the 40B comprehensive permit just in time for Newton to apply for state assistance, and we were very lucky to win this award in the first round. The year 2026 seems like a long time away, but it is actually closer than when I first got involved with this project in 2018. Mayor Fuller and Metro West/Civico deserve a great deal of credit as do Barney Heath, Amanda Berman and Eamon Bencivengo in the planning department for having the vision, foresight and commitment to take advantage of the state’s offer to sell the Armory to the city for $1 to convert into 100% affordable housing. Kudos all the way around. This will be a great project for my neighborhood and the city.
Big time props to Mayor Fuller for recognizing this opportunity, having a vision for the property, and making the whole thing happen. I had serious doubts about this project. I’m glad to have been proven wrong.
I’m also very glad the Mayor came to her senses about the State’s ill conceived plan to turn the former Indigo Hotel into a homeless shelter. Newton does not need homeless shelters. Newton’s contribution toward solving the homeless/housing crisis should be building more affordable housing.
To that end, I believe we should be requiring all large residential projects seeking a Special Permit, to designate 30% of their housing units as affordable.
Agreed that the Armory plan is great for affordable housing, but I don’t believe that Newton is exempt from helping to solve the problems of the homeless as well. In my last few years of teaching, I had a few students whose families had lost their homes and were living in wretched conditions. Located near a train stop, that Indigo site might have provided an easy commute for some of the homeless (yes, more than a few of them have jobs) and perhaps facilitated the employment of others.
It’s a tough issue. Every community, however, might be called upon to house some of the thousands lacking basic shelter.
@Bob Jampol – agree 100%
@Bob Jampol: thank you for reminding us of our mutual obligation to help others in need. Mayor Teddy Mann fulfilled this obligation when he persuaded the state to open the doors of the West Newton Armory to provide shelter for homeless individuals. Yes, it is a tough issue. But we should follow Mayor Mann’s example and do the right thing.
Great. Let’s get this show on the road. Between having housing there and IF Dunstan St ever gets finished, we will have a much more interesting and vibrant section of Washington Street.
I’ll stand by my position that the most effective way for the city of Newton to combat homelessness is to require large residential developers to designate 30% of their housing units as affordable. I believe the large homeless shelter proposed by the State for Indigo would have become permanent and placed an undue burden on Newton’s schools and city services.
To her credit, the Mayor was quick to pull the plug when it became clear the State’s Indigo plan was for longer than the two years they had originally implied. Local officials [including the Mayor] are not elected to solve the problems of the world. They are trusted by their constituents to always do the right thing for Newton.
Of course we don’t live in a bubble and this city should do its part to help solve larger problems. While I appreciate that some folks want to solve the state’s homeless problem by building shelters in Newton, I believe our city’s contribution should be building permanent homes for people who need them. We can do that more effectively by moving our affordable unit requirement to 30%.
The 30% would help, but more effective would be to partner more with non-profit developers to build some 100% affordable projects. The City has shown little interest in working with non-profit developers. Case in point, the developer they selected for the Armory is a for profit developer and then had to bake-in their profit. That is crazy.
Equally crazy is that MBTA Communities wouldn’t allow the city to count projects that require that level of affordability
This evening Newton’s Zoning Board will be meeting to discuss Toll Brothers proposed 40B residential development on Rte 9. If the 30% affordable standard were applied, it would result in 13 more affordable units then are currently being proposed by the developer.
City government should be pushing projects like Toll Brothers toward Special Permits rather than 40B. We can do that with an expedited Special Permit process for developers willing to concede 30% affordable.
To follow up on Mike’s point, the City Council pushed the Austin Street project to provide more affordable units than prescribed in the 40b formula. 30% seems a reasonable number though the developers will scream bloody murder, no doubt.
As for MaryLee’s point, are there nonprofits out there who would partner with the city in building 100% affordable units in some project? And would the city be interested in being involved beyond supplying some financial incentives? Most governments, local to federal, evince little desire these days to get involved in exclusively low and middle income “projects,” or any project at all for that matter. They’d rather leave it to big developers and wash their hands of the headache. That’s why the best we have done in recent memory is getting a half dozen affordable units here, thirteen there, and a similar trickle while the need grows and grows.
@Bob Jambol, Boston and Worcester have both partnered with non-profit developers to build 100% affordable projects.
During the course of the discussions about Village Center Zoning Redesign, the Planning Dept. always talks about what is feasible for developers…but the answer to that is very different if we are talking about For Profit or Non-Profit Developers and the city always assumes the former
Ann Arbor MI is a great example of a city that does the same
@MaryLee–
I think the challenge of what you’re suggesting–creating 100% affordable housing development in Village Centers–is the fact that most village center properties are privately owned, which creates a very different financial dynamic than the Armory, which is owned by the City.
Mike, In Newton Center there are at least four city owned parking lots that could and should be completely reimagined. But we seem to have a complete failure of imagination at City Hall
Fair point, MaryLee. I like the way you think!
Non-profit developers look at Newton’s process for approving housing and tell us they can’t afford it (time is money, I guess). The city studied the break-even point for the percentage of apartments that could be affordable about 5 years ago. At the time, 20% was the most aggressive number in the state (and is ours now), but anything higher than that and the project would not be built. 30 or 100% sounds good, but if the denominator is zero, you don’t get new affordable units. I think Boston just adopted 20%.
Andrea’s comment suggests that based on a study done by the city about 5 years ago, developers can’t make a profit if they are required to dedicate more than 20% of new housing units as affordable. I vehemently disagree with that contention. The recent Austin Street development is proof that Andrea is simply wrong.
If other City Councilors are operating under the same assumption as Andrea, it might begin to explain why the City Council left scores of affordable housing units behind on the negotiating table when approving Special Permits for Riverside and Northland. Those two projects in particular could have easily absorbed a 30% affordable requirement, because they include other highly profitable commercial components.
In my [oft repeated] opinion, the City of Newton should be insisting on a 30% affordability standard from all large scale projects that include housing. We can do this by incentivizing developers to apply for Special Permits as opposed to using 40B.
May I weigh in here as a mixed-income sustainable housing developer? (I am one of the developers of 28 Austin Street.) Here are a few observations:
First, to encourage more affordable housing, zoning rules need to be transparent, clear, and consistently applied. In the case of 28 Austin Street, the City’s RFP set the required affordability at 25%. The agreed upon land price reflected that requirement. After the fact, at the eleventh hour, the City Council insisted on 33% affordability. Having already spent two years and hundreds of thousands of dollars, the developers reluctantly agreed to this last-minute demand in order to get the required special permit while knowing it made the project economically infeasible. Only a work force housing loan fund created by the state a year later that lent us $1.3 million at a zero interest rate for forty years made the project economically feasible.
I think 25% affordability should be a requirement of all projects, large and small, in Newton. But the rule needs to be set up front and not changed after the fact.
Second, if the affordability requirement is known in advance, developers bid land prices to reflect the requirement. Our current Village Center rezoning is creating new property rights with greater value for landowners. It is right and proper for the City to retain some of that value creation to achieve important goals like affordable housing through inclusionary requirements of 25% affordability. This is identical to the state’s Chapter 40B requirement meaning there would be no advantage to pursuing a comprehensive permit instead of a special permit with regard to affordability.
Third, competition drives developers to accept the minimally acceptable return after landowners, lenders, and equity partners get paid. If the inclusionary requirements are too onerous (above 25%, I believe), land value is more often driven below the value of existing buildings and no housing will be produced. For anti-housing activists, this may be a desirable outcome. But if we do desire new housing production, then a 25% inclusionary requirement is a reasonable maximum and on par with the state’s Chapter 40B requirement.
Once a developer bids the land price to the highest acceptable price, a developer must pay a bank required interest on a construction and permanent loan and provide an acceptable return to the developer’s investors. Investors compare returns from real estate development to other investment returns. A developer makes money only after providing acceptable returns to debt and equity investors. Today, that return is about 6%. With construction costs and interest rates high, it makes financing and constructing new housing nearly impossible today.
Final point: new housing, whether affordable or market rate, is expensive.
For example, the City of Newton announced in November 2021 it would spend $2.45 million of Federal ARPA money to acquire four structures in Auburndale in very poor condition totaling just 7400 square feet. Still unrenovated and uninhabitable, the City will likely eventually spend another $2.5 million or more to make them into four to six affordable homes — about $750,000 to $1 million for each home.
Likewise, the City acquired the former Armory in West Newton from the Commonwealth for just $1 in October 2021 with the promise to convert it to 100% affordable housing. Through an RFP process, the City selected the project developers, a joint venture of a for-profit developer and non-profit developer. The developers estimated in 2021 that the project would cost $25 million to develop 43 affordable apartments, over $580,000 per unit — without any land cost.
The Armory developers suggest the $25 million cost will eventually be paid for with no fewer than 10 different federal, state, and local subsidy programs including $5 million from the City of Newton and almost $11 million from the sale of highly competitive state and federal low-income tax credits. Construction won’t begin until all of these complex financing sources are in place.
The rules of economics apply to non-profit and for-profit developers equally. Interest rates, construction costs, and required investor returns determine the cost of new housing. And both non-profit and for-profit developers earn development fees to pay their employees. On the Armory, development fees will total almost $2.5 million, 10% of the project cost. This is twice the typical development fee on market rate housing. In general then, non-profit developers make their money on fees up front and for-profit developers make their money over time based on the success of the operation of the project.
Given the deep subsidy required to create 100% affordable housing, there is just not enough government subsidies to build as much housing as is needed.
Stated 25% inclusionary housing policies, on the other hand, have the potential to create one new affordable home for each three market rate homes without any cost to taxpayers.
For more information about building subsidized housing, please see this link:
https://village14.com/2021/10/31/lets-elect-local-officials-with-viable-housing-strategies/
@Scott Oran, thank you for bringing the 411 and a reality check on the economics of creating affordable housing. So many people (including quite a few on Village 14) just do not have a clue. If it were so easy, there would not be a housing crisis in the Greater Boston Metropolitan area.
I have a lot of respect for Scott Oran. He’s a straight shooter, and knows what he’s talking about. He also contributed a marvelous building to the landscape of Newtonville and to the fabric of the city as a whole. As a 60 year resident of Newton, I value things like that.
I want to push back on Scott’s suggestion that the profitability point for developers disappears if they are required to designate more than 25% of new housing as affordable. First, although it may have been an extremely difficult task [as articulated in his comment], Scott’s Austin Street building did in fact designate 33% of the units as affordable. It may have taken a post-construction refinancing to make it all work economically. But in the end it worked out for the city and the developer at 33% affordable.
The financial dynamic of the Austin street development was likely given a boost by the inclusion of street level retail space. The additional income from retail space helps diffuse the cost of building affordable housing. This same factor comes into play with other secondary uses like office and research space. In a large development like Northland, the developer has the ability to underwrite the cost of affordable housing construction with other types of highly lucrative commercial space. It still irritates me that the City Council negotiated such poor deals for affordable housing with the developers of Northland and Riverside.
In addition to a developers ability to diffuse the cost of affordable housing with other mixed uses, the City of Newton should offer even more incentive to hit the 30% affordable mark. I believe we should allow mixed-use and residential developers to build five story buildings by Special Permit if they concede 30% affordable.
Where in your view would it be desirable, permissible to construct five-story buildings?
One specific example would be 28 Austin Street. In my opinion that building should have one more story. And there are already numerous examples of buildings in Newton with more than four stories that function perfectly well with surrounding neighborhoods. The Towers at Chestnut Hill is a good example of those.
@Mike Striar… regarding requiring affordability above 30%: As I wrote above, “If the inclusionary requirements are too onerous (above 25%, I believe), land value is more often driven below the value of existing buildings and no housing will be produced.” 33% affordability was achieved at Austin Street only because the City’s RFP required 25% which depressed the land value (of a municipal parking lot) and a new state program fortuitously came along after the City Council post hoc required an increase to 33%. Just to be clear, without the State’s new work force housing state loan program (now discontinued) which came a year after the City Council vote, Austin Street could not have been built.
Regarding retail and office subsidizing affordable housing: If only it were so! Retail rents are lower than residential rents so the subsidy goes the other way. And with recent post-pandemic work from home preferences, demand for office space is severely damped with 20+% vacancy (and rising) for existing offices and rents dropping (and below residential rents.) Likewise, lab space was overbuilt in response to pandemic demand in time for biotech stocks to correct, forcing biotech firms to retrench, and therefore it will take many years, if not a decade or more, to fill lab buildings already under construction.
So, in sum, unfortunately if we require too high a percentage of affordable housing (>25%), no housing will be built as land cost will not support conversion of existing uses to new housing. Likewise, encouraging mixed use is not a winning strategy to help create more affordable housing as residential rents are higher than retail or office rents so other uses can’t subsidize the housing use.
Scott, isn’t one solution to this to add height? Land cost doesn’t change. More units means fixed costs get spread over a bigger project? Especially on Washington Street, I’d think an extra floor changes the math.
@fignewtonville… Unfortunately, changing zoning to permit greater height or to allow a larger building doesn’t change the economics of the housing developer; it simply makes the land more valuable to its owner. (Developers generally compete to buy land and therefore will bid its price as high as remains economically feasible to achieve returns required by their lenders and investors.)
In terms of construction cost, there are some, but generally only modest, economies of scale. Larger buildings are generally more complex too offsetting any economies. And building above six stories, for example, requires greater life safety requirements to meet the so-called “high rise” building code.
Unfortunately, there don’t seem to be any magic bullets for making housing construction less expensive or providing more affordable housing.
@Scott Oran – That’s a really interesting wrinkle that wasn’t obvious to me. i.e. if the zoning allows one more floor the economic benefit of that mostly goes to the property seller rather than the developer.
Scott’s comments were depressing. There’s no arguing with facts. But I will offer my own perspective, which differs considerably from Scott’s.
As a qualifier… I’ve spent 35 years as a partner in a real estate investment and development company. [I’m involved in other businesses as well, but real estate has been my primary focus]. For years my partners and I specialized in adding value to undeveloped properties by obtaining 40B permits for single family homes. Along with our construction partners, we built about 2000 homes in southeastern Mass using 40B. The partnership also owned and managed other property types, including an apartment building in which 100% of the units were designated affordable.
Through good and bad economic times, developers have been lining up to build on any available slice of land in Newton. If Scott Oran’s company had passed on building Austin Street [after the affordability requirement was changed], it’s a sure bet that another developer would have stepped up to build it. Different developers bring different resources to the table. Some get a better loan rate. Some are vertically integrated, and less dependent on subs. When a development project in Newton has political support, there will always be a developer who wants to build it.
Our City Council needs to better prioritize affordable housing. It’s clear from Northland and Riverside, they have not adequately done so. A large part of the problem appears to be a lack of expertise on the Council. They are simply overmatched every time they sit down to negotiate with a sophisticated developer.
Newton’s policy should be very simple, and its message to developers clear. We expect 30% of the units of any new large residential development to be designated as affordable. If you want the City’s cooperation, 30% is the price of admission. If this city took that approach, I guarantee the developers would still be lining up to build in Newton.