AT A TIME when the cost of housing is driving people out of Massachusetts, increasing homelessness, and forcing parents to work multiple jobs to pay the rent, the Healey administration will award $27 million in tax credits to developers of unaffordable—and often luxury – housing in Gateway Cities.
Gov. Maura Healey has justifiably identified housing affordability as the number one problem facing the state, and renters in the 26 Gateway Cities are struggling with surging rents, evictions, displacement, and homelessness. As the mayors of Salem and Lynn warned: “Our current residents are being pushed from our cities, and we are having a harder and harder time being a welcoming place to new residents.”
Which makes it hard to understand why the state continues to spend precious resources on exclusively high-end housing. The recently announced $27 million in tax credits through the Housing Development Incentive Program (HDIP) ignores the pressing need for affordable housing and will, in many cases, only worsen the current crisis. HDIP should be reformed to support developments that include affordable units.
This latest round of HDIP awards from the Executive Office of Housing and Livable Communities (EOHLC) subsidizes developers of 547 units in 13 market rate and luxury projects in 11 Gateway Cities. Only 13 of the 547 units will be affordable for households making a middle-or low-income wage. Why? Because, under current law, HDIP credits subsidize only market rate developments.
This $27 million comes on top of $90 million already awarded in the last 10 years and is just the beginning of expanded spending on market rate and luxury housing. Last year’s billion-dollar tax bill tripled the annual cap on HDIP tax credits to $30 million every year and threw in an additional $57 million. The July awards are only the first of three funding rounds scheduled this year. HDIP developer subsidies will cost taxpayers up to $327 million over the next 10 years for what supporters say will yield 12,500 apartments. Absent reform, none of them will be for low or moderate-income Gateway City residents.
Two years ago a Massachusetts Law Reform Institute (MLRI) analysis found:
HDIP rents are often shockingly high with no limits on increases;
HDIP is often misdirected to strong market areas where no subsidy is needed. More than half of HDIP credits and more than half of the units were awarded or reserved for only 5 of the 26 Gateway cities.
Only 2 percent of the 4,000 units in built or previously approved HDIP projects are somewhat affordable.
While HDIP can be used for mixed-income developments, the credits can only support the market rate units and most projects are entirely market rate.
HDIP provides no direct or community benefits to lower income families and fails to recognize the housing emergencies they face.
HDIP caters to smaller households with disposable income and only about 2 percent of apartments are suitable for families with children.
Perhaps in response to this report, EOHLC “encouraged” developers applying for credits in this round to “consider” including affordable units and a mix of bedroom sizes. However, that encouragement had almost no effect. Like previous awards, only 2.4 percent —13 of 547 units—will be somewhat affordable and of those only three could be rented to those with very low incomes. And, as before, very few of the new apartments can accommodate families with children—67 percent are studios or one-bedroom units and only 2.6 percent are three-bedroom apartments.
How is this addressing in any way our desperate need for housing for low- and moderate-income families?
We understand that HDIP can be a useful tool to make projects feasible in some Gateway City communities that are unable to develop any market rate housing without this assistance. But, as before, several communities receiving new credit awards already attract market rate developments without the need for precious state subsidies. The booming city of Worcester that garnered the largest share of previous HDIP tax credits was awarded another $2.5 million for a project with 198 high-rent apartments – none affordable.
And why should we reward cities with poor affordable housing track records with new HDIP resources for entirely market rate development? One example is Fall River,which is overseeing a market rate “boom” and had already received $7.8 million for 248 HDIP apartments.
The city’s renters struggle with a dangerously low vacancy rate, soaring rents, and increased evictions. Yet Fall River allowed its affordable inventory to shrink by about 100 units since 2013 while it added more than 600 market rate and luxury units since 2017 and gave zoning approval to another 2,000. The city has no plan to address the shortfall. Nevertheless, EOHLC gave Fall River another $5 million for 82 market rate units in two developments. This makes no sense.
The Legislature and the governor should go back to the drawing board and fix HDIP to require mixed income housing—both market rate and affordable. Meanwhile, the state must do more than “encourage” a measure of affordability and equity. EOHLC should devise a meaningfully competitive framework for HDIP awards based on factors including affordability and the municipal affordable housing track record. It should prioritize weak market and distressed areas along with a range of bedroom sizes and benefits to local residents.
We shouldn’t be paying developers to make the affordable housing crisis even worse for Gateway City residents.
Georgia Katsoulomitis is executive director and Judith Liben is a senior housing attorney at the Massachusetts Law Reform Institute.
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