What some affordable housing proponents miss
Back in the 1970s, when I took my first professional courses in real estate appraisal, I learned some fundamental things about Massachusetts communities’ real estate tax revenues that I see many other proponents of affordable housing in Cambridge clearly do not understand, to our danger
Homogeneity of building size and style is a key element of residential real estate market prices and values. More of it increases market values; less of it decreases them.
Homogeneity of interior uses (how many and who live there) is of far less influence to the value of neighboring buildings.
Our state’s Appellate Tax Board has the power to lower significantly the assessment (and thus the real estate taxes) of any building where the neighborhood zoning is changed. The obviously well educated neighboring of town of Brookline was once shocked to see its real estate tax revenues lowered dramatically by the board (because he town had adopted rent controls, back before those became outlawed by statewide referendum). That lowered reasonably expected future rents, and rental income is a major factor affecting market values and thus real estate assessments and taxes payable.
But any time the zoning of an adjacent or nearby building is changed – to allow more height, smaller setbacks, smaller side, front or rear yards or less tree canopy or sunlight – neighboring owners are entitled to varying degrees of real estate tax rebates. I’d rather forgo some expert testimony fees before the board than see any neighbors and our whole city suffer by my keeping quiet and not warning of these dangers.
There are far safer and better ways of providing affordable housing. Some proven examples:
My own house is on a northeast corner. Directly across the street on the northwest corner is a larger Victorian house, which – with my avid public support – was converted into a well-run halfway house for mentally challenged folks. That hasn’t hurt the market value of my house, because that house is a far handsomer Victorian than mine, and better painted. Right now, I’m hurting its market value; but its interior change has not and will never hurt me.
In 1963, at 64 Wendell St., I started a trust for – and helped buy – a vacant three-family house to be turned into a nonprofit clubhouse to house eight to 12 graduate students and working folk (including me). We converted it into one big house, sharing the living room, dining room and kitchen on the first floor and the three bathrooms, one on each floor. I lived there until getting married three years later.
These are real examples for how we can encourage affordable housing without overbearing zoning gimmicks that have inherent dangers of tax revenue reduction and unhappy citizens.
I suggest some safer, more constructive and easy approaches.
- Be conservative about approving overbearing taller, wider buildings; less front, side or rear yards; or less sunlight or trees than nearby buildings have. Why pay dearly for those at the Appellate Tax Board?
- Be correspondingly liberal about allowing a wide variety of changes inside existing residential buildings, which avoids monetary dangers and neighborhood unrest but can provide affordable housing. Some examples:
Get rid of the antiquated provision in our existing zoning limiting occupancy of any single-family house to only “people within the second-degree of kinship.”
Allow by right subdivisions of a large single-family house into separate apartments as long as there are no (or very minimal) exterior changes, such as new rear or side entrances not easily visible from the street.
Let few elderly homeowners stay where they are rather than having to move into a retirement community by adding helpful tenants or co-owners who could help them with household or personal chores.
- Recognize that majority-tenant voters also would like new affordable housing buildings to be indistinguishable by look from market-rate housing nearby, just as recipients of publicly funded food demanded government-paid pseudo credit card to replace those old stigmatized food stamps. (Remember those?)
- Never forget the law of supply and demand, and make all new office and laboratory zoning always work for, not against, us. Two years ago, I arranged a rental for a condo buyer who was living abroad. The first person who wanted to rent her small one-bedroom on Chauncy Street was an unmarried scientist working in Kendall Square. When I moved here in 1959, Kendall was literally a wasteland; I remember a newspaper story about the city having to spend money to dispose of junked cars left there regularly. But his rental application showed he was earning $400,000 per year.
To avoid forcing out longtime tenants, change office and laboratory zoning to require the same number of apartments as employees to be built within a 20-minute commute by T or a required free shuttle bus. Say half of a projected 100 employees decide to rent in that building, and the other half rent or buy elsewhere. That’s 50 fewer people competing with existing residents for existing apartments.
Would this drive developers away from Kendall Square, which pays one-third of our real estate tax revenues? I don’t think so. Biotech workers want to work near other biotech workers. A biotech office in Newton would not work as well.
I had the chance to ask this of Jonathan Gray, president of the Blackstone Group, at the 2019 Yale Alumni Real Estate Conference. As the first questioner after his keynote address, I described my idea and asked if it would cause him and other office developers to flee. He laughed and said: “I think I’m the largest owner in Kendall Square. And I think something like this could be worked out.”
I now can’t imagine a better partner to help solve our housing problem at no cost to Cambridge.
Some final suggestions:
Let’s stop bragging about how our real estate tax rate gets lower every year and how high our city’s credit rating is. Scrooge had a superb credit rating, too. But until he came to rethink his values, he wasn’t happy.
Our super-low tax rate hasn’t made us happy, either. Whenever a suitable building comes on the market, why doesn’t our city buy it and convert into municipal housing for some of our police, firefighters, teachers, city hall, hospital, postal workers and clergy who’d like to live where they work?
To promote homeownership in a city where two-thirds of people are renters: In my experience, tenants can afford to pay a fixed-rate mortgage, but just don’t have the necessary down payment over the mortgage amount. Second mortgages for half the down-payment are hard to find and have super high interest rates. There’s nothing to prevent our city from becoming a reasonable rate second-mortgage lender for tenants becoming displaced. Our city borrows, via tax-free municipal bonds, at an interest rate lower than 2 percent. We could issue second mortgages to worthy longtime residents being squeezed out, at around 4 percent and, after allowing for an occasional default (which would give the city title to the property to sell to another current resident) and administrative expenses, would probably generate money. What use of city resources could be better or fairer?
Fred Meyer, Hammond Street