Jefferson Park Federal public housing is due to be remade like Jefferson Park State, seen in the background. (Photo: Marc Levy)

The $905,000-per-unit price tag for building a new Jefferson Park Federal public housing development is going up even more, and the project will take longer to finish. Still, officials and board members at the Cambridge Housing Authority say the increased cost of the Rindge Avenue project isn’t out of line, considering the challenges the authority is facing. The new construction will add 103 much-needed apartments for low-income families and replace the existing 175 dilapidated units with modern ones,

The authority’s board of commissioners on Nov. 22 approved a price cap for construction costs of $221.9 million, or $15 million more than estimated in February of this year. That total equates to almost $800,000 per unit for the 278-unit development but leaves out substantial financing costs that won’t be known for sure until they’re finalized. These costs include expenses for lawyers and accountants who create the complicated arrangements that enable affordable-housing developers to tap into money from private investors and loans to pay for projects.

Private investors are necessary since the government gives little support to public housing and other affordable developments.

A report a year ago from CHA planning and development director Margaret Moran, responding to critics who had assailed the high price tag for Jefferson Park, estimated that financing costs accounted for about $160,000 per unit. If that holds true with the new, higher construction price, the total cost could reach $960,000 per unit.

CHA executive director Michael Johnston said in an email that construction costs in the region have been rising “by double digits in the last year and a half” and “many projects have seen pricing coming in 12 percent to 18 percent or even higher than estimates, to put Jefferson Park’s increase [of 7 percent] in context.”

Johnston said the increased cost of Jefferson Park would also result in more equity for the project, and that higher maximum rents that the federal government will support with rent vouchers will raise the amount that CHA can borrow to finance it. The authority still has a financing gap of about $10 million “but feel comfortable that we have the support and resources available to fill it,” Johnston said.

The authority still needs a crucial approval from the state Department of Housing and Community Development. The department allocates federal low-income housing tax credits to affordable-housing developers. Developers then sell the credits to investors who want to reduce their taxes. The proceeds help pay for developments such as Jefferson Park.

Cost limits

CHA missed out on obtaining tax credits from this year’s allocation because it will not meet another deadline Dec. 31 to close on the project. The reason: It was not satisfied with earlier bids from subcontractors. Now the authority hopes to close on the project by February or March, Johnston said.

The state agency had raised questions about the high cost of Jefferson Park, according to Clara Fraden, CHA director of planning and development for planning, who spoke at the Nov. 22 meeting. Johnston was asked whether the concerns had been resolved. “As far as we know, yes,” he said.

The department’s tax credit allocation plan for 2022-2023 sets a cost limit of $399,000 per unit for large urban projects such as Jefferson Park. The Cambridge project far exceeds that amount. Johnston said “it is widely understood” that the maximum costs in the allocation plan are not realistic.

Therefore the department asks developers to break out “extraordinary costs” in their projects’ tax credit applications, such as removal of hazardous waste, Johnston said. Jefferson Park’s price tag shrinks to “under $500,000 per unit” when those costs are deducted, he said, which is “the norm for the Greater Boston market.”

Samantha Kaufman, spokesperson for the department, said she could not answer questions about Jefferson Park or “how we respond to applications” for tax credits because an application is“under review” by the department.

High bids

At the Nov. 22 meeting, Fraden said the authority solicited bids from subcontractors in early September and they were 25 percent higher than expected. A second round in October was “still too high,” she said. “For example, waterproofing had been estimated at $1 million – and it was $10 million.”

Private developers can hire a general contractor who chooses subcontractors; in contrast, public entities such as CHA must seek bids from a general contractor and separately from individual subcontractors. Those companies must be vetted by the state, which reduces the number that are eligible and cuts competition, public developers have said.

When fewer than two subcontractors bid on a project, prices are “through the roof,” Moran said. Bids in which more companies participated were within 2 percent or 3 percent of estimates, she said.

More space, more cost

Another challenge that raised costs was the large number of big units in the new Jefferson Park, Fraden said, with 130 of the 278 apartments being three-bedrooms or more. That means CHA must build more space.

The authority began planning to rehabilitate the federal development in 2017 and intended originally to modernize the existing 175 units. A detailed examination of the project found tremendous deterioration, and the plan switched to demolishing the buildings and constructing an entirely new development with 103 additional units.

Meanwhile, Cambridge had adopted the Affordable Housing Overlay, a zoning change that eliminated many zoning requirements throughout the city for projects that are 100 percent affordable. The overlay is intended to help affordable-housing developers by speeding the approval process and reducing uncertainty.

Still, Jefferson Park, the second project to go through the process, spent months before the Planning Board. The board has no authority to impose conditions, but its suggestions carry weight, and CHA planners changed the design and increased the number of trees in response to Planning Board comments.

Housing authority board members defended the cost of the project at their Nov. 22 meeting. “The real cost issues are what we’re required to do as a public agency … It’s easy to throw stones. Private developers are doing the same thing,” said Susan Connelly, chief operating officer of Housing Opportunities Unlimited, a nonprofit providing relocation and other services to affordable-housing owners. Board chair Elaine DeRosa, former head of the Cambridge Economic Opportunity Committee, said: “It costs to do what we do.”

Moran said the cost was “very competitive for a public project. It’s a big number, the largest in our history. But it is a solid number, a number we can move forward to closing.”

The adjacent Jefferson Park State development was rebuilt too, and was completed in 2018.