Friday, July 19, 2024

Cambridge, Boston and Somerville, to name a few cities that are “pro housing,” have a serious housing production problem. Cambridge has kept up in some manner by thoughtfully requiring housing as part of rezoning for lab development. If you ask why housing has to be required, it’s because “developers” build only what they can make money on, and outside of small-scale luxury flips, large housing projects do not “pencil out,”or make money. 

Land costs are a factor, but it’s far more complicated. Some have also blamed the hot lab market for developers choosing commercial over residential, but six months ago financing opportunities for labs all but disappeared, and some say lab is oversubscribed. With that market challenged for now – other than previously financed construction that will get finished but probably not rented – I thought immediately of how to move the dial on housing.

To blame any one factor for costs would be wrong, and I lack the deep knowledge to argue which of many costs could have the most impact. We know high-rise housing is most expensive and that the most efficient construction is below 80 feet, uses wood and has parking at grade. How much height makes high-rise construction workable is a difficult question. Cambridge is also not a market where developers often risk putting hundreds of units online at once.

The big developments are worth supporting, though, as they produce large numbers of inclusionary units. I was proud to be able to help permit Market Central (first called Mass+Main) and the 55 Wheeler project, which combined account for well over 150 permanently affordable units. Market Central was also required to have three-bedroom units, which was precedent-setting. It was also the first 20-percent-affordable project. The tallest building was just under 200 feet and benefited from existing surface car lots along with a low parking requirement imposed by the city. Wheeler Street, which also had the 20-percent-affordable requirement, was below 80 feet in height with not very deep underground parking.

I cannot think of any other large housing developments since, other than those required by lab construction.

New housing also helps support a declining retail market in our once-vibrant squares and retail corridors. The City Council was right in eliminating parking minimums, but some parking is necessary – and it alone won’t solve the problem. 

My experience is that large holders of housing, or at least most, are okay with modest returns, but housing – meaning maintenance, management and capital improvements – are costly. In talking with several developers and architects, I find a consensus that one average-sized unit of housing built with union labor – which I’m all for – costs $650,000, all-in. When people see condos sell for more than $700,000, you can see why.

I believe in housing supply. (I grew up in an apartment building and managed to stay in Cambridge because my mother worked a miracle on a condo opportunity.) When I owned a two-family in the Highlands, I saw how my rents decreased significantly because of housing built in the Quad and at Alewife.

The city should more aggressively track the effects of drastic supply increase on the immediate rental market. The Highlands neighborhood is uniquely suited to show how supply works.

I urge the City Council, mayor, vice mayor and city manager to work with the development community, the governor and lieutenant governor and surrounding communities to see what tax incentives or other relief could or would move the dial to get market housing developed with required affordable units.

Local and state governments could provide combined relief. Zoning may help in some cases, but it is not a fix-all. Let’s roll up our sleeves – together – and be ready to spark housing production when interest rates come down.

Anthony D. Galluccio is a Cambridge resident and partner at Galluccio & Watson LLP, and a former state senator, mayor and chair of the Cambridge School Committee. He is a longtime board member of the Hildebrand Family Self-Help Center in Cambridge.