The Cambridge Redevelopment Authority approved $10 million on Thursday to help housing development in Cambridge. The new campaign, called the Housing Capital Fund, will allow the authority to invest in mixed-income housing projects, specifically focusing on those “struggling to obtain financing in the current market,” with the goal of expanding Cambridge’s affordable housing options.
The memo proposing the fund is not specific about affordable housing requirements for projects. Instead, the authority will work with projects to ensure that they go beyond Cambridge’s 20 percent inclusionary housing requirement, for example by adding affordable units to increase the percentage or making existing affordable units even cheaper to rent.
No project size has been specified on paper, but Kyle Vangel, the director of projects and planning at the authority, said 55 units is likely an upper limit for viable projects.
“A sweet spot for this fund might be the 10-, 20-, 30-unit projects of modest scale,” Vangel said, “where the award we’d be giving them could be what enables them to move forward – that final slice.”
The authority also plans to evaluate projects based on factors such as low-carbon design and sustainability, the inclusion of public spaces such as stores and open areas, and the current use of the site.
That last criterion – current site use – was not included in the original proposal but brought up in response to authority chair Conrad Crawford, who raised the concern of displacement and gentrification with new development.
“We do not want to be actively displacing tenants,” said Tess Hofmann, the authority’s senior project manager. “If it were a site that already has naturally occurring affordable apartments on it, that would be less attractive than a vacant site. That will be one of our selection criteria.”
But beyond these many selection criteria, Vangel said, “It will be a priority to have diversity across the fund portfolio, which may mean a mix of tenancy, length of investment and size of project.”
Connection to Kendall
The authority has been highly involved in the development of Kendall Square, starting from the 1960s with the Kendall Square Urban Renewal Plan, and has helped transform the square into its current status as a biotech and innovation center. It continues this work with recent projects such as an underground Eversource substation and the redevelopment of Ames Street.
In the background section for the proposal, Hofmann acknowledged, “The success of Kendall Square has created significant job growth in the area, and that success has caused the housing crunch in Cambridge to become more acute.”
The housing fund is a step in the authority’s expanded role since 2018: remedying the negative effects of Kendall Square growth on the Cambridge housing market.
Its application has to be considered in the context of Cambridge. In August, City Manager Yi-An Huang noted that there was some $80 million put into the city’s Affordable Housing Trust last year, but here the per-unit cost of construction means using it all at once would build just 320 homes. Taken strictly as construction costs, the authority’s fund would build 40.
Pilot and precedents
The authority has previously invested $5 million into the ongoing development of 2400 Massachusetts Ave. As part of the investment, it bought 4,000 square feet of the building to be permanently affordable to middle-income buyers. The authority cites this pilot effort as a basis for motivating the new housing fund.
Other inspirations include the $50 million statewide Massachusetts Momentum Fund and the $100 million Housing Production Fund of Montgomery County, Maryland, both of which use public money to finance mixed-income, mixed-use development. A New York Times article covering the Montgomery County fund describes these arrangements – in which government agencies invest in privately built development – as a way to combine two approaches to addressing high housing costs: providing subsidies and increasing housing stock.
In its proposal, the authority seems to follow in the footsteps of Montgomery’s fund. As with private real estate investors, making a good return on investment is still very much part of the conversation. On Thursday, Hofmann said, “Our goal would be to make these investments and then return the appreciation to the fund so that this can be an evergreen project for the CRA and hopefully a source of generating some funds.”
Unlike private investors, though, the authority takes public benefit as a return on investment as well as monetary gain.
“The primary goal of the CRA Housing Capital Fund is to leverage its capital to invigorate housing production in Cambridge,” the proposal memo states, “and thus the CRA would agree to investment or financial terms that are below current market expectations.”
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Good to see investment in affordable housing. People need homes. Economic imbalance is a drag on the local economy and is ultimately destabilizing. It is hard to find essential workers if they can’t afford to live here.
$10 million is a good chunk of change, but realistically how much good can it do? The Walden Square II project is projected to cost ~$80 million for ~95 new housing units. At that rate, we could hope this money would fund an additional dozen or so units.
I assume the hope is that it will help push more projects over the finish line that are nearly completely funded, which will obviously be better than 12 units, but the problem still remains that construction in this city is still insanely expensive, where the cost to construct a new unit is nearly double the average price of a home in this country.
How do we reduce construction costs to stretch these dollars further?