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Affordable apartments not as expensive as initially reported here

On Monday, I posted a link to the latest BPDA affordable-housing specifications and made a couple of stupid, incorrect assumptions that made it seem like the cost of an affordable apartment in a BPDA-approved building was higher than it should. I've corrected the dumb mistakes in the story; basically, if a family of three is lucky enough to win the lottery for an "affordable" apartment, their rent should be about $1,400 a month, not $1,900 a month.


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Comments

How much would you guess of each dollar spent on housing goes to real estate and insurance lawyers and city regulators?

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Not nearly as much as goes to people selling the land.

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Even at 1,400, when you add on utility costs in Boston, you're going to need to earn well over 90,000 before taxes each year as a household to not be engaged in bare sustenance living. Thus rendering one ineligible for said affordable housing. Until that rent is well under 700, it's not going to work for people who don't make a high salary.

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Until that rent is well under 700, it's not going to work for people who don't make a high salary.

I don't have the answer to the problem. However at $700 a month, the tenant is only paying $8400 a year, which is not enough for most landlords to pay their expenses (including real estate taxes and probably a mortgage) and still make even a small profit.

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Assuming rent at 30% of household income for rent, you'd need $56k to afford this unit - basically 2 incomes at $15 per hour. Quite achievable.

You won't get a $700 rent just about anywhere in the country. At $8400, take off say $3k for taxes and insurance even in a low cost part of the country.

Tha leaves $5400. Even if you are willing to accept zero return after interest, you'd have to buy the place for about $100k.

The bigger question is why we require developers to build this affordable housing which only drives up cost and restricts supply. The policy itself is one reason housing is so expensive around here.

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The bigger question is why we require developers to build this affordable housing

Because if someone didn't twist the arms of developers, exactly zero new affordable units would be built. Yes, the people in the market-rate units are subsidizing the people in the affordable ones and that's perfectly OK.

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Affordable NEW units are an oxymoron.

We don't need new affordable units - we just need new units - about 3000 per year. that will take care of the upper and middle incomes - (although middle income will have to live in "used" housing that may not be in the city center - OMG!!!)

It's all about supply and these policies limit supply and drive up the cost of living in Boston.

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Agreed. If every Toyota Camry buyer had to subsidize the cost of 20% of all of the news Camry's being sold, Camrys would have to be a lot more expensive and a lot fewer people would be able to afford them. This of course would mean that fewer Camrys would be sold, which means they would have to be even more expensive, and pretty soon you're selling a car that should be $23k for $33k just so that some people can buy them for $13k, and meanwhile a lot of people that needed an affordable, mid-sized car can no longer afford one. This is great for the relatively small number of people whose income is low enough that they are entitled to the $13k car, but it screws over the vast majority of middle income people who are not quite rich enough to afford a $33k car (which is actually most people).

Tack on to this the fact that we have STRICT limits on how many housing units are allowed to be built (because of zoning) and you can see how this situation would end up being pretty bad for the middle class.

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one of the reasons why housing is so expensive in the city is that the housing being built, in general, is for those of a certain income level (all those "creative class" types with six figure salaries) that have moved into and gentrified many parts of the city. The bigger question is how come you think that housing for workers who do not make six figure incomes is going to just appear if the developers are not required to build it?

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They are not in the business of meeting social needs - once you make them do that - it drives up their costs and decreases margins - which means they build less - exacerbating the problem. You can't fix it by making them build these units - that just makes the problem worse.

It costs easily $200-$250 per sf to build a unit of housing - even on the low end. For a 1200 sf unit - that's $250-$300k. Add in land costs and basically you can't put up a housing unit for under $450k or so. But there's plenty of demand for those units. The problem is that we are not building enough because of stupid policies like this. With better zoning and lifting of restrictions you'll get developers to build lots of units for say $450k-$600k - and many people living in older units will buy these and make room in older units costing some fraction of that for middle income people (the low end will always have to be subsidized).

My neighbor rented his unit out for about $6500 per month a few years ago. Two years later, he tried to rent it out for $6000 and couldn't get the rent so he just sold it. The smaller units downstairs that go for $1900-$2900 are sitting vacant and struggling to find tenants. Why? Similar new units (and there are hundreds coming on the market every year) are renting for that kind of money - so the landlords will probably have to lower their prices. THAT's the way it should work.

But these policies keep the prices high for the real estate investors - so don't count on them changing any time soon. The builders aren't going to build for middle income - because they can't - the numbers don't work (this is not just a Boston problem - labor and material costs are skyrocketing).

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By "real estate investors" of course you mean "current home owners"

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Plenty of housing for the middle of the market gets built in the United States. That housing just gets built in areas where the costs of land, construction, and bureaucratic red tape make it possible to build for middle-income buyers/renters and still make a profit.

While the Inclusionary Development Policy in Boston has a laudable goal, it also indirectly makes market-rate new construction even more expensive simply because the implicit subsidy for the affordable units makes the production cost for the market-rate units higher. If we expect developers/contractors to pay their workers union/living wages, that also makes new construction more costly. So developers, at least in the core neighborhoods, do build for the top of the market simply because it's difficult to make money otherwise.

Maybe if we made it easier to build housing aimed at the middle of the market, more of it would get built.

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