Is $4,654 for a one-bedroom apartment 'market rate'? What a report on Mass. housing shows.

A housing development program for the 26 gateway cities in Massachusetts that was a key part of the new tax relief bill is raising questions about what is “market rate” when it has already subsidized one-bedroom units that rent up to $4,654 a month.

Barnstable is one of the gateway cities.

The Housing Development Incentive Program has subsidized millions of dollars to create housing units in the commonwealth. But a report by the Massachusetts Law Reform Institute argues the program “subsidizes only unaffordable housing, with rents that can be shockingly high and with no limits on increases,” including a Malden Center development where one-bedroom units can cost up to $4,654 a month.

But supporters defend the program, which operates largely outside greater Boston, as necessary to promote mixed income communities.

Amid a growing housing crisis in Massachusetts, the recent tax relief bill granted $327 million over the next 10 years to the Housing Development Incentive Program for tax credits to develop housing containing at least 80% market rate units.

The statute defines market rate as units that are “priced consistently with prevailing rents or sale prices in the municipality.” Despite the need for 175,367 units of affordable housing in Massachusetts, the legislation is notably silent in defining affordability.

“Market rate sounds so innocuous,” said Judith Liben of Massachusetts Law Reform Institute. “Well, think of the Massachusetts market, and you know that means it means very high rents.”

Barnstable is addressing market rate housing, town official says

The Barnstable Town Council has approved six Housing Development Incentive Program projects, with two completed, Barnstable Director of Planning and Development Elizabeth Jenkins said Monday. The largest project featured a developer turning a former vacant nursing home across from the high school into 53 housing units, including 10 affordable ones.

"It is important to recognize HDIP is a tool that was designed for Massachusetts gateway cities not to address affordable housing but to address market-rate housing," said Jenkins. "We know these projects can be very difficult to get off the ground and finance."

The town has adopted eligibility standards for developers to benefit from the Housing Development Incentive Program. Those standards include whether the project increases the number of new residential housing units, offers a diversity of housing units, influences the neighborhood positively, or represents the redevelopment of under-utilized sites.

"Having this incentive helps make those mixed-income projects feasible and able to proceed," said Jenkins. "The projects that have gone forward, they may not be deed-restricted units, but I would definitely call them naturally occurring attainable housing in our community."

Market rate rents out of reach for average renter's wage, in parts of Massachusetts

The National Low Income Housing Coalition reported that an hourly wage of $31.98 is needed to afford a two-bedroom market rate unit in eastern Worcester County. Renters, however, are estimated to earn on average $18.22 per hour. This discrepancy puts market rate housing rents out of reach for many in Worcester.

Last month alone, 3,120 eviction cases were filed in Massachusetts.

To Liben, the Housing Development Incentive Program “ignores the dire affordable housing crisis that the commonwealth is in.”

“If you look at HDIP and ask: where is this commonwealth’s need for housing? Who needs housing? Is it any housing that we want? Like 12,500 units that aren't affordable at all? No portion of them is affordable? Is that what we want? Do we care about number of units for housing rather than what kind of units available to whom?” she asked.

Tax credits limited to gateway cities

Another feature of the Housing Development Incentive Program is that only developers in gateway cities are eligible to receive the tax credits.

“The 26 cities are enormously different cities,” Liben said. “While the need to revive downtowns and have more middle-class people come live in what are fairly low-income communities might be true for some gateway cities, HDIP doesn’t differentiate at all between Malden, Quincy, Lowell, or Fall River.”

The state program requirement of 80% market rate units

Andre Leroux, the director of the Gateway Hubs Project at MassINC, acknowledged the differences in the housing markets across the gateway cities. Nonetheless, he said that the Housing Development Incentive Program still “works the way it’s supposed to work, because in the analysis that I’ve done of all of the projects that have been funded by HDIP, 93% of all of the projects have been outside of the Boston area.

“In the metro Boston area, you can actually use HDIP to increase the amount of affordability in a project,” he added.

Peter Dunn, chief development officer of the Executive Office of Economic Development of Worcester –– the city that Liben called the “poster child of HDIP’s problems” –– stated that HDIP projects in Worcester were “historically … 100% market rate.” Worcester’s newest Housing Development Incentive Program project, however, provides for the 20% cap of affordability allowed by statute. Dunn suggested that it is best to leave the decisions of affordability to the locality.

“I know in Worcester we’re in a different place in terms of our market than we were five or 10 years ago, and I can imagine a lot of other gateway cities might still be in that kind of market condition,” Dunn said. “So, I think it really is best for the local community to figure out what composition of a project is best for them and whether it has that local support rather than having it be totally prescribed or mandated by the state level, because every community is different.”

'Every community deserves to have a mix of incomes'

Leroux saw forgoing affordability altogether as an asset of HDIP, “because every community deserves to have a mix of incomes.”

“Otherwise, through policy, we’re promoting segregation –– economic segregation, which is often also racial segregation,” Leroux said. “I find it really strange to be in a situation where some progressive housing organizations or social justice groups are trying to limit the kinds of housing that you can build in communities where low-income people live: are you saying that you only can have low-income people in these communities?”

Housing for a mix of incomes

Keith Fairey, president and CEO of housing nonprofit Way Finders, discussed the importance of creating housing for a mix of incomes in communities like Holyoke, which have been “devastated by disinvestment and abandonment.”

“The city leaders in Holyoke don’t want people to leave Holyoke when their incomes increase: they want people to stay in Holyoke even when they become more economically mobile,” Fairey said. “And HDIP provides the opportunity to do market rate housing alongside affordable housing, because the economics and the finances of developing housing here –– whether it’s affordable housing or market rate housing –– don’t work very well without a subsidy. The rents or sales would not pay for the development costs on their own.”

Census data reveals that Massachusetts has lost around 50,000 residents. Fairey is hopeful that an increase in housing options in communities like Holyoke –– which at its peak had 60,000 people, but today has 37,000 people –– can “fill up the delta that we’ve lost in terms of our population in the commonwealth.”

Cape Cod Times reporter Zane Razzaq contributed to this report.

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This article originally appeared on Cape Cod Times: Report: Tax incentives for mixed income housing leads to high rents