Avoiding Boston’s housing pitfalls
PHOTO/NATHAN FISKE
The apartments at the 145 Front Street at City Square development will add a layer of luxury -- such as a view of Union Station from its sundeck -- to the city's affordable and market-rate housing stock.
PHOTO/NATHAN FISKE
$1,542 per month vs. $2,580 per month.
A strong allure of Worcester is its affordability compared to the big city in the east, as illustrated by the median home rental price in Worcester vs. Boston.
Yet, as Worcester seeks to revitalize its downtown, high-priced luxury is playing a bigger role, especially with housing and how that permeates to demand for high-end amenities. The trick city officials and developers are trying to pull off is adding that luxury layer while still offering a diverse housing mix and avoiding the pitfalls Boston is now facing, which has put the Massachusetts' capital city on the verge of an affordable housing crisis.
“Worcester has a good mix. I think for a while we were a little more top heavy with affordable housing. So I think we are working our way to a good mix between market rate and affordable,” said Michael Traynor, Worcester' chief development officer.
Despite Worcester's solid mix, the affordability issue has become such a hot-button one that MassHousing this year set aside $100 million to help fund new workforce housing across the state. The goal is to make sure there is enough housing for the workforce that will be the backbone of the state in the next 15 years, said MassHousing Executive Director Tim Sullivan.
MassHousing plans to do this by making money available to developers building market-rate apartments.
“In order to make housing work, developers need to be able to make the sources and uses balance out,” Sullivan said. “What we see in the middle-income space is that the rents aren't high enough to support the loans to make the deal work and the rents aren't low enough to make the subsidies work.”
Affordability crisis
In Boston, the median rental rate shot up more than 48 percent between 2011 to 2016, hitting a $2,580 median, according to the Zillow Rent Index. Other areas of metro Boston, such as Cambridge and Jamaica Plain, have seen rents climb even higher.
This increase has been attributed to a number of factors, including a lack of housing stock as well as younger populations choosing to rent longer before buying, according to the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University in Boston.
These rising rates have put an especially strong squeeze on Boston's workforce that does not have the income to cover the growing rates but are not protected by being able to tap into affordable housing. This has prompted Boston Mayor Marty Walsh to launch an initiative to have 44,000 units of workforce housing built by 2030.
Worcester has a much more balanced rental stock, with the city maintaining a 14-percent mix of affordable housing as well as a large stock of market-rate housing, Traynor said.
These assertions are backed up by the Zillow Rent Index, that shows a relatively constrained 13.6-percent increase in median rent in the last five years up to $1,542.
In addition to the existing Worcester market-rate duplexes and triple deckers, there are 1,154 units of market-rate housing either recently completed, under construction or will be finished within the next 18 months,said Traynor.
What this market-rate housing, which is by definition for those making 60 to 120 percent of the area's median income, does is help insulate the city against the kind of rental creep that has been happening in Boston, he said.
Putting on the glitz
All this is to say there is a solid base in Worcester on which luxury housing can be added. It is something the city has never had, and clearly there is a market for if a developer is bringing it in, Traynor said.
“You have to start with a community with good bones and a good community, like Worcester, and create a market that doesn't exist,” said Andrew Marshall, the president and chief operating officer of Malden developer Roseland, which is building 237 apartments in its first phase at the 145 Front Street at City Square development
These luxury units will feature outdoor swimming pool with a sundeck, a courtyard, a full-time concierge, a fitness center with on-demand yoga and spinning services, and a clubroom. All of these are amenities do not exist anywhere in Worcester and could draw people in from as far as Boston who want a luxury lifestyle.
“You're not excluding anybody; you're just creating more housing options,” Marshall said.
This is a model that the company has been pursuing for 30 years, said Marshall, back when there was no such thing as a luxury-apartment building, so everywhere the company went it was a new concept.
This concept has a ripple effect through a community, he said, with stores cropping up and people downtown bolstering a community's image.
“People want to move back to the city for its urbanity, its nightlife, its restaurants,” Marshall said. “The related effect of having high-end housing is you have higher earners living in your downtown, and they are going to want better restaurants and they boost that image.”
The stability of affordability
Even while Worcester seeks to add luxury with the 145 Front Street development and the 168-room, high-end AC Hotel by Marriott, market-rate housing remains the city's mainstay, Traynor said.
One of the developers creating that type of housing is Rob Branca, president of Branded Realty Group LLC. He is building the El Morocco Restaurant on Wall Street in Worcester into 80 to 90 market-rate units.
For developers, this type of housing is more of a long-term play that might not see the speed of return some investors and developers are looking for, Branca said. However, in return he finds that these professional tenants in the middle of the market tend to be stable, staying for a long time even if they change jobs within the community.
They are simply a larger portion of the Worcester community, giving the development access to a larger market than if it had gone for a luxury angle, he said. The trick is providing amenities these professionals want in what will be their home without pricing the project out of the market.
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