Luxury units in buildings like 315 A Street in South Boston accounted for 69 percent of all units built in Boston. While luxury units are affordable to households with incomes above $100,000, the city’s median household income is just $53,900.
While activists in Roxbury debate whether the 44.9 percent of units designated affordable there have concentrated too much poverty in the neighborhood, real estate developers in downtown Boston are grappling with a radically different problem — a boom in the construction of $4,000-a-month luxury units that may soon result in a glut.
In between either extreme, middle-income families looking to buy or rent in Roxbury or any other Boston neighborhood are grappling with their own problem: a scant inventory of moderately-priced housing. And that scarcity is pushing housing prices farther out of reach for many Bostonians.
Boston leads the nation in its production of affordable housing, with nearly 22 percent of its housing stock receiving subsidies, mostly from the state and federal governments. But the city’s production of affordable units is not keeping pace with the need for affordable units, according to Joe Kriesberg, president of the Massachusetts Association of Community Development Corporations.
“We have more need that most other cities because the market here is so high,” he said.
Compare the latest addition to the city’s affordable housing stock, 39 units of elderly housing near the Roxbury Crossing stop on the Orange Line, to the hundreds of units opening up in the glass and steel luxury apartment towers rising in the Back Bay, Downtown Crossing, Chinatown and the South Boston waterfront.
The numbers tell the story. Of the 8,598 units of housing under construction in Boston since 2011, 69 percent are in the upper market, 19 percent are affordable and just 12 percent were in the middle of the market, according to statistics compiled by the city’s Department of Neighborhood Development.
Affordable units are generally for households with incomes under $50,000 and are deed-restricted. Middle income units are not deed-restricted but are defined as middle-income affordable because they are located areas where the current market price is affordable to a household in the $50,000-$99,000 income range. Upper income units are affordable to households with incomes of $100,000 or above.
Income inequality
A three-bedroom unit in the 45 Province Street highrise sold for $2.6 million last year.
Underlying the vast inequities in the city’s real estate market is a growing gap between the city’s wealthiest residents and its poorest. While the bottom 20 percent in Boston averages $15,000 a year, the top 5 percent earns $220,000. That spread has earned the city the ranking of the fourth in the nation in income inequality.
And while most workers in the United States have seen their incomes stagnate or decline, the rich are indeed getting richer.
“If you look at gains in income in the last 10 to 20 years, the percentage of those gains that have gone to the top 10 to 20 percent of earners, it’s extraordinary,” notes Northeastern University Economics Professor Peter Enrich. “The result of this is that you have a very small, very wealthy group. Now they’re increasingly wanting to be back in the city.”
In addition to its status as a leader in income inequality, Boston now is leading the country as the most rapidly gentrifying city, according to a study by the Federal Reserve Bank of Cleveland. That trend is putting more pressure on the lower-income end of the city’s workforce. According to a Harvard University study conducted last year, one in four Bostonians spends more than half of their monthly income on rent.
“You have an increased demand for high-priced housing,” Enrich noted. “It’s bound to cause displacement. There’s a wealthy class that is much more prominent than they were 30 years ago. The wealth they are accumulating accounts for the fact that everyone else isn’t doing so well.”
Corporate executives, lawyers at white-shoe firms, investment bankers and tech industry executives are among the moneyed class driving real estate development — and displacement — in the city, according to Enrich. Other professions — teachers, public servants, business owners, even doctors — have seen their wages stagnate in recent years.
The gulf between high-income earners shows up in the per-capita income of the city’s neighborhoods. At the low end, in Roxbury, the per-capita income is just $17,579. At the high end, the Back Bay per-capita income is $89,658.
“The median income of blacks, Latinos and Asians is way below the area median income for Greater Boston,” notes Kathy Brown, executive director of the Boston Tenant Coalition. “And they’re the majority population of Boston.”
The median income for black, Latino and Asian families in Boston is $43,800 a year, according to statistics Brown provided that were compiled from HUD and U.S. Census data. The median income for white families is $111,500.
Dwindling inventory
The building boom has increased the real estate inventory in Boston in recent years. But because the for-profit housing market has become so heavily skewed toward the top income earners, the private market is suffering from a lack of inventory, pushing prices up on the city’s housing stock.
“That market is really tight,” Kriesberg said. “The challenge for the city is how we build housing at different price points to maintain economic diversity.”
While there are federal and state dollars allocated to the development and preservation of low-income housing, there are virtually no resources for moderate-income buyers.
“All the federal money is for lower third of the market,” Kriesberg said. “If we don’t want to have rapid gentrification and we don’t want vacant land to lie fallow, we have to have a strategy to build moderate-income housing.”
Even with the city’s building boom, inventory is not keeping pace with regional demand, according to Marc Draisen, executive director of the Metropolitan Area Planning Council.
“Housing prices in Greater Boston are too high,” he said. “The main reason for that is we’re not building enough units.”
The luxury building boom in Boston notwithstanding, many suburbs have enacted restrictive laws on new development. For the Greater Boston area to keep pace with real estate demand, the area would have to produce 14,000 units a year, according to Draisen. But housing production in Greater Boston has ranged from 4,000 units a year to 9,000 units.
As expensive as rent has become for middle-class buyers and renters, the working class — families of four earning $45,000 or less — has it harder, Draisen says.
“There are tens of thousands of families paying more than 50 percent of their income on mortgage or rent,” he said.
Developing a plan
Kriesberg has been appointed to a new housing task force convened by Mayor Martin Walsh and tasked with developing a plan to create more affordable and middle-income housing units in Boston.
The task force will include nonprofit and for-profit developers, academics, tenant representatives, neighborhood activists, union representatives and state representatives Kevin Honan and Daniel Cullinane. Walsh said the task force will release a plan this summer to guide the city’s housing policy over the next four years.
“We have to bring key community members and experts to the table to find diverse and creative solutions to these challenges,” he said.
One guideline affordable housing advocates have floated during meetings of Walsh’s transition team on housing is aiming for development in Boston that provides one third of all units affordable to low-income, one third affordable to moderate-income and one third market rate.
A coalition of South End activists worked out a similar strategy with the Boston Redevelopment Authority for development on city-owned land in that neighborhood in the 1980s. Despite an agreement, called the South End Neighborhood Housing Initiative, few moderate-income units were ever produced in that neighborhood. The South End’s housing stock bifurcated, with production and preservation of affordable units and steeply increasing real estate values in the neighborhood.
While 41 percent of housing units in the South End are now subsidized, the middle class has effectively been squeezed out with one-bedroom condos in the neighborhood selling for more than half a million dollars.
Walsh acknowledges that there is no clear path to shoring up the market for buyers or renters who don’t qualify for affordable housing but says his task force will seek answers.
“Every city in America has this problem — people being priced out,” he said. “Nobody has come up with a solution that works. We’re going to work on a solution. We’re trying to be creative.”
