'It’s Like Threading A Needle': Boston Developers Struggle To Fill Affordable Units As Wu Pushes For More

Kai Palmer-Dunning needed an affordable apartment in Boston in early 2021, and he thought applying six months before his lease expired would be plenty of time to find one.

After finding a unit in a new building that he qualified for on his $55K-a-year salary, it took him more than a year from the beginning of the application process until he could move in, forcing him to move back in with his parents in Roxbury while he waited.

He ultimately moved in January 2022 into one of 50 income-restricted units at the Residents at Forest Hills Complex, a 250-unit property that had opened in December 2020. It was just one of many new developments across Boston where city-mandated affordable units have sat vacant for extended stretches.

“It was difficult,” said Palmer-Dunning, an advocate with civic group Reclaim Roxbury. “That is very frustrating to hear that those units are sitting vacant when there are people in my situation, or worse situations, that don’t have anything to fall back on while waiting for these units.”

While Boston is in the midst of a housing crisis, the city’s lengthy process of getting applicants approved and placed into affordable homes can leave those units sitting vacant long after a building opens. Some new buildings, with dozens of income-restricted units between them, have been open for more than a year and still haven’t conducted a housing lottery, a Bisnow analysis found.

The Boston Planning & Development Agency monitors 3,929 affordable housing units. Of those, 314, or about 7.9%, are listed as unoccupied, according to data Bisnow received from the agency.

Having these units sit empty not only keeps some low-income Bostonians from access to affordable housing, but it also creates significant financial issues for developers, who often try to refinance or sell a building once it is leased up but can’t do so if a large chunk of it is vacant. 

“It is very time-consuming, and we have had units that have taken as long as a year to fill,” said Mount Vernon Co. Chairman Bruce Percelay, who has built hundreds of multifamily units in Boston over the last three decades.  

Needham-based SEB Housing, a consulting firm that works with developers to fill affordable units through the city’s Inclusionary Development Policy, has raised alarms about the delays in Boston’s process. In a March 2021 memo it posted on its website, an SEB official expressed issues with the BPDA’s housing program, citing inconsistencies in the program that have led to a slowdown in approvals for unfilled units and to households being unfairly denied.

“I am concerned that some recent direction coming from the BPDA is inconsistent with the BPDA’s own standards, is inconsistent with general fair housing practices, and is inhibiting our shared goals of efficiently filling affordable units with the households who qualify for and need the housing offered through this important program,” the memo said.

As hundreds of apartments are sitting vacant, developers are now facing the prospect of having more units to fill. 

Mayor Michelle Wu in December proposed changes to the Inclusionary Development Policy that included lowering the threshold for IDP projects from 10 to seven units and upping the required proportion of income-restricted units from 13% to 20% in each building. 

Wu’s proposal has drawn the ire of real estate industry leaders, who say it will add to the growing list of apartments sitting vacant because the city’s application process is already plagued by delays.

“It’s very frustrating that the city wants more affordable units and then the units don’t get filled because the criteria is very specific, and in some cases, it’s like threading a needle because you can’t have someone who earns too much, you can’t have someone who earns too little,” Percelay said. 

The BPDA and the Mayor's Office of Housing declined to make anyone available for an interview for this story and declined multiple requests for comment about delays to the IDP process. City officials have said in the past they are working to address these issues and have hired more staffers to help improve the process. But those who are working to fill affordable units with residents who need them say the process is still too slow and difficult to navigate, and requiring more IDP units could make it even harder. 

“My honest fear is that it’s going to be a mess,” Sullivan & Worcester partner Jennifer Schultz, an attorney who works with multifamily developers in the city, told Bisnow. “You already have an understaffed City Hall, and I have already seen time and time again that the process of getting these units released to the market takes much longer than market demand.”

A ‘Very Slow Process’

Boston’s Inclusionary Development Policy was implemented in 2000 through an executive order from then-Mayor Thomas Menino. Since the policy was established, private developers have created 4,044 on-site and off-site income-restricted units in the city, and 721 are under construction, according to the BPDA.

For tenants looking to move into an affordable unit, they first must search through a city database of buildings with IDP units, find the ones with income restrictions they qualify for, then choose one where they would like to apply. They must then request an application for that building’s lottery, a process that is run by developers and their third-party partners but overseen by the Boston Fair Housing Commission. 

There isn’t one standard lottery application across the city, and Palmer-Dunning said the application he filled out required him to submit over 30 documents, like wage earnings for two consecutive pay cycles, proof of Boston residency and a full list of assets, a process he called “very intimidating.”

“I imagine for somebody who either does not have online accounts for things or doesn’t have an organized system, it could be a barrier,” Palmer-Dunning said. 

Once that application is approved, applicants are then notified of the lottery date for the building and given a number. Applicants selected in the lottery then go through an additional round of screening in which they must provide further financial information, including bank and tax statements, before being approved for the unit. After that information is certified, they are given a move-in date. 

While the lottery system is by far the most widely used process, there are other systems that developers can go through to fill their IDP units, including an open waitlist application process and a first-come, first-served process. 

Developers looking to fill their IDP units typically bring on a specialized consulting firm such as SEB Housing or Maloney Properties to help market the building and create a lottery system that the city must approve before they move forward. Once the system is approved, these consulting firms help applicants to ensure that they are eligible for units. 

In October, the city hired two staffers in the Mayor’s Office of Housing in an effort to put more attention on these income-restricted apartments and the backlog of applications, the Boston Business Journal reported. The office didn’t respond to Bisnow’s request for comment on the current staffing situation. 

The Boston Fair Housing Commission, which oversees the lottery, has also seen its fair share of backlash. In 2018, Sheila Dillon, chief of housing for the city, and the Department of Neighborhood Development stepped in to take over operations for the understaffed commission that had “1.5 full-time staffers assigned to the task,” the Boston Globe reported.

Of the 314 unoccupied units across the city, dozens of them are housed in buildings that completed construction more than a year ago but are still classified in the BPDA’s system as “Lottery Pending,” meaning that a lottery hasn't yet been completed for the units.

Packard Crossing, an Allston project developed by The Hamilton Co., received its certificate of occupancy in April 2020 and is still waiting on a lottery for 10 IDP units in the building, according to BPDA data. 

Lincoln Property Co.’s Harrison Albany Block, which has a total of 650 units, was ready for tenants in January 2020, but 32 are unoccupied and also have a lottery pending.

Charlestown’s Ropewalk Complex, owned by Pennsylvania-based Vision Properties, received its certificate of occupancy in September 2021 but has 11 affordable units that still have a lottery pending, according to BPDA data.

Representatives of The Hamilton Co., LPC and Vision Properties didn’t respond to Bisnow’s requests for comment.

Wu’s proposal is designed to increase the IDP pipeline, and some experts are worried about what that could mean for the current process and the backlog of applications for tenants trying to get into these units. 

“If they’re going to have more, they’re going to have to make the process more efficient, not less, especially with the units being built,” a source familiar with the IDP unit leasing process told Bisnow. “There's a bottleneck that’s just going to continue to slow down the process of getting households into these units.”

City Realty Director of Acquisitions Clifford Kensington said the problem isn't demand but that the application process is so complicated, it makes it hard for tenants to be approved quickly.

“We’ve definitely seen it as a very slow process,” Kensington said of filling IDP units. “They are always the last units closed, even though there is no worry about someone taking them.”

Adding Logs To The Jam

Building affordable units isn't the only way to satisfy the IDP requirement. Developers can also pay into a fund that will create housing elsewhere. With $186M in IDP contributions since its inception, Boston has funded the development of an additional 2,616 units with 187 under construction, according to a Jan. 26 public hearing on Wu’s proposed changes.

In January, the BPDA held two public hearings for the changes to the IDP, and both meetings garnered over 100 participants who wanted to voice concerns, criticisms and praise for the changes. For some housing advocates, there was a concern that the waitlist for these units wouldn't improve as more were proposed to be built.

“We should really lower the threshold to five units or less, because you can really see that almost every time there is an affordable housing development in Chinatown, we see a long, long waiting list and we see a long need for it,” Karen Chen, executive director at the Chinese Progressive Association, said at the hearing.

Developers waiting for income-restricted units to be filled continue to carry assets that haven't reached their full value, making it harder for developers to refinance their buildings after completion, Schultz said. 

“They have certain payout milestones that they are supposed to be hitting,” Schultz said. “You have lenders asking, ‘Why have your lease-up rates not moved from 75% from 2021 to 2022? What’s going on with those units?’”

Adding requirements that reduce a building’s earning potential makes it more difficult to finance construction, but higher IDP requirements aren’t the only changes the Wu administration is pursuing. 

Wu has proposed a string of policies aimed squarely at commercial real estate, including a hike in linkage fees from $15.39 to $30.78 per SF for new lab buildings and $23.09 per SF for all other new commercial development. She also signed a home rule petition for rent stabilization that would cap rent increases between 6% and 10% based on inflation. 

“I believe that the requirement for 20% [IDP] on top of discussions of more linkage fees, on top of discussions of rent control, will result in a dramatic reduction in the number of units available because developers will put their pencils down and not build these units,” Percelay said. “I don’t think it will make it more complicated because I think you’ll find that decrease in the production of affordable housing.”

For residents like Palmer-Dunning who are happy to see a stronger push toward making housing in Boston more affordable, there is still a need to update the system and finally put an end to units sitting vacant as more begin to flow in.

“It’s great news, but hearing that IDP units are still sitting vacant, I’m hoping that with all this new funding, in addition to adding new units, they’ll streamline the process so there aren’t just more units sitting vacant,” Palmer-Dunning said.