As Boston's Suburban Housing Shortage Worsens, Developers Decry 'Absolutely Absurd' Approval Processes
In Wilmington, a suburb about 15 miles northwest of Boston, The Procopio Cos. has been working to build the small town's first two multifamily developments in a decade.
The projects aren't huge: they total less than 100 units in three-story buildings. But the process to get them approved was long and arduous, highlighting the difficulties greater Boston will face as it looks to address its housing shortage.
"To give you a scale of how challenging it is to permit anything, both of them took three and a half years to permit, and they're tiny projects," Procopio Cos. CEO Michael Procopio said. "It's absolutely absurd trying to get stuff done out there."
Procopio, speaking last week at Bisnow's Booming Boston Suburbs event in Needham, was one of several developers who spoke about the painful, arduous process of building multifamily in the cities and towns outside Boston.
Many communities that haven't experienced much recent multifamily development don't have clearly defined rules for getting projects approved, making even small projects take years. And for larger projects in closer-in cities like Newton, developers say they acted more like political campaigners, spending several years and hundreds of thousands of dollars to earn support for new buildings.
The challenges of building housing in the Boston suburbs have been further compounded by rising construction costs and land costs, especially as the region's booming lab market gobbles up development sites at prices with which multifamily builders can't compete.
These headwinds to adding new supply come as the region already faces a housing shortage, and multiple forces are creating high demand for multifamily in the suburbs. The pandemic led renters to look outside of the city to find more space. A generation of empty nesters is looking to downsize from single-family homes into multifamily units that require less upkeep and offer more walkable amenities. And the dearth of inventory in the condo and single-family housing markets is forcing people to rent who otherwise might buy a home.
"We’re obviously in the middle of a housing crisis driven by supply and demand, there simply is not enough supply," Procopio said. "You saw people move out of the city in Covid thinking it was going to be temporary, and they embraced these semi-suburban, walkable communities."
Every submarket in the Boston suburbs has apartment vacancy below 6%, according to Colliers' Q4 report, and several have vacancy rates at 3% or below, including the Route 495 North, Route 495 West, Route 195 South and Worcester submarkets.
Rents across the Boston area increased 11% during the year ending Dec. 31, according to Colliers, and Procopio said he has seen some suburbs with rents rising by 15% to 20% over the past year. But that hasn't been enough to offset the rising expenses developers face. Increasing costs of land, materials and labor have pushed down development yields to the 4% range on some projects, he said.
"If you look purely at the numbers for development deals and how tight development yields have become, no one would do the project; people would look at this and say we're crazy," he said. "Return on cost coming down to the 4s on some projects is absolutely insane, yet there’s still demand for it because of the constrained supply we have in this market. Nowhere else in the country is like this on the development side."
Other parts of the country do face similar challenges as the Boston suburbs in building housing, but developers said the region's fast-growing life sciences market has made it uniquely difficult to build apartments in some areas.
"Life sciences demand has created an imbalance for land prices," Boylston Properties' Andrew Copelotti said.
He gave the hypothetical example of a 3-acre site in Watertown that could support 200 multifamily units. He said a multifamily developer would probably pay around $20M for that, but if a life science developer sees it as an attractive site, it could pay as much as $40M, given the higher per-square-foot rents for that sector.
"It's going to further exacerbate the problem and further constrain [housing] supply by getting pushed out by other uses," Copelotti said. "That is going to put a tremendous amount of pressure on everybody."
"That’s all behaving a lot like Cambridge was behaving five or six years ago," Procopio said. "We’re seeing that exact same imbalance start to play out in those communities, which are actually even more challenging because they don't have a lot of the processes in place for clean and streamlined multifamily."
"It’s a lot easier to meet the demand in some of the urban communities than it is out in the burbs where they're seeing a life science, and frankly some industrial explosion, and it's still really challenging to permit multifamily," Procopio added.
Procopio said the problem with some suburban communities is they have had so little multifamily construction that they don't have an established process for developers to get approval.
"The worst thing that happens is you go into a community and there's no rulebook whatsoever, that makes it really challenging," he said. "That's why simple projects take three or four years to get permitted, when even a complex project in Boston can get done in one year."
Two developers with large-scale projects underway in Newton have experienced firsthand the obstacles that exist in trying to add much-needed housing supply to the Boston suburbs.
Northland Vice President of Development Kent Gonzales said the firm began the process in 2013. It spent three years meeting with development partners and community members to sketch its vision for the property before publicly announcing the project in 2016, and then it formally filed its application for the special permit process in 2018.
The developer received its approval from city council in December 2019, but then opponents in the community received enough signatures to hold a citywide ballot initiative on the question of whether to overturn the project.
The project had backers in the community such as housing advocates and environmental activists who support dense residential development, Gonzales said, adding that volunteers knocked on virtually every door in Newton to spread their support for the project. Northland also spent $320K on the campaign, compared to $28K spent by the opponents, the Boston Globe reported in February 2020.
Gonzales said the developer had to be careful to follow election financing laws and was only able to fund in-kind services, but he said that represented "a lot of money."
The initiative was included on the same ballot as the presidential primary election in March 2020. Gonzales said the large turnout on that date is what enabled the development to win the initiative, as many of the supporters wouldn't have been as energized as opponents if asked to turn out only to vote on the project.
"There were attempts to have a special election off of that date, and that would probably have killed the project," he said. "If people didn't come out to vote, the project wouldn't have happened."
He said Northland is finally preparing to break ground this summer on the project, nine years after its planning process began.
"Developing in the suburbs, it’s a long-term commitment," he said. "You need to have patient and enlightened investors who are along for the ride, because it’s not a short ride ... it’s not for the light-hearted."
Mark Development principal Damien Chaviano said that even without having its projects put on a ballot initiative, the firm has needed to launch similar campaigns to win the support of Newton City Council for its major developments.
The developer in 2017 received approval from the Newton City Council for 160 housing units at the corner of Washington and Walnut streets. In October 2020 it received approval to develop 10 buildings including 582 units, plus hotel, retail and office near the MBTA's Riverside station in Newton.
Chaviano said it has spent hundreds of thousands of dollars hiring people to knock on doors and talk with community members about its projects and persuading them to testify in support to the council. It found through those conversations that two-thirds of the public supported development, despite the opposition being more vocal at community meetings.
"We realized we were no longer developers, we were politicians, quite frankly," Chaviano said. "So we shifted our energy from talking to consultant teams and design folks to getting out the vote, conversations, living room discussions, bringing seniors to hearings. We realized if we were going to get that kind of multifamily approved, it was going to take city councilors seeing heads they know would translate to votes."
Chaviano said he hopes the process will be improved by a new law signed by Gov. Charlie Baker last year that requires municipalities with MBTA stations to legalize multifamily zoning within a half-mile of the transit stops.
"It’s empowering the MBTA to look at the real estate they hold and put it on the table for developers," he said. "The MBTA is spending a significant amount of time now on the real estate side figuring out how do they unlock this land because there is an avenue for developers to come in and maximize value, which historically has not been the case. I think you’ll see a lot of transactions."