Development costs cripple both builders and buyers

 As the already-high cost of development in Boston continues to rise, it is threatening to eclipse the possibility of a stable Greater Boston housing market, according to the Boston Foundation’s 2015 report card, which was released last Friday.

Unless the city becomes more welcoming to higher-density building, housing in the area is likely to be all but unaffordable, the report asserts.

Building in Boston is hampered by a combination of prohibitively high construction costs and the price of desirable land, according to the report authored by Northeastern University professor Barry Bluestone and his team at the Dukakis Center for Urban and Regional Policy.

This leaves developers stretched to build units that are not luxury or low-income housing, with a dearth of residences available for middle-income buyers.                          
                   
“We believe this state of affairs poses a real threat to Greater Boston’s future health and prosperity,” Boston Foundation president Paul Grogan said in the report.

Grogan called the market tendency toward high-end development “unsettling,” especially as the city pushes to accommodate the influx of new residents. Between 2010 and 2014, about 172,000 people moved into the region, but Greater Boston saw the construction of only 15,000 new houses, condominiums, and apartments.

The report highlights an irony: The region is becoming increasingly attractive to young professionals, particularly those who seek to live in Boston proper, who are looking at smaller housing options, and thereby pushing rents ever higher.

This year, the average monthly rent for a two-bedroom apartment in Boston is $2,602, according to the Foundation report.

Land purchases account for about 58 percent of the total development cost.
The result: Constructing a family-sized unit of 1,600 square feet would cost more than $438,000, according to the report, and renting a new unit of that size would land around $3,215 a month.

The investment hikes have spared no form of housing, the report cautions. Condos in Greater Boston are selling at a median $401,398, a mere one percent below the median single-family home sale price.

Dorchester has consistently topped the list of communities in the sale of three-deckers, with Lawrence a distant second. Yet only about 170 sales of three-decker units in Dorchester are expected by the end of the year, the lowest number since before 2010.

Other communities are seeing marked increases in three-decker sales. The report’s authors estimate three-unit home sales in South Boston will increase by 72 percent by the end of 2015.

“These increases are again a response to investors buying up triple-deckers to rent them out to a population desperate for rental housing and willing to cram many roommates — each paying a high monthly fee — into one unit,” the report states.

The median price of a single unit in a three-decker has increased 95 percent since 2009 and 8 percent since last year, up to $477,057 by the end of this year.

The trends can be managed, Bluestone said, but “only by taking aggressive action now.”                                                    
Recommendations include larger housing projects, broader zoning for higher density multi-family housing, and incentives to donate land for affordable and mixed-income housing.


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