Taxpayers Spend $57 Million on Affordable Housing Projects

Wednesday, April 25, 2012

Jeff Lavery and Walter Bird Jr., GolLocalWorcester Reporters

About $57 million in public funding is behind nine affordable housing projects in Worcester, even though the city has more affordable housing than required by law. In some cases, developers are spending more than $500,000 per unit – hundreds of thousands of dollars more than some people pay for their home.

Additionally, the city stands poised to direct $1 million toward affordable housing projects in fiscal 2013 through its HOME Affordable Housing program. That amount has been declining in recent years, and is less than the $1.8 million spent in fiscal 2012.

Cap affordable housing

City Councilor Konstantina Lukes has raised the issue of project costs in the past, and believes current data provides more than enough impetus to tighten the spigots. She and others point out that 13.6 percent of housing in the city is subsidized – more than the 10-percent state minimum of required affordable housing.

“I truly believe we need a cap on affordable housing,” Lukes said. “We have exceeded our necessary quota. Those monies are not efficiently spent and I have concerns about the oversight and lack of efficiency in spending those monies.”

Lukes has been among the most vocal councilors on affordable housing and was a driving force behind a report Chief Development Officer Timothy McGourthy released in February that detailed nine specific affordable housing projects in the Main South area of Worcester. Total development costs were $73,963,109 for those projects. Of the total, 77 percent, or $56,834,700, came from public funds.

The projects are not exclusively affordable housing, with some offering market-rate rents.

Several housing projects

This has given Worcester a healthy inventory of affordable housing projects. Over the past three years, subsidized housing in the city has increased by 4 percent. That includes projects such as 9 May St., with a price tag of $19.1 million. It is owned and being developed by Worcester Common Ground, Inc. (WCG), a Community Development Corporation (CDC) founded in 1988.

WCG acquired the building at the end of March 2006 and was approved by all funders, the Historic Commission, the Planning Board and the Zoning Board of Appeals for use as 46 units of one-, two-, and three-bedroom residential rental apartments. It also called for a common community space in the May Street portion of the first floor, utilizing the historic front entrance. The total development cost of each apartment unit is $414,539.50, of which $236,739.15 is publicly funded.

WCG is attached to Austin Corridor II, a $7.1-million project with $6.2 million in public funding. It is among those receiving assistance through the city’s HOME funds, a report on which city councilors were to review at a meeting Tuesday. In fiscal 2013, Austin Corridor II is slated to receive $200,000 through the program. Other HOME funded projects for fiscal 2013 include the Kilby Gardner Hammond project, which is scheduled to receive $670,000. HOME funds are distributed to local communities through the U.S. Department of Housing and Urban Development.

Wrong perception

The numbers, according to WCG Executive Director Stephen Patton, do not paint an entire picture. He also pointed out that public funding includes tax credits.

“I don’t consider that public money, I think, so much as you might,” Patton said. “The people that buy the tax credits would have probably found a way not to pay taxes.”

For Patton, it comes down to perception. Many people, he said, think of affordable housing as being only for the poorest and for those who don’t work. Not so, he said, adding, “Almost all our tenants work, but if you make $10 an hour, $400 a week, $1,600 a month, how much rent can you afford? There’s just not enough income. ”

As for the costs associated with projects such as Austin Corridor II, Patton said rehabilitations are typically expensive, because, “They’re difficult to maintain.” He also referenced the HOME report, saying it was “honest, but not complete. It could have shown where funding went over the past five years.”

The report details the funding for projects from fiscal 2012 through fiscal 2016.

Housing report

A housing report is expected to be ready later this year and is being compiled by RKG Associates. The New Hampshire-based firm provides private, public and institutional clients a comprehensive range of advisory, planning and strategic consulting services related to real estate, land use and economic development. Calls to their offices confirmed the report is in the hands of the city, but has not been signed off on. McGourthy said the report is an ongoing project that should be ready in the coming months, noting an ample supply of housing for all income levels is vital for the city to remain competitive.

“RKG is working on a housing study on behalf of the city which should be completed by June,” he said. “The study will provide detailed information about Worcester’s demographic changes and housing trends. Once we have this data, we expect to convene an advisory committee to work with the city administration to outline a targeted housing agenda to ensure that the city boasts a strong, diverse housing market. Our existing data is from 2002, well before both the previous market high and the following economic downtown.”

In order for Worcester to remain competitive, McGourthy added, “It must have a housing stock to support all interests and income. We look forward to working with the advisory committee and the community to ensure that we build the Worcester housing market for the next decade.”

City Manager Michael O’Brien, in a 2010 report entitled “The City of Worcester Housing Strategy – A Formula for Neighborhoods in Transition,” highlighted the need to provide affordable housing and said the city would maintain a 10-percent minimum of such projects, which it has. He also said Worcester would strive to seek a balance between the demand for affordable and market-rate units and “stimulate the development of mixed income housing.”

City Councilor Joseph O’Brien believes affordable housing is a critical part of that effort and said there is “a lot of misunderstanding” as to what it actually means.

“The reality is a lot of projects are targeting working families,” he said. “For example, city workers, a large number of DPW workers, would qualify for affordable housing. The overwhelming majority of folks living in these projects are working families.”

Unlike Lukes, O’Brien stands firmly opposed to a cap on affordable housing, saying, “Absolutely not, especially with the problems you’re looking at here. I don’t see where the net profit to that is. We want people to have affordable places to live. I don’t understand the logic. It would be bad for the city.”

He pointed out at that no city tax levy money has been invested in the nine affordable housing projects in the Main South neighborhood.

District 1 City Councilor Tony Economou, on the other hand, said he supports a cap on affordable housing. A local real estate agent, he cited the per-square-foot costs of some of the projects, which in two of the nine exceeded $300. The costs in new housing construction, Economou said, are usually around $150 per square foot.

“It’s hard to swallow paying money like that for some of these projects,” he said. “I personally think we have more affordable housing than we need. There needs to be a balance. Housing has become so affordable that the numbers may be skewed.

“You know what’s happened? Some people, homeownership isn’t the right fit for them, for whatever reason. But I see even people that might have had some difficulty, they’ve been able to secure housing in the rental market. With a good rental history, in a few years, they’ll be back in the buyers' market in no time.”