Government Subsidized Housing, Built at Luxury Prices, Sparks Outrage

Thursday, March 15, 2012

Scott Van Voorhis, GoLocalWorcester Reporter

Worcester has the distinction of having a large concentration of government-subsidized units for the poor built at costs typically associated with luxury homes and condos.

The cost to build an “affordable” unit in a number of new Worcester housing projects rivals that of upscale suburban homes and even deluxe urban condos, ranging from nearly $300,000 to more than $542,000 per unit, stats released by city officials show.

The costs, which are heavily subsidized by taxpayers through a variety of subsidy programs, have sparked outrage among some Worcester elected leaders and officials.

By contrast, the median home price in Worcester is $154,700, having fallen from over $220,000 back in 2008, according to Zillow.com.

“The developers are getting a nice chunk of change and we get more low income people,” said James DelSignore, the city’s auditor.
The construction costs were enough to raise eyebrows among real estate experts.

A developer who spends more than $540,000 to build a home or condo, if it were market rate, would likely sell it for over $600,000, said Tom Skahen, partner and co-founder of Littleton-based PrimeTime Communities.

That’s right in the range of sprawling new luxury homes Skahen is selling right at a new development in Shrewsbury called Farm View Estates.

“It looks like you some pretty high affordable prices,” Skahen said.

Closer to home, you could buy a sprawling, 3,700 square foot home on Audubon Road in Worcester, complete with six bedrooms and six baths, according to a listing on Zillow.com.

Or if condo living is more your style, $600,000 is about what one of the penthouse units at Natick’s deluxe Nouveau condo tower fetched.

While the 45 unit Hadley is in a league of its own, other new subsidized rental projects in Worcester they are still far higher than what it costs to build the average home or condo, city stats show.

The cost to build a half dozen other new subsidized housing projects in Worcester range from $299,000 per unit to $414,000. That includes both the public subsidies and the money the developers put in, the numbers show.

The sky high construction costs raised the hackles of some Worcester city councilors at Tuesday’s council meeting.

City Councilor Konstantina Lukes took aim at the Hadley project. The former 1920s furniture building at Main and Madison was converted to subsidized housing, with the developer, who went bankrupt, tapping millions in state historic tax credits and other subsidies.

Lukes argued it would have been cheaper for taxpayers to have torn down the building and put up a McDonalds.

The councilor was also irate over what she argued is a mismatch between large public subsidies in these projects compared to relatively modest contributions of equity by the developers.

The ratio of public to private money on the projects ranges from half to well over three quarters, according to the city analysis.

But James Levin, a developer building 13 affordable units at 5 May St., offered a different take.

He estimates his per unit costs at about $250,000.

However, Levin contends critics fail to account al the restrictions that are put on developers who tap into public financing, including prevailing wage rules that force builders to use union labor, driving up building costs by 30 percent.

The process of applying and receiving various public subsidies is also a long and drawn out process, dragging out construction and driving up costs.

And those taking aim at the city’s new crop of subsidized apartment projects might also want to take into account the once decrepit and hazardous condition of a number of the buildings, Levin said.

Before he started work on the 1880s brownstone on May Street, it was abandoned, home only to squatters. City officials were spending a quarter of a million just on all the fire and police calls related to the building, he said.

In fact, far from making money, Levin said at this point he has already chewed through his fee for building the project.

“We are contributing our entire developer’s fee,” Levin said. “We are doing it for fun.”