Affordable units get cut

August 10, 2007
By

John Ruch

HEATH ST.—The developers of the American Brewery Lofts condo project and the Boston Redevelopment Authority (BRA) are blaming each other for financial pressures that led to an unusual cut in the development’s required amount of affordable units.

Under the city’s “inclusionary zoning” policy, the 79-unit development that recently opened at 251 Heath St. was required to include 11 units marketed at “affordable” rates. But on July 19, the BRA board agreed to let the developers cut that to eight affordable units.

No one disputes that the developers—Connecticut-based Commonwealth Ventures and Rhode Island-based Procaccianti Group—requested the cut in affordable units, citing some kind of financial pressure.

While the BRA said such cuts are not unheard of, they are also “not really typical,” according to spokesperson Lucy Warsh. “Basically, the BRA was assisting this project in an unusual way.”

According to the amended affordable housing agreement, approved by the BRA board and signed onto by the developers, the cut was made “[b]ecause of the softening of the condominium sales market and rehabilitation costs that were significantly higher than originally projected…This change complements other efforts, including an increase in private equity and third-party financing, necessary to address Project cost overruns.”

“The project was in serious danger of being foreclosed upon,” Warsh said. “Given the tough market conditions, it was a question of losing three affordable units or having no project at all.”

But the BRA was the real problem, according to Michael Dorion, the project’s sale broker at Jamaica Plain’s Coldwell Banker Residential Brokerage and an active participant in the affordable unit cut negotiations.

“It had nothing to do with market conditions or anything like that,” Dorion said. “It was more a change of heart by the BRA.”

Commonwealth Ventures, which has been the public face of the project in the neighborhood, referred questions to Dorion and his partner, Sarah Carroll. Company principal Richard Galvin did not return a Gazette message left with an assistant.

According to Dorion, the financial pressure was a result of a change in the materials for a particular wall requested by BRA staff as part of its regular design review process.

“We were going to do a different type of stone facing,” Dorion said. “The BRA decided they wanted brick.”

“It cost [the developers] almost $2 million in change-work orders. It delayed them months,” Dorion said, adding that the overall cost was $2.1 million. “They’re only recouping about two-thirds of that.”

“So the developers went back to see if there was any relief for this,” Dorion said, explaining that he joined in meetings with the developers and BRA staff, including an on-site visit.

Before the cut in affordable housing was approved, Dorion said, the developers tried another alternative. He said a Beacon Hill developer who wanted to reduce the number of on-site affordable units in a project there was willing to buy the American Brewery Lofts units at market rates, but then sell them at affordable rates, as a trade-off that would help both projects. But that was not approved.

Dorion declined to comment on the record about sales demand for affordable units in the project, but said demand is good for the market-rate units.

“We actually don’t know what wall they’re even referring to,” Warsh said when told Dorion’s version of the story. “It sounds like an interesting and possibly unfounded claim. That’s really strange.”

She noted that the developers agreed to the language in the revised agreement that referred to a soft sales market. And she cited possible other factors revealed in the BRA’s review of the project’s finances.

Warsh said that while a 10 percent budget margin for possible cost overruns is common in rehabilitation projects—the Brewery Lofts are partly in a rehabbed brewery—this project budgeted only 5 percent.

The developers may also have relied on overly ambitious profit projections from the roughly 83 parking spaces that are being created, she said.

“Apparently, they planned for more than $2.5 million from the sale of the parking spaces,” Warsh said. But, she said, it turned out that the project needed to deed a space to each unit, “which lost them over $2 million in sales that they originally accounted for.”

Whatever the reason for the cut in affordable units, it goes against the grain of neighborhood concerns about affordability and related diversity of residents in early planning meetings.

“I would hope the BRA would do a lot more to increase the number [of affordable units],” said the Jamaica Plain Neighborhood Development Corporation’s Joseph Vallely at a 2003 community meeting about the project.

On the other hand, the affordable units arguably aren’t that affordable anyway, however many there are. The units were approved under an old inclusionary zoning standard that said they had to be affordable to people who earn 80 to 120 percent of Greater Boston’s area median income (AMI). In practice, that means people with upper-middle-class incomes.

In 2006, the BRA changed the inclusionary zoning to reflect the much lower Boston AMI, and using hard maximum income limits instead of percentages. But the old standard still applies to American Brewery Lofts.

The developers have fulfilled another affordability-related promise by giving $100,000 to the BRA affordable housing construction fund, according to Warsh and Dorion.

The project is advertised on its web site as “value priced housing” because the sale prices—about $400,000 or less—are somewhat lower than usual for new construction. In 2003, Galvin described the project as 50 percent affordable, apparently referring to these sale prices, which are relatively low from a regional perspective.

The project largely went through a Mission Hill approval process, though it has a JP address. Community Alliance of Mission Hill president Rich Johnson, who was not in office at the time of the project’s approval, said he does not know enough about the situation to comment at this time.