Federal Realty seeks affordable housing waiver in Somerville’s Assembly Row

This story was originally published in the Somerville Journal. 

Assembly Row developers say an increase in the amount of affordable housing required by the city may cause a halt to their project, at least temporarily.

Last May the Somerville Board of Aldermen passed an ordinance requiring 20 percent of residential development to be affordable units, an increase from the previous 12 1/2 percent.

The ordinance stemmed from what aldermen call a citywide housing crisis, resulting in the displacement of many residents who can’t afford the rising rents and property values.

On April 6, Federal Realty Investment Trust (FRIT), developers in Assembly Square, formally asked the Planning Board to waive the current affordable housing ordinance and allow them to build at the 12 1/2 percent established when they started the project in 2005.

Though an unprecedented request, Somerville Director of Planning George Proakis said current zoning states developers have a right to apply for a special permit and waiver if a change occurs in the middle of a project.

“The zoning was written in the way that it allows [developers] permission to ask permission [for a waiver],” explained Proakis.

The waiver

Nearly 500 residential units are currently under construction in the Montaje residential building near Partner’s Healthcare and are set to open starting in September. However, residential units in the building on block 8 will be stalled if affordable housing must be at 20 percent, argued developers.

Under the original ordinance, 62 units in the new residential building will be affordable, compared to 98 affordable units under the current ordinance.

The project was first undertaken in 2005, explained FRIT Director of Development Patrick McMahon at Thursday’s meeting, and the land value assessment and structure investment was considered with 12 1/2 percent affordable housing included.

Under that ordinance, there are currently 56 affordable units in Avalon, the first two residential complexes, McMahon said in an interview. When the new rental and for-sale units are finished, there will be an additional 127 affordable units, totaling just over 1,000 units.

At the meeting, Planning Board member Michael Capuano said he was skeptical of the affordable housing waiver. When the percentage increased from 12 1/2 to 20, he said the board suggested the aldermen exempt FRIT, but they rejected the recommendation.

“The Board of Aldermen said 20 percent for a good reason, because this is what people said this is what the community wants,” he said.

Capuano applauded FRIT for its overall contributions to the city, but said things change over the course of 10 years and developers can’t be exempt because they don’t like the law.

“The waiver we are seeking from the 20 percent back down to 12 1/2 percent really is to respect that investment made at the time in order to enable the project, and several projects, block by block, to move forward,” responded McMahon.

Ward 1 Alderman Matt McLaughlin said though he supports commercial development, Somerville is in an affordable housing crisis and needs the extra units.

“I want jobs and I want homes, that’s what Assembly means to me,” he said. “We know what’s coming, we changed the rules … We do not have a luxury housing crisis in the community, we have an affordable housing crisis.”

There are some residential buildings in East Somerville, said McLaughlin, that are much smaller than those in Assembly yet are meeting 20 percent requirement. With nearly 500 units, he continued, FRIT is not at high risk and it’s not to much to ask of them.

Public benefits contributions & value assessment

When Assembly Row was in the beginning stages in 2007, there were a series of public benefits FRIT agreed to, which included a $15 million contribution to the orange line stop, Linear Park, an underpass near the Fellsway bridge, and 12 1/2 percent affordable housing.

As of now, said Executive Vice President of Development Don Briggs in an interview, the total amount of contributions were priced at $240 million. With roughly half of those projects completed, FRIT has used close to $180 million, with nearly $53 million on the affordable housing units.

“We couldn’t create the place or the neighborhood we’ve created without the infrastructure, T stop, connectivity, all those things go towards laying the groundwork to actually creating a great neighborhood,” said Briggs. The majority of the remaining $60 million from the public benefits contributions will be used for affordable housing, said McMahon, paired with a few infrastructure costs and linkage fees.

To pay for the additional 7 1/2 percent of affordable units, said Briggs, one of two things needs to happen: construction costs need to go down or rents need to go up. When that happens, the project can continue.

“This is not an ultimatum,” said Briggs. “This is frankly economic. Right now the land value we have incurred as a result of everything we’ve done today and committed to today … With the 20 percent, [the value] doesn’t work.”

Briggs said FRIT is making a 5 percent return, well below market rate for a project of this scale. When the other buildings open, that percentage will be upped to 6.

“We would not have done this if we didn’t have faith and trust in the city of Somerville and the people,” he continued.

If the Planning Board doesn’t grant the waiver, developers say construction will be delayed from moving forward and they will have to figure out the new values and economics before starting again.

“We totally understand the affordable housing issue. We understand the pressure that is being put on the communities like Somerville, like South Boston,” said Briggs. “But we’re hopeful the city recognizes what we’ve done, that we’ve sort of kept our word every step of the way … and honor the agreement that was struck back in 2007.”

The next public Planning Board meeting will be at 6 p.m. at City Hall on Thursday, April 20.

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