Affordable For Whom?
Just a few blocks from famous Harvard Square in Cambridge, Massachusetts, on the corner of Massachusetts Avenue and Garfield Street, lies a juicy prime commercial lot in Cambridge. Look
again. It’s Garfield Place, where the city of Cambridge recently finished construction on eight luxury-cost units of affordable housing for
eight low-income families.
Initial cost: Almost $1.5 million, calculated from the $378,000 assessed land value plus $1.07 million in construction loans. The staggering $181,000 cost per unit is more than
four times the average market value ($42,800) of a Cambridge apartment.
Continuing cost: Rent subsidies, because the low-income families won’t possibly be able to cover the on-going mortgage payments.
Continuing cost: $51,800 annually in lost property tax revenues to the city (the project is tax-exempt), assuming an equivalent commercial building could have been on the site
instead. That forfeited tax revenue alone, divided among the eight families, could have given each family $6,000 annually forever and saved the other costs.
DOES THIS MAKE SENSE?
Garfield Place is the new look of public housing. It’s being built by the Cambridge Housing Authority. The new look is not huge complexes concentrating the poor and fostering
crime and stagnation, but scattered small sites mixed into ordinary neighborhoods. So far, so good.
But it is still public housing, and expensive in three ways:
(1) The cost of construction is, for various reasons, much higher with public money than private money.
(2) New construction, it’s well known, is much more expensive than old construction.
(3) The choice of a prime commercial site in the case of Garfield Place also pushes cost up dramatically. Besides lost tax revenue, the construction on the outside at least has to
match the historic 19th-century mansions on its two sides, one owned by Harvard University. The city government is making all the wrong choices on each of these points.
AVOID PRIVATE HOUSING
For whatever reason, the municipal government avoids looking at options with the much more economically operated private housing market, which would reduce costs or expand the number of
poor families helped. For the same initial cost of Garfield Place, for example, the city could buy 34 typical Cambridge apartments or even 24 high-end Cambridge apartments (based on
figures from Cambridge Assessor’s Office: $42,800 average assessed value of a Cambridge apartment, $60,000 typical assessed value of a high-end apartment with rent about $1,500 a
month.) Or for the same continuing subsidy cost, the city could subsidize dozens of tenant families in average-rent privately owned apartments.
The suspicious factor in the city’s choices is the huge payments going to top-level professionals. Call it executive welfare.
In the Garfield Place project, at least a quarter million dollars is going to the architect, the engineer and high-level bureaucrats with overseeing functions (calculated by subtracting
building permit estimated construction costs from total loans procured).
Then, at least another quarter million dollars (based on standard contractor mark-up) is going as profits, salaries or overhead to the developer, the various contractors and the owners
of the construction-related companies working on the project.
Less than a quarter of the project costs are going for materials and direct construction labor.
Making the choice of new construction at public cost keeps millions of dollars flowing to a circle of construction professionals and executives. The Garfield Place developer has done
six other projects in the city previously.