Kittredge Building to Become Self-Storage Facility
A building known in recent years as the Kittredge Building at 55 Emery Street in Springfield was sold in 2022 and is being converted in an indoor self-storage facility.The building now spans about two city blocks and sits on 1.2 acres of land, some of it now under I-91. It was built in 1886 as the National Needle factory, which manufactured needles for hand and machine sewing. Kittredge Restaurant Supplies moved there in the 1920s and was the go-to place for restauranteurs throughout the Pioneer Valley. This business moved to Agawam in 2008. The building sat mostly vacant since then, though an EMS company was located there for a short stint.In 2020, the building became a stand-alone historic district, which prevents it from being demolished or substantially altered on the exterior.But now it is going to stay the same outside, but be transformed into an indoor self-storage facility, owned by QOZ Self-Storage II LLC. Are those owners initials, you may ask? Nope, QOZ is short for Qualified Opportunity Zones, economically distressed areas that qualify for tax breaks for investors.Investment in QOZ for self-storage is a relatively new, and quite lucrative, investment opportunity. Storable.com has a section on its industry-focused site that lays out how sought-after QOZ sites are that can be turned into storage. There are three tax benefits to locating in a QOZ, and that, combined with the low price $2.15 million for 90,000 SF (a mere 41 cents per square foot - even with the sale price being $350,000 over asking price) makes it quite a good bargain for the buyers.This one building gives a telling story of the history of the US economy over the past 150 years. From manufacturing a product that was distributed nationally and internationally (1886-c.1925) to selling goods (manufactured in the US and abroad) to service businesses (c.1925-2008) to being a place without a clear use (2008-2023) to a massive space to store people's excess consumer goods.
Is New Bedford Trying to Stop the South Coast Rail?
Despite clamoring for years for commuter rail service in New Bedford, officials in that town are now threatening to sue the MBTA for seizing city land in order to construct said rail.A May 2023 article by Matt Stout in the Boston Globe lays out a complaint sent by New Bedford officials in April 2023 saying that the land taken should be returned to the city.The MBTA paid $486,627 for the land and Stout wonders if this potential law suit is simply a way for the city to sell the land at a higher price, rather than a genuine attempt to stop the South Coast Rail project, which would only benefit New Bedford residents.To learn more about the situation, read the Globe article here.
Will the Fed Raise Interest Rates Yet Again?
The New York Times has admitted the US economy is in a recession and reporter Jeanna Smialek asks if the Fed will take steps to prevent what she calls a "slight recession" from turning into a big one.Inflation is high - as consumers well know - and the Fed has usually dealt with that by raising interest rates on loans, thus making it more expensive for already-stretched consumers to take out loans for houses, cars, or businesses. This results in less wage growth and increased unemployment and less consumer spending. Seems counterintuitive, right?The idea is that a slower economy will bring inflation under control (as shoppers stop shopping, sellers lower prices, so the idea goes). But the price increases we've been dealing with since 2021 are now driven by services - i.e. wages - and not by material goods. That's a lot harder to curb, as wage cuts are impossible to institute.Banks are failing, largely because they didn't have the capacity to deal with higher interest rates making their older holdings worth less. So will other banks fail if the Fed raises rates? And if so, what kind of chain reaction might that set off?See what the Fed decides this afternoon.
Will Lower Rents and Government Grants Fill Those Empty Boston Storefronts?
An April 2023 article by Diti Kohli in the Boston Globe detailed various approaches being considered to fill empty storefronts in Boston. The residential areas of the city, such as Back Bay and Hyde Park, have a booming storefront retail market right now. But the office-centric areas of Downtown Crossing and the Financial District are struggling to find both office and storefront tenants.Kholi details a variety of approaches being considered: lower rents, grants from the city to relocate businesses impacted by COVID, to name two.Katie Grissom, head of retail at Nuveen Real Estate, interviewed in the article, says that big box and national chains were already doing poorly in 2019 and she thinks this is a great time to reimagine downtown. More independent retailers and experiences such as the WNDR Museum are what pedestrians want, she says. Michael Nichols, the president of the Downtown Boston Business Improvement District, said that downtown has 10% more places to eat today than it did in 2019. However, it's unclear how long those restaurants and cafes will last, because in 2022 Boston only saw about half the foot traffic it had pre-pandemic and is projected to hit only about 60% of pre-pandemic levels in 2023. With offices clearing out due to layoffs and the preponderance of remote workers, something different definitely needs to happen on the streets of Boston.
Massachusetts’ Q1 Residential Data Points to a Slowdown in Sales
The Massachusetts first quarter residential real estate data is out from MLS and it shows that homes continue to hold on to their value (good news for sellers), but are only rising very slightly in price and sales are taking longer to happen (good news for buyers).The first quarter of the year (January – March) is usually a slow time for selling or buying a home in snowy Massachusetts. And yet, prices have continued to rise, albeit more slowly than during the peak pandemic years. In Q1 of 2023, the median sale price came down to the list price, after having exceeded it for two and a half years. Pre-pandemic, median sales price was below list price. The median sale price for a SFH in Massachusetts this quarter was $535,000 a 39% increase over 2019’s median price for the same quarter, but only a 1.9% increase over Q1 in 2022. Q1 of 2022 turned out to be the fastest of the past five years for sales to happen, and in 2023, the average time for a home to sell is now well over a month statewide.The news is about the same on the condo front. Median sales price for the first quarter of the year were $1,000 above asking price, which is negligible. The median sales price of condos in Mass is now $500,000 which is an increase of 36% since 2019 and an increase of 6% from the same time last quarter.The days on the market for condos is also longer than the rush in early 2022, with condos also taking more than a month to sell now.With mortgage rates still very high (and more than double what they were until September 2022), sales are slowing. The sales volume has decreased markedly in Q1 compared to the pandemic year and is only slightly higher than Q1 of 2019. The residential real estate market in Massachusetts seems to be stabilizing in terms of time on market, offer prices and volume of sales. The prices, however, are remaining at the heights they reached during the pandemic, which makes it hard for first-time buyers to enter the real estate market. Lending rates are a further impediment to new buyers.
Will Housing Prices Fall in Massachusetts in 2023?
What will happen with housing prices nationwide and in Massachusetts in particular in the next year?Moody’s predicts that home prices will fall across the country in 2023 and 2024, based on the nationwide 12% dip in prices between June 2022 and February 2023. As of February, the median sales price for a single-family was $363,000, down from $413,800 last June. Moody’s predicts a recession in late 2023, no easing on lending rates, and increased unemployment – all of which will keep prices down.Prices are falling most dramatically in large Western and Southwestern cities like San Francisco, Seattle, Denver, Las Vegas, San Diego and Phoenix. The Southeastern and Northeastern states are still holding value.The dramatic chart below shows how mortgage applications have plummeted as the interest rate has risen in late 2022.And while prices are decreasing, Moody’s stresses that this is a market correction, adjusting downwards after the extreme spike of prices during the pandemic, and not a crash. They predict prices will continue to fall by 5 to 10% by 2025, but they will still be about 30% higher than they were in 2020 before the pandemic. An overall increase in value of 30% over five years is a good return on housing investment.Housing need will continue strong, according to Moody’s, as the national market has a 1.5 million unit shortage.What about Massachusetts?The Mass Association of Realtors’ February report showed that sales of existing homes declined for the 12th month in a row and the sales of new homes were lower in January 2023 than in January 2022 or January 2021, but if we look back to pre-pandemic days, sales are up. So the 18 months or so of the pandemic realty frenzy (March 2020 – September 2021) can be considered an anomaly, and probably should be.A March 22, 2023 article on Boston.com by Vivi Smilgius and Eileen Woods on Boston.com gives a deep dive analysis of the Warren Group’s Housing Report and shows us that residential property is still increasing in value in the state as a whole:But in Greater Boston, residential real estate is finally starting to fall in price, showing that market correction that Moody’s suggests is happening across the country: Although the prices are declining in Greater Boston, they are still much higher than the median prices in the state as a whole.The Warren Group shares a breakdown by county of median prices and volume of single-family sales between February 2022 and February 2023. Only two counties saw a decrease in sales prices compared to the previous year(Norfolk at 3.8% and Middlesex at 0.9%), but all counties had a double-digit decrease in volume of sales – except Norfolk, which had an increase in sales volume of 3.9%. The data is below: The condo market shows even larger dips in volume of sales, and has more loss of sales value than gains: So while prices are up overall in Massachusetts, inventory and number of sales are down and each county is quite distinct in housing market data.Realtors often look to Spring as a time of increased sales. Will more homes and condos come on the market this Spring in Massachusetts? Only time will tell.
Boston Housing Crisis Q&A
Andrew Brinker, business correspondent for the Boston Globe held a Q&A on Reddit about the Boston housing crisis.You can read the whole article here, including more lengthy answers, but below are some of his answers to short questions posed by Reddit users:
- Q: How do we ban tenant-paid broker fees?
- A: State legislation
- Q: How much housing in Boston is owned by foreign investors?
- A: There's no data that tracks that, but cash buyers may indicate foreign investment.
- Q: What online tool can help find housing?
- A: Housing Navigator
- Q: What percentage of housing is corporate owned?
- A: No one has done that research
Pitfalls of Affordable Housing Plague Workers
One of the curious features of affordable housing is that units designated as "affordable" are often beyond the means of working people to afford.Boston Globe reporter Miles Howard detailed his saga of trying to stay in Boston by finding an apartment he can afford. He's lucky enough to be living in a below-market rate unit, but is worried his landlord might raise the rent. So he set out to see what his options were.His article details his attempts to get into affordable housing. He didn't earn enough to qualify for the apartments set aside for those earning 60% of the AMI (the Boston AMI for a single person is $98,000, so we can assume he is earning less than $58,000 as a reporter).And if he actually got into affordable housing, he'd have to recertify his eligibility annually, not just by providing paystubs or tax returns, but also by having his bank statements audited, transaction by transaction.So what will this reporter do? He's staying put for now, but isn't ruling out the idea that he'll be one of the hundreds of thousands of people leaving Boston (145,000 between 2010 and 2020), because he can't afford to live in the city.
Renting in Boston Just Got Harder
As if the rental crush that started as the pandemic eased in late 2021 wasn't bad enough, rental apartments are even harder to find in Boston today and the rents on the few units that do become vacant are just going higher and higher.According to the Boston Globe, rents in Greater Boston are up 6% since March 2022, which is a steeper increase than the nation as a whole. The median rent for a 1BR in Boston is now $2,011, on par with NYC and San Francisco. That's $24,132 a year, and it means that the income needed to rent that median unit is about $100,000 per year.The vacancy rate is 0.49% - which essentially means any unit that becomes vacant will be rented in a day. A healthy vacancy rate is 5%The Globe interviewed a young woman who couldn't find a place to live on her own after a break-up and wound up spending months living in her car before finding a room to rent with strangers in Jamaica Plain. Another interviewee is a Harvard instructor who lives in a room in a shared collective. She would like her own place, but can't find anything she can afford.White collar professional workers are living like students just to be able to afford to live near their jobs.
Can't Afford Boston? Try Japan.
Japan's shrinking population and a cultural distaste for second-hand homes has led to a growing number of vacant homes (akiya) for sale at seriously low prices, some for as little as $25,000.The country's 2018 housing survey identified about 8.5 million akiya and the number has likely risen since then. Heirs can refuse to take possession of a house that has been left to them in an estate, and in those cases the municipality auctions the house off - for tens of thousands of dollars.The New York Times ran a piece about the akiya and some of the non-Japanese buyers who have relocated to them, when they've been priced out of their home markets. Two Americans have started a business promoting the inexpensive akiya housing to international relocatees.Some in Japan are worried about what it will mean for Japanese culture if so many foreigners move to the country, but few native buyers are stepping forward.Read the whole article here.
Do Climate Change Refugees Know Where to Go?
A recent episode of PBS's Terra program featured Americans who moved within the country (one from Washington to Florida) to avoid climate-related hazards, only to find new weather problems in their new locations. You can watch it on YouTube here.Terra used data from Pro Publica to map out the safest weather/climate areas in the US, based on predictions of how climate will change. New England as a whole fared well, though Southwestern CT, a bit of coastal Maine, a sliver along the CT River in New Hampshire, and Cape Cod and the North Shore of Mass didn't get "Safest 10%" status, as you can see in the map below, from the show.Risks arise from flooding, fire, heat, and drought, and the riskiest 10% of the country is in the south and west, as you can see in the map below, also from the show and using data from Redfin:One of the big dangers of extreme heat is how difficult it is for humans to adapt to it - at home, and on the job. In places where humans (and the built environment) have already adapted to extreme heat - such as Florida - people should have an easier time as the heat rises, because they and their spaces have become acclimatized to it.The fastest-growing metro areas in the US are nearly all in the South - Denver, Seattle, and Oklahoma City are the only non-Southern areas. Why are people moving out of the climate-safe Northeast and moving to the climate-risky South? Because middle-income people can't afford to live in the safe areas. And in the Midwest, housing is cheap, but there are fewer jobs.
How the Property Tax System is Impacting Housing Shortage
The Wall Street Journal recently shared how the low property tax rates for undeveloped land may be keeping some landowners from developing those parcels.They illustrate the low rate paid for vacant land by a parcel in Austin, TX that has been used as a parking lot for many years. The owners earn revenue from the parking and because the land is unimproved, their tax rate is substantially lower than nearby properties that contain buildings. Austin used to be an affordable town with plenty of housing, but it has become a boom town in recent years, resulting in a housing shortage. There are plenty of vacant lots, but owners of those lots are reluctant to build.A proposal from tax reform experts is to increase the tax rate on vacant land and decrease the rate on improved parcels, resulting in the same revenues for municipalities, but shifting the burden.Pittsburgh has adopted this taxation plan and it resulted in more construction activity, but it's not politically popular and developers tend to think it wouldn't make that much of a difference. Detroit is currently considering adopting it, stay tuned.You can watch this episode from WSJ on YouTube here.
Vacancies in Boston Office Space at 20 Year High
Catherine Carlock has an article in the April 15, 2023 Boston Globe detailing the surge in office vacancy rates in Greater Boston. It started with the pandemic when many white collar professionals worked remotely. As Carlock says, the market took a "wait and see" attitude about whether office vacancies would stay high as the pandemic ended.As she says, we are seeing. More workers are doing their jobs remotely and as a result, the regional office vacancy rate was 19.1% in January, the highest in 20 years. And since January, more than 1.5 million SF of office space has been vacated - nearly a full Hancock Tower's worth.But it's not all bad news, as newer Class A towers (with the best amenities, the most modern conveniences) fill up, older Class B and C office space is struggling to lease up.Office buildings that are for sale are not a great investment at this time, with properties losing sometimes half their value. Loan defaults are also a concern, certainly for variable-rate loans.72% of Boston's $4.28 billion in budgeted revenue for this fiscal year is expected to come from property taxes, but the city's administration says its not worried. There are still businesses choosing to locate in Boston, notably Lego, relocating from Enfield, CT to Boston and the law firm Goulston & Storrs.
1,000 New Apartments Planned for Downtown Worcester
A MassLive article from April 18, 2023 (full article here) details several upcoming residential and mixed-use development projects that, if completed, will add 1,000 residential units to the city.The projects are:35 Portland St (currently a parking lot behind the Hanover Theater) to create 108 studio and 1BR units. Planning permission granted April 2023.274 Franklin St (several blighted parcels totalling 3.75 acres) 364 units from studios to 2BRs, 21 of which will be ADA accessible. Construction to begin Spring 2023.5 Salem Square (former site of Notre Dame des Canadiens church, demolished in 2018). 163 units, 14 of which ADA accessible. A 20,000 SF grocery store and ground floor parking garage. Preliminary planning permission granted March 2023.3 Eaton Place (currently vacant land) 145 units, 12 accessible. Preliminary planning permission granted in 2023.484 Main St (former Denholm Department Store, owned by the city). The Worcester Redevelopment Authority issued an RFP in 2022 and is reviewing submissions for redevelopment to include housing.
The History of Zoning & How It Exacerbates the Housing Crisis
An April 2023 newsletter by Peter Coy of the NY Times reviews Robert Ellickson's 2022 book "America's Frozen Neighborhoods: The Abuse of Zoning" which Coy calls "a valuable contribution to the growing movement against NIMBYism." NIMBYism is a favorite target of many New Urbanists who are pro-city, pro-density, and anti-single-family zoning. Coy says that today's housing crunch started a century ago under the Hoover administration. President Herbert Hoover thought that in asking municipalities to create local zoning, they would encourage what he thought would be ideal communities - safe, affordable housing for workers, good access to roads and good businesses nearby. But municipalities had different ideas of what they wanted in their communities: namely suburban single-family homes: to bring in more property tax revenues and keep poor people out.Coy highlights some of the key points of Ellickson's book, which analyzes zoning regs in Austin, New Haven, and Silicon Valley to show how their zoning laws have impacted each community. The conclusion of the book, per Coy and per Paul Krugman, also of the NY Times, is that bigger cities are better (more economically productive) and thus more density is a desirable outcome.
Is the MBTA Communities Zoning Plan Realistic?
Former MA Governor Charlie Baker signed into law a requirement for all Eastern and Central MA communities served by public transit (MBTA, commuter rail, or bus station) to create a high-density zoning district by right, within a half-mile of a train or bus station. The high density districts must be of at least 50 acres, 25 of them contiguous and allow multi-families by right.Charlotte Kahn published an excellent analysis of the problem with this plan back in March 2022, while the public comment session was still open.Some of the main critiques are:
The plan calls for massive numbers of new residential units in towns that are already quite dense. For example, Somerville is required to construct 9,067 new units. 13,477 are required in Cambridge, and 12,642 in Worcester.
There is no requirement about affordability of these units, so towns that are already prone to high-end market rate units will just get more, which may push out lower earners.
"Upzoning" to these densities will mean displacement of existing residents and businesses and the destruction of green space and historic buildings.
When first proposed, towns were allowed to opt-out, with the understanding that they would not be allowed to access funding through the Housing Choice, Local Capital Projects, or Mass Works streams. These are major public funding sources for some communities and not used at all by others.But this year, Massachusetts has a new Governor and a new Attorney General, who have now ruled that there is no opt-out option. "Compliance with the MBTA Communities Zoning Law is mandatory," said AG Andrea Joy Campbell.The AG press release goes on to say how important safe and affordable housing is to the state government, yet the MBTA law says nothing about affordability or the rational behind the plan.This topic seems to be flying under the radar of major news organizations, but we at Daly Appraisal Services will continue to monitor it and share updates.
Insert Park Here?
The Boston Globe recently reported on a plan to build a park over the Mass Pike and train lines in Chinatown, making a way to connect the two sides of a once-physically united neighborhood that was divided by the infrastructure project of the 1960s.You can read the full article here:A park over the Pike in Chinatown Boston Globe 4.13.23
Boston Globe Editorial Suggests State Needs to Take Control of Housing Regs
The Boston Globe published an editorial on April 10, 2023 that detailed the long-reaching consequences of an important early twentieth-century law. In 1920, the state gave zoning and planning authority to cities and towns, which, the Globe says, resulted in many municipalities suppressing housing growth in an attempt to keep out renters and the lower classes, particularly in the Greater Boston area.As a result, the cost of housing in Massachusetts increased at a greater rate than the national growth. In Q4 of 2022, the median single family home in Boston cost $707,250, compared to $378,700 in the United States as a whole.In Boston proper, 46% of renters are considered rent-burdened (meaning they pay more than 50% of their monthly income on housing costs) and 110,000 people have left MA since the start of the pandemic. The Globe attributes this loss of population to the high cost of housing.What can be done? The Globe endorses more government intervention at the state level to encourage municipalities to dramatically loosen zoning restrictions - even when local officials argue against it. The Globe suggests that the Governor and AG should levy legal consequences on towns that don't comply.Read the article here: Boston Globe editorial 4.11.2023
Will Building More Market Rate Apartments Increase the Affordable Housing Stock?
Banker & Tradesman published an article on March 26, 2023 asking "Can Massachusetts Build Its Way to Affordability?". In short, they believe the answer is yes and that more market-rate housing will actually by itself create more affordable housing.It's a commonly-held belief that the construction of market-rate apartments increases the rent in the area where they are built. Existing landlords, it is thought, see how much new units are going for and hike their rental rates, which results in higher rents for older, possibly less well-maintained, units. Another commonly-held belief is that the construction of affordable housing depresses value in the area where it is built, as there is a conception that affordable housing brings with it poverty-related issues such as crime, drugs and violence.This may be a twentieth-century perspective. Low-income public housing was historically built in already economically depressed areas or in otherwise-unoccupied areas of vacant land. Low-income housing also used to be built as large tower blocks (the Cabrini Green project in Chicago springs to mind), where only very low-income people lived in high density with no support services on-site and poor transit infrastructure.In the twenty-first century, many large "projects" of low-income housing (including Cabrini Green) were demolished and new construction tended to be less-dense and less confined only to those considered low or very-low-income; i.e. those earning less than 60% of the Area Median Income are considered low income and those earning less than 30% of the Area Median Income are considered "very low income" and are usually not working for that income. Many states such as Massachusetts encouraged mixed-rate housing development. That meant that in a new housing development (be that a blocky apartment building or more dispersed townhouses), some percentage of the units would be reserved for people earning below the AMI and the rest would be market rate. Developers got preferential treatment and lower-interest loans if they included affordable units in their new builds.And what happened in the neighborhoods? Several studies published since 2000 have shown that building market-rate units actually helps with the demand for affordable (but not subsidized) rents in their neighborhood.The Upjohn Institute in 2019 and the Hudson Institute in 2017 both found that increased availability of market-rate or luxury units actually has a "filtering up" effect that results in more affordable units becoming available as local renters who can afford to do so upgrade their apartments by moving into the newer, more expensive units, leaving their old and now less-desirable units available for renters with a tighter budget.Similarly, a 2021 study by Redfin found that low-income housing developments had either no effect or a positive effect on housing resale values in the immediate area of the development. Living in a socio-economically diverse neighborhood (or "economically integrated" neighborhoods as they are sometimes known) is beneficial for everyone along the income spectrum. Lower-income children in economically-diverse neighborhoods have better physical and mental health and are more upwardly mobile economically.For the people earning more, it can change their perceptions of poor people - unless the spread of incomes is too great, according to an interesting Urban Institute panel. Their recommendation was to build more middle-income market rate units, rather than so many "luxury" units. However, as the Urban Institute notes, the return for developers is on luxury units. UI asks, what cangovernment do to incentivize new building that contains units that are market-rate but affordable to middle-income earners?
Massachusetts Loses Population Again
The US Census has just released the latest population data (July 2021 - July 2022) and it shows that Massachusetts has again lost population, with a total loss of 57,000 people and nine of the state's 14 counties losing population. The arrival of international migrants is mitigating the loss.The Salem News has an excellent and detailed analysis of the recent Census data which shares the following points:
Suffolk, Middlesex, & Essex Counties had the largest population loss.
Massachusetts had one of the largest population declines in the country.
There is a "wealth flight" and the new millionaire's tax may exacerbate that.
It's becoming less affordable for middle-income people to live in the Bay State.