Strategy for Inclusive Growth to Increase Funds for Affordable Housing, Speeding Development Approvals

Mayor Michelle Wu today announced a set of proposals to make substantial changes to Inclusionary Development Policy (IDP) and the commercial Linkage Policy that will enable Boston to support its growing population and ensure the city is a place where families of all income levels can afford to live. These changes will increase Boston’s supply of affordable housing while maintaining the City’s position as an attractive market for real estate development. Mayor Wu’s strategy for inclusive growth will lower barriers to development and create a more predictable development timeline. Together, the package of actions will enable development that allows the city to grow equitably and inclusively. 

“We are using every tool that the City has to urgently address Boston’s housing crisis,” said Mayor Michelle Wu. “By directing public and private resources from development toward our shared vision of a Boston for everyone, we are taking necessary steps to ensure Boston remains a place that current residents, families and future generations can call home. I’m grateful to this team and our partners for their work to continue prioritizing affordability for residents in our city’s continued growth.” 

Inclusionary Development Policy (IDP)

Under an Inclusionary Development Policy (IDP), developers of market-rate residential developments are required to support the creation of affordable housing in exchange for zoning relief, Under the current IDP, developments with ten or more units in need of zoning relief support the creation of income-restricted housing through on-site units, off-site units, or through payment to an IDP Fund managed by the Mayor’s Office of Housing. The IDP requirements were last updated in December 2015. In January 2021, the Massachusetts State Legislature approved a Home Rule Petition that allows Boston to codify inclusionary development into the zoning code. The Mayor’s proposed changes are aimed at directing a larger share of resources from development toward the Administration’s vision of a Boston for everyone.

The Mayor’s proposed changes to IDP include: Lowering the threshold from 10 to seven units, and, for rental projects, increasing the proportion of the project that is income-restricted from 13% to 20% of the project, while also deepening affordability requirements. In an innovative approach, 17% of the project will be income restricted at an average of 60% of Area Median Income, and an additional 3% of the project will be offered at market rents and reserved for people with housing vouchers. Federal Housing Vouchers usually pay a landlord Fair Market Rents at 100% of Area Median Income. As a result of the updated policy, voucher holders will have more options, as voucher holders generally have incomes less than 30% of Area Median Income. Additionally, with Boston’s Small Area Fair Market Rents, landlords who rent to eligible households may be able to get higher Fair Market Rents depending on their zip code. Between the voucher units and traditional IDP units, the resulting affordability will be 55.5% of Area Median Income. 

For homeownership projects, on-site IDP requirements will be increased from 13% to 20% in IDP Zone A & B (the top third and middle third of citywide neighborhood median values), while holding affordable requirements at an average of 90% of Area Median Income. The Mayor is using new authority to incorporate the IDP into zoning, therefore assuring that all developments with seven or more units help to meet Boston’s affordable housing needs. The effective date for the new rules will be determined based on the BPDA Board, Zoning Commission, and City Council approval processes, but it will not affect any projects currently under review. 

“Expanding the supply of affordable housing in the city is critical to both long term economic success and advancing equity goals; the Samuels & Associates team supports the Mayor’s efforts to identify multiple strategies to address this challenge,” said Abe Menzin, Principal and Executive Vice President of Samuels and Associates. “The process for considering changes to the city’s Inclusionary Development Policy continues to be thorough and based on analysis of the many complex factors that determine affordability and economic feasibility. Though it is an increasingly difficult time to build and finance housing projects, we are committed to working with the city on creative solutions to advancing housing affordability goals.”

“Boston’s housing crisis has many dimensions and requires many solutions but at the end of the day we desperately need more revenue to help renters and would-be homebuyers access safe, stable housing,” said Joseph Kriesberg, President of the Massachusetts Association of Community Development Corporations. “So we are very pleased that Mayor Wu is taking these critical steps forward to provide more funding and more affordable homes for our city’s residents.  These efforts, combined with her prior commitment to invest ARPA funds in housing and her proposal to the Legislature to create a transfer tax on high-value properties, will help thousands of families across our city.  MACDC and its members will continue to partner with the Mayor and our City Council to take further steps to address this crisis while we also collectively advocate with our state legislature and new Governor to make the additional investments we so clearly need.”

Linkage Policy

The changes to the Linkage Policy include lowering the threshold and exemption from 100,000 square feet to 50,000 square feet, increasing the total linkage fee over two years to $30.78 per square foot for lab space, and to $23.09 for other commercial uses, up from $15.39. Sixteen percent of the fees will support job training and job preparedness programs, while the remaining 84 percent will support the creation and preservation of affordable housing. The increase in the fees will be phased in over two years. Projects with both lab and office space will be considered on a pro-rata basis. Linkage funds are used to support the creation and preservation of affordable housing, as well as to support the job training and job readiness needs of Boston’s residents. 

“Mayor Wu’s proposed increase to the linkage fee is an important step in the effort to address Boston families’ housing needs,” said Symone Crawford, Executive Director, Massachusetts Affordable Housing Alliance. “Linkage has been and will continue to be a vital resource for building new affordable homes in Boston. MAHA and our allies have been advocating for an increase in linkage for years and this proposal shows that Mayor Wu is listening.”

These IDP and Linkage recommendations are based on research completed by RKG Associates (IDP) and by Karl Seidman Consulting Services/ConsultEcon, who were hired to examine each policy and the financial impacts on development, as well as feedback from the IDP Technical Advisory Committee (TAC). Next, the Administration will conduct a public engagement process to hear input from residents.

“The City needs to increase and diversify its housing stock in order to serve the residents that are living here now and to meet the demands of our growing population. The changes that the Mayor is recommending allow the supply of housing to increase while generating critical resources for the production of affordable housing,” said Sheila Dillon, Chief of Housing. “The funds generated through these policies will allow the City to acquire, preserve, and develop housing that will provide stable, affordable housing for generations.”

“The Mayor recognizes that in order for our economy to thrive, every Bostonian needs the opportunity to participate,” said Amy Nishman, president of the Job Training Alliance. “The non-profit job training community will use these resources to prepare and upskill our residents to meet employer demand.”

In addition to proposing changes to create more affordable housing, Mayor Wu is also  implementing changes to incentivize new development through a predictable, efficient, and values-based approach. These changes build on the executive order signed by Mayor Wu in October to speed the development of predominantly affordable housing in the City. 

“Boston’s workforce is the backbone of our region’s economy. As that workforce grows, we need to increase both our market and workforce housing supply and deed-restricted affordable housing,” said Chief of Planning Arthur Jemison. “The Mayor’s agenda will ensure that development occurs through a transparent and swift development review process so that we can support our city’s most urgent needs.” 

The City will launch a process to review proposed changes to Article 80 in order to make it more timely and predictable for projects that meet the City’s goals of resilience to climate change, affordability for residents, and equitable growth across neighborhoods. Under the new regulatory approach, the BPDA will develop a “scorecard” for projects. Projects that meet these goals may be eligible for streamlined review, focused community engagement, and simplified mitigation and community benefits. Projects which innovate in these three areas could possibly receive consideration for tax relief and infrastructure support. The reforms will also create new, predictable regulatory milestones for Article 80 review. These changes will be studied and canvassed with the community in the first quarter of 2023 with implementation targeted for the new fiscal year. Aspects of the changes, such as the scorecard, will be offered for public comment and discussion.

“The program the Mayor announced today is carefully crafted to advance the housing and sustainability agenda she campaigned on,” said Matt Kiefer of Goulston & Storrs. “The details of implementation will really matter, but combining higher IDP and linkage with meaningful permitting efficiencies and possible public support for development is potentially path-breaking. In essence, the Mayor is saying to the development community, ‘we’ll be expecting more public benefit from you, and we’ll also be making it easier for you to deliver it.’”

As part of this agenda for shared growth through development, the BPDA is also examining other changes to the Article 80 process that will make development review more timely, predictable, and transparent. The changes also include operational and procedural changes to the Boston Civic and Design Commission (BCDC) to streamline the design review process. 

Next Steps

With these recommendations, the Boston Planning & Development Agency and the Mayor’s Office of Housing are kicking off a process that will include public hearings and a public comment period on each policy, before submitting recommended zoning amendment language to the BPDA Board, for an initial vote on each policy. For the Linkage Policy, the Zoning Commission will then take up the proposed zoning amendment. For the IDP, the BPDA vote would be followed by a City Council review and vote, followed by a vote of the Zoning Commission. BPDA is hosting a website for both the IDP and the Linkage Policy that includes draft and/or final studies, housing and housing market data, background information on each policy, announcements about upcoming public hearings (the first public meeting for Linkage is Jan. 11; the first public meeting for IDP is Jan. 21), and an opportunity to provide comments. 

BPDA will seek input from the community and other stakeholders on proposed changes to the development review process. The BPDA plans to share a draft scorecard in February 2023, host information sessions in March 2023; and implement the scorecard, as well as other new policies, by July 2023.

This announcement builds on Mayor Wu’s initiatives to address housing affordability in Boston issues which includes filing a Home Rule Petition relative to real estate transfer fees and senior property tax relief, signing an Executive Order designed to speed up affordable housing production, signing an Executive Order relative to affirmatively furthering fair housing, convening a Rent Stabilization Advisory Committee to inform future legislative proposals, hiring the City’s first Chief of Planning, announcing an action plan to best utilize the City-owned land described in the Public Land for Public Good: Citywide Land Audit, and launching Welcome Home Boston, a historic investment in affordable homeownership in Boston.

About the Inclusionary Development Policy

Boston’s Inclusionary Development Policy (IDP) was created by Executive Order in 2000. The current policy requires that market-rate residential developments with ten or more units in need of zoning relief support the creation of income-restricted housing through on-site units, off-site units, or through payment to an IDP Fund managed by the Mayor’s Office of Housing. The IDP requirements were last updated in December 2015. In January 2021, the Massachusetts State Legislature approved a Home Rule Petition that allows Boston to codify inclusionary development into the zoning code. Through 2021, almost 3,600 on-site and off-site income-restricted units have been created through the IDP and the fund has supported the construction or preservation of nearly 2,500 additional income-restricted units. 

About the Commercial Linkage Policy

The Linkage Policy began in 1983, with the approval of Article 26 of the Boston Zoning Code, which sought to balance large-scale commercial development with needed residential construction. In 1986, the City of Boston launched the Neighborhood Housing Trust (NHT) to manage housing linkage funds and expanded Article 26 to include job training as an element of the linkage policy, now managed through the Neighborhood Jobs Trust (NJT). The Neighborhood Housing Trust has collected $227 million in funds since its inception. These funds have supported the creation of over 7,000 new income-restricted units and preserved almost 6,000 existing income-restricted units. The Neighborhood Jobs Trust has received over $55 million in Linkage funds to support Boston’s education and workforce development efforts, with almost $3.5 million disbursed in 2021 alone. The 2021 Home Rule Petition also gave the City of Boston the power to more readily make changes to the Linkage policy without seeking further state approval. The City increased linkage fees with this new flexibility in March 2021.