Boston Is Getting Really Expensive

You may find yourself with a beautiful house, and a beautiful spouse, and a beautiful kid. And a back-breaking mortgage. How did we get here?

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Snort a Xanax before you read this. Because if you’re living in Boston, your dirty little secret is about to get out: You can’t afford to be here. No one’s judging you, unless you count the rest of the U.S., save New York, Honolulu, and a few other places pricier than here, places you’d never deign to live anyway.

Stoic you are, Bostonians, heirs to transcendentalism, firm believers in self-reliance. You don’t complain, and you just won’t quit. Instead, you spend a huge percentage of your paycheck to house yourself and those you love, and even more to enjoy fancy first-world amenities, like food and electricity. It’s true. Boston’s cost of living is 39.7 percent above the U.S. average, with groceries and healthcare running 26 percent above average, while our median household income remains stubbornly on par with the rest of the country. More than a third of the city’s homeowners work four months or more each year just to pay for housing.

Is it any wonder fewer of us are doing it? According to a U.S. Census report in January, the rate of homeownership in the Greater Boston area is now below 60 percent, the puniest number on record.

There’s simply no place to live. If you sold your home right now, the supply is so low that you might not be able to get back in the market. That’s because the city’s population growth (14.2 percent since 1990) has far exceeded construction rates. Between 1950 and 2000—half a century—remarkably little housing was built. That was fine; Boston’s population was shrinking most of that time. But in the past 20 years the population has exploded, and Boston has been scrambling to catch up.

Unfortunately, most of the new construction you see around town doesn’t match real demand. Developers have built rental and condo towers filled with studios and one-bedrooms designed for people with disposable income seeking luxury living—empty-nesters fleeing the ’burbs, transient DINKs, our well-endowed students. But those units are too small to accommodate Boston’s two major growth groups: millennials who double- and triple-up to afford the rent, and families. As a result, new luxury rental buildings, such as Chinatown’s Radian tower, have had to offer unbelievable deals—like three months of free rent—to compete for the wealthy minority.

The result is a major shortage of the kind of housing we really need, leading to a staggering rise in home values in all neighborhoods. If you just look at condo prices over the past five years, Dorchester has doubled; Southie is up 54 percent; and Roxbury is up 132 percent. Citywide, condo values have gone up 43 percent. We entered this century with a serious housing shortage, and it’s going to take several more boom-bust cycles to catch up. Meanwhile, Boston’s population, and those of neighboring cities like Cambridge and Quincy, will continue to grow while the suburbs stagnate. Many of us are hanging on for dear life.

Neighborhood Prices, by Square Foot

Boston’s condo costs range dramatically, depending on location. Hover over each neighborhood below to see costs per square foot in 2015. —By Neighborhood X and Mary Catharine Witt

Undeterred by shocking prices, ruthless bidding wars, and the prospect of a lifetime of sacrifice, we continue to want a piece of Boston. Why? In part because, like much of the world’s population, we’ve fallen in love with urban living, and Boston is New England’s only real city. (Apologies, Providence.)

Recent college grads, urban sophisticates, techies, and young professionals want to live in close proximity to good restaurants, shops, and cultural centers. They certainly don’t want to waste time sitting in the sixth-worst traffic in the nation. (Point of fact: Boston’s commuters spend an average of 64 hours every year getting high on carbon monoxide while listening to NPR.) That talent pool has been joined by Grandma and Grandpa, Wellesley capitalists, professional women who have stepped out of the workforce to raise their kids—people drawn to city living, some for the first time in their lives, because Boston is safer, and more urbane, than it’s ever been.

Compounding demand is the prodigal return of companies that once squatted along Route 128. They’re setting up shop in Kenmore, the Financial District, Fenway, and the Seaport because they want to be where the action is to attract the region’s talent. Other major companies are following suit, including Converse and GE, both of which moved their headquarters from suburban campuses to downtown Boston to take advantage of the tens of thousands of ambitious young people graduating each year from the area’s 85 colleges and universities. That’s both a blessing and a burden.

When it comes to the high price of housing, you could blame rapacious landlords; or the proliferation of “luxury” condos (where are the “just okay” condos?); or the spawn of the wealthy hoovering up all of our stock; or the VC-financed fantasy salaries at hot startups that tend to vaporize upon entry. But you’d be better off shaking your fist at clouds.

Instead, you might want to start thinking more about the role of the Boston Redevelopment Authority (BRA), which for decades has directed what gets built, and where, in the city. Unfortunately, Boston’s only development, planning, and zoning agency historically has had a lot of trouble getting developers to build housing. That’s because it’s more expensive—and more difficult to sell—than office space or hotels. All things being equal, a good businessperson would rather finance a tower for a single, known tenant, such as Vertex or Marriott, than wait for dozens of unknown investors to buy condos one at a time.

Developers’ reluctance to build housing could have been offset by proactive zoning from the BRA. Banks and developers hate unknowns, and the single most important thing a developer needs to know before he or she buys and builds is how much a property is worth. The answer to that question basically comes down to height. If I can build 60 stories, that’s a lot of square footage to rent or sell. If I can build only two stories, well, you can see where this is going. Alas, developers in Boston don’t know how much their land is worth because the BRA is woefully behind on zoning the city. Fifty years behind. In fact, much of Boston is still zoned like a suburban office park, with the exception of a patchwork of special districts where the BRA was forced to pay attention.

As a result, Boston’s developers spend inordinate amounts of money on properties and then spend lots of time trying to extract realistic, 21st-century-approved building heights from the BRA. Don Chiofaro paid a lot for the Harbor Garage in 2007 because he was convinced that he’d be able to talk the city into allowing him to build much taller than the existing zoning allowed. He wasn’t crazy—most of the upzoning in this city comes through variances, or other ad hoc measures. Well, Chiofaro recently looked at his pro forma financial statements and declared that he would rather eat his own concrete garage than build anything less than 1.3 million square feet. Oh! said the BRA. We hate that ugly garage, so how about we compromise at 900,000 square feet? Chiofaro balked. And if he goes, 120 housing units may go, too.

Maybe Chiofaro was overly optimistic for thinking the BRA would give him exactly what he needed. Then again, others have had more luck. Real estate developer Steve Samuels, for instance, bought a bunch of land in the Fenway that was zoned low, and like Chiofaro, he thought that with a little patience, he could get more height from the city. Just look at a map of Boston—it only made sense for the Fenway to become a denser neighborhood to service the Longwood Medical Area and major universities nearby. But the BRA hadn’t given Fenway a second thought. Samuels spent nearly a decade convincing the city and the community that building taller (in some cases, 28 stories taller) wouldn’t turn Boston into a rat-infested hellhole. (Wait, that’s what the Fenway was before he got there.) During that time, he paid taxes, interest, and lawyers’ fees on the property, while assisting the city’s planning process.

Now that the Fenway is built, Samuels looks like a hero. Which he is, because the place was a dump before he got there and now it’s not. But keep in mind that Samuels isn’t doing charity work: He passed along all of those holding and planning costs to the consumer. Now you can rent 488 square feet in the new Van Ness building for $2,954 per month, on property that was a crappy tire shop just a few years ago.

The BRA has also failed to slow down land speculation, leaving consumers (and nearby neighborhoods) to foot the bill. In the Seaport, real estate speculators passed their planning and upzoning costs along to the next speculator, causing land valuation to go through the roof. Put another way: After the public spent $8 billion in federal and state money to ready the Seaport for development, the gamblers went wild buying and selling the potential to build, making tons of money while not building a thing.

Let’s look at one of those deals in detail. In 2004, Frank McCourt sold 23 acres of open parking lots on the South Boston waterfront to News Corp. for $145 million (McCourt was financing his purchase of the L.A. Dodgers). He’d spent years waiting for the city to hammer out a plan for the area, but then unloaded his miserable acres of asphalt. Two years later, News Corp. sold the same land, a little farther along in planning, to Morgan Stanley for $204 million. That’s a 41 percent profit in 24 months without engaging a single crane or backhoe. When the BRA approved the Seaport Square Master Plan, paving the way for major development of midsize towers in 2010, the land finally had real value. Now everyone knew what it was worth. To limit speculating, the BRA could have made Morgan Stanley’s Seaport approvals non-transferrable. But it didn’t.

Instead, over the next five years, Morgan Stanley parceled out its 23 as-yet-unbuilt (but planned and approved) acres to various entities for a total of $654 million. Minus permitting costs, that’s a $450 million profit (more than triple the purchase price). Nice for the investment bank, terrible for Bostonians.

After changing so many hands, the land price was seriously inflated. How did the final buyers offset their costs? They built lots of office space (which is cheaper to build). Few public amenities (why bother?). Fat buildings that take up entire super blocks. And ultra-expensive housing, like at Waterside Place, where a 598-square-foot one-bedroom can be all yours for $2,685 per month. You can’t afford to live here because developers bought land from speculators at hyperinflated prices and had to recoup their costs.

Meanwhile, the BRA has been meting out these valuable height variances in exchange for almost nothing from the private sector. When Morgan Stanley and developer John Hynes got permission to build 6.3 million square feet in the Seaport, a deal worth billions, the city convinced him to donate $8 million to build District Hall, a temporary, quasipublic “innovation” building. After a 10-year lease with the city, Hynes gets his land back. Bostonians, that land is rightfully yours. Let’s put a school there. Or a library. Or a museum.

Other cities are much better at extracting neighborhood-building amenities from private developers. When developer Forest City Ratner got approval to build Frank Gehry’s 76-story New York tower, for example, the Big Apple got a new 100,000-square-foot public school out of the deal—in the building.

As Bostonians, we’re willing to put up with a lot. We’ve figured out how to make it work even though we’re dealing with some of the highest costs of living in the country. The proof: On lists evaluating the financial savvy of states’ populations, Massachusetts continually ranks in the middle of the pack. We’re managing to pay our rent and save money. That’s Yankee ingenuity at work.

At one point, Yankee ingenuity even drove how and what we built. When the city’s population exploded during the first wave of immigration, from 1880 to 1920, developers designed what would become the backbone of Boston’s working- and middle-class economy: the incredible, remarkable, fantastic triple-decker. A family could buy the whole thing, live on the first floor, and pay off the mortgage by renting out the rest. Once the mortgage was free and clear, your pregnant teen and her deadbeat beau could move in upstairs for free, and you could visit your lovely grandchildren daily. And so on.

Now we’re building for the wealthy few. And that won’t help us in the long run. Developers’ high building costs are driving them to build smaller units, and lots of them. Forget three-bedrooms. Boston is becoming a city of small apartments. Where will families go? I really don’t know.

Cities lose when they become outrageously expensive. We lose our working people: hospital staff, cops, firemen, taxi drivers, teachers. When rents and home prices skyrocket, these people have to choose among long commutes, leaving the region, or demanding higher salaries. That’s what drives up the region’s exorbitant healthcare, basic-service, education, and food costs. The dearth of quality restaurant workers has made dining out so expensive in Boston that it’s no fun anymore.

Companies risk losing knowledgeable and experienced staff—those thirty- and fortysomethings—because when people start families, they find themselves priced out. It’s difficult to scale up when you lack middle management. We talk about innovation, but while companies may stick around, they’ll hire cheaper contract labor from around the country, and the world, rather than employ locally. The creative class will seek more-affordable towns, taking Boston’s funkier side—the boutiques, bakeries, breweries, and galleries—with them. Because the city has failed to protect small retail, more interesting spots are taking root in Worcester, Providence, and Portland. It’s happening now. I hope you like T. J. Maxx and Starbucks. And then, of course, there’s the high level of stress we’re experiencing trying to make ends meet. Which explains the aggressive driving and all of that honking.

A better regional plan would take the heat off Boston’s real estate. For years, progressive planners have discussed the possibility of developing an “Urban Ring” of communities around Boston. These mini hubs would be zoned to accommodate greater density, to act more like small cities and support the industry, shops, restaurants, and nightlife people crave. They would be connected to one another by a public transportation system designed as a ring, rather than spokes radiating from Boston’s center.

Unfortunately, it would take a massive effort to get city, town, and state administrators to agree on a regional transportation system that supported such an interconnected vision. In fact, MassDOT suspended its Urban Ring planning in 2010 due to insufficient funds, even as the region’s rail service limps along and traffic worsens.

Small thinking holds us back. When every Massachusetts town operates as an independent entity, we only hurt ourselves. We witnessed that a couple of years ago when Cambridge and Boston battled for Vertex’s headquarters. Two cities that the rest of the world sees as one fought as rivals, rather than reap the benefits of a joint venture. As Boston launches its major planning effort, dubbed Imagine Boston 2030, regional planning should drive the discussion. The sidewalk doesn’t end at the city line.

Without regional planning, proactive upzoning, and faster growth, the market will determine who stays, and who goes. If you have the cash, you can stay. If you don’t, adios.

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