Chelsea Infill and Small Developments

I was recently looking at doing a 50 unit project in Chelsea. I ran into two major problems. First, even though the project would have abutted a new Silver Line station that powers that be will not allow anything to be built with less than a 1.0 parking ratio. Second, in their great foresight, the city council saw fit to adopt an affordable housing requirement. For a fifty unit deal, one must provide 8 units of affordable housing. Sales for such units incur net losses of $300k + per unit. So it makes sense to opt for the $200k per unit buyout. But since that adds $1.6mm to the project cost the deal was no longer viable. Given the cost of construction a marginal location like Chelsea was always going to be done on thin margins. This pushed the calculus right over the line.
 
sidewalks said:
I was recently looking at doing a 50 unit project in Chelsea. I ran into two major problems. First, even though the project would have abutted a new Silver Line station that powers that be will not allow anything to be built with less than a 1.0 parking ratio. Second, in their great foresight, the city council saw fit to adopt an affordable housing requirement. For a fifty unit deal, one must provide 8 units of affordable housing. Sales for such units incur net losses of $300k + per unit. So it makes sense to opt for the $200k per unit buyout. But since that adds $1.6mm to the project cost the deal was no longer viable. Given the cost of construction a marginal location like Chelsea was always going to be done on thin margins. This pushed the calculus right over the line.
Click to expand...

Do you mind disclosing the location you wanted to build on, or the T stop in question?
 
sixth street...couple blocks away from Broadway right on new silver line
 
sidewalks said:
I was recently looking at doing a 50 unit project in Chelsea. I ran into two major problems. First, even though the project would have abutted a new Silver Line station that powers that be will not allow anything to be built with less than a 1.0 parking ratio. Second, in their great foresight, the city council saw fit to adopt an affordable housing requirement. For a fifty unit deal, one must provide 8 units of affordable housing. Sales for such units incur net losses of $300k + per unit. So it makes sense to opt for the $200k per unit buyout. But since that adds $1.6mm to the project cost the deal was no longer viable. Given the cost of construction a marginal location like Chelsea was always going to be done on thin margins. This pushed the calculus right over the line.
Click to expand...

Ok, I’ll ask the potentially ignorant question here. I thought that developers received funds from the affordable housing agency in one way or another (e.g, either for the buildout or for subsidizing the cost to buyers) for the affordable units? I guess I never understood how the program actually worked? Or is the $300k+ net loss per unit already considering any funding received.
 
No funds are received. There are other programs one can participate in to secure tax credits but that requires a higher ratio of units to be affordable- at least 25%.

The losses are simply a cost that is added to the project. The units cost far more to build than they can be sold for. Construction in greater Boston is bananas and most projects do not pencil out, even if you are getting the land at a reasonable figure.

I also looked at a 30 unit deal in Dudley square recently. The construction costs render the land unbuildable. That will likely be the case for another construction cycle, unless you are a non-profit with a hodgepodge of subsidies or a larger owner who is willing to underwrite a tiny return while the area appreciates.
 
sidewalks said:
No funds are received. There are other programs one can participate in to secure tax credits but that requires a higher ratio of units to be affordable- at least 25%.

The losses are simply a cost that is added to the project. The units cost far more to build than they can be sold for. Construction in greater Boston is bananas and most projects do not pencil out, even if you are getting the land at a reasonable figure.

I also looked at a 30 unit deal in Dudley square recently. The construction costs render the land unbuildable. That will likely be the case for another construction cycle, unless you are a non-profit with a hodgepodge of subsidies or a larger owner who is willing to underwrite a tiny return while the area appreciates.
Click to expand...

As a developer, which areas of Chelsea are most desirable/promising, and which are least?
 
I have been focusing on areas close to transit and I do like the bones of the downtown. I think Chelsea has a bright future and it's a good hold for appreciation, but the numbers don't work in this cycle any more. Not with the affordable requirement. The rents and condo values aren't high enough.
 
sidewalks said:
I have been focusing on areas close to transit and I do like the bones of the downtown. I think Chelsea has a bright future and it's a good hold for appreciation, but the numbers don't work in this cycle any more. Not with the affordable requirement. The rents and condo values aren't high enough.
Click to expand...

How "long" do you think it will be before it makes sense again? Does the SL3 change that outlook? What about Amazon?
 
sidewalks said:
I have been focusing on areas close to transit and I do like the bones of the downtown. I think Chelsea has a bright future and it's a good hold for appreciation, but the numbers don't work in this cycle any more. Not with the affordable requirement. The rents and condo values aren't high enough.
Click to expand...

Of course rehabbing existing housing stock and flipping doesn’t apply to affordable housing requirements.
 
617 said:
Of course rehabbing existing housing stock and flipping doesn’t apply to affordable housing requirements.
Click to expand...

Indeed, it runs 180° counter to the creation of affordable units.
 
Towns/cities really need to look at easing requirements for the sake of letting housing be built.

Like you know, try to naturally bring down prices.
 
Jouhou said:
naturally bring down prices.
Click to expand...

The market is not "natural," build build build is not natural. That the only way to lower prices in your eyes has nothing to do with decommodification or attempting to address the contradiction between use and exchange value but only with a doubling down on developmentalist capitalism (which has demonstrated repeatedly the tendency to exponentially increase exchange values not do anything to bring them down due to speculation) is quite telling. All the more so that you claim this to be "natural." Far from it, this is highly contingent on our present social and political structure.
 
djohnstonb said:
How "long" do you think it will be before it makes sense again? Does the SL3 change that outlook? What about Amazon?
Click to expand...

Amazon would change the dynamic over night. SL3 may eventually change the dynamic, but perhaps not in quite the way you may think. Our project was based next to an SL3 station, so that part of it was already baked in. The city's insistence on a 1:1 parking ratio artificially limits the density we can achieve on the site. If the city sees that people are using SL3 and the parking ratio's can be diminished, such projects may become viable.
 
sidewalks said:
Amazon would change the dynamic over night. SL3 may eventually change the dynamic, but perhaps not in quite the way you may think. Our project was based next to an SL3 station, so that part of it was already baked in. The city's insistence on a 1:1 parking ratio artificially limits the density we can achieve on the site. If the city sees that people are using SL3 and the parking ratio's can be diminished, such projects may become viable.
Click to expand...

242 Spencer was required to have a 1.0 parking ratio despite being 100% affordable and TND testified to the city that their other properties in Chelsea have an ~0.6 parking usage. Chelsea must change their parking ordinances if they want to achieve the growth they claim they want.
 
Last edited:
Chelsea is too close to Boston to not be successful in the future.

I'm just not sure how much higher this real estate cycle has right now. I believe we are currently going to be heading for a CONDO glut in Boston in the future 2-4 years.

I don't see salaries rising and I believe house prices are out of whack and don't make sense. I sense a correction in the future with rising interest rates and it should be significant the problem is the value of the homes will drop but you will need to come up with 20% cash like the 80's to get a loan.

I don't believe interest rates will ever exceed over 5% in my lifetime.
The almighty dollar will end up like the British sterling which once ruled the planet for 100years.
 
TheRifleman said:
Chelsea is too close to Boston to not be successful in the future.

I'm just not sure how much higher this real estate cycle has right now. I believe we are currently going to be heading for a CONDO glut in Boston in the future 2-4 years.

I don't see salaries rising......
Click to expand...

i have a friend in the State House who says there's a lot of rumblings related to salaries just not sustaining the upper tier of our housing boom. But i look at this from just numbers; if our office demand remains steady for a few more years–if compared to the overall supply, we should consider if housing supply ever will rise to meet the demand.

People are considering this possibility more seriously.
 
We have been underproducing housing for many decades in Massachusetts. Building more housing is additional supply. Supply/demand definitely works which is why the prices have increased - restricted supply.
 
TheRifleman said:
I'm just not sure how much higher this real estate cycle has right now. I believe we are currently going to be heading for a CONDO glut in Boston in the future 2-4 years.
Click to expand...

I disagree with this. Most new buildings have been apartments (outside of a select few very high end buildings). There's honestly a big condo shortage at the moment.
 
tysmith95 said:
I disagree with this. Most new buildings have been apartments (outside of a select few very high end buildings). There's honestly a big condo shortage at the moment.
Click to expand...

Its not like the locals are buying these condos in the cities? Who actually can afford 700K-1,4M condo in the city with condo fees. These are rich and mostly upper class international groups of people.

I believe their are plenty of condos you just can't afford them. I believe this is what is pushing the city condo boom.

http://www.latimes.com/opinion/editorials/la-ed-adv-investor-visas-20151127-story.html
 
You must log in or register to reply here.

Back
Top