Assembly Row Development | Assembly Square | Somerville

JeffDowntown

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It's not quite that straightforward. I'd argue that renters and purchasers of condos everywhere in the area bear the cost of the affordable housing subsidy, not just renters/owners in this project. And FRIT bears a significant portion (most) of the cost through lower profits.

I had a whole long explanation for this typed out, but it was needlessly complicated. Basically, changes to producer cost affect the quantity producers are willing and able to supply, and supply interacts with demand to determine market price. When units are traded freely, all consumers face market price. So if the market price for an Assembly Row condo is $800k, it will be $800k no matter how much FRIT payed to build it.

If affordable housing requirements cause developers to not build units they would otherwise then all consumers of housing pay the cost of this restrained supply, not just tenants/owners in units built by those specific developers.
It is certainly a stealth tax on all parts of the market. And it is largely there because we seem unwilling to bay broad based taxation for community benefits like affordable housing anymore.

At the mid-market, like Assembly, it likely constrains supply (obviously hurting prices for all mid-market residential customers). (Scary that Assembly pricing is mid-market for Boston!)

At the high end of the market, it probably doesn't constrain supply, it just raises the prices of the units. Hence all the luxury units in Boston. An extra $200,000 to cover the affordable units, on a $ 3 Million condo is less noticeable to the buyer. More pricing flexibility in the luxury market.
 

JumboBuc

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At the high end of the market, it probably doesn't constrain supply, it just raises the prices of the units. Hence all the luxury units in Boston. An extra $200,000 to cover the affordable units, on a $ 3 Million condo is less noticeable to the buyer. More pricing flexibility in the luxury market.
This isn't how markets work though. I don't want to pull this thread off into the economic weeds, but cost only relates to price through the interaction of supply and demand. If a producer-side shock has no effect on supply then it will also have no effect on price. If a given condo goes for $3 million after the developer paid $200k to cover affordable units while still making an economic profit, that unit would still go for $3 million had the developer not paid $200k to cover affordable units. Why would the developer only charge $2.8 million (in the absence of that $200k affordable housing cost) when we've observed that the market bears a price of $3 million? Costs only pass through to price when these costs push developers to hold back from developing (i.e., by constraining supply).
 

Arlington

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The best time to build affordable urban housing is always 20 years ago. Lower income (and thrifty) folks mostly buy used cars and used houses handed down by the rich who were proflagate and status-seeking enough to demand the shiny new.

I am grateful to FRiT for contributing to the T station cost. If we want developers to do that at Sullivan, Wellington and Rivers Edge they need to know that government is a reliable partner.
 
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tysmith95

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Affordable housing is not shiny new developments at Assembly Row. Affordable Housing should be old beat up triple deckers in East Somerville where Yuppies moved out because new units that they could afford are built in places like Assembly.
 

odurandina

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oh you jackboot thug.

You can't make political statements like that anywhere near our beloved Boston.

Someone's feelings might be hurt. :D
 

JeffDowntown

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This isn't how markets work though. I don't want to pull this thread off into the economic weeds, but cost only relates to price through the interaction of supply and demand. If a producer-side shock has no effect on supply then it will also have no effect on price. If a given condo goes for $3 million after the developer paid $200k to cover affordable units while still making an economic profit, that unit would still go for $3 million had the developer not paid $200k to cover affordable units. Why would the developer only charge $2.8 million (in the absence of that $200k affordable housing cost) when we've observed that the market bears a price of $3 million? Costs only pass through to price when these costs push developers to hold back from developing (i.e., by constraining supply).
You are describing a perfect market with perfect information.

Developers are always somewhat guessing what the market will bear. In the case of luxury units that number has to be surprising some developers in Boston recently (there were lots of naysayers on this forum). And they are more likely to try pushing the number when they have extra costs to cover, testing the upper limit as it were. Markets are not perfect.
 

JumboBuc

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You are describing a perfect market with perfect information.

Developers are always somewhat guessing what the market will bear. In the case of luxury units that number has to be surprising some developers in Boston recently (there were lots of naysayers on this forum). And they are more likely to try pushing the number when they have extra costs to cover, testing the upper limit as it were. Markets are not perfect.
I hear you about imperfect information and less-than-perfect markets. You're absolutely correct. Developers do not have perfect foresight about what the market will bear when designing their properties. An uncertain developer with doubts about what the market will bear would be more likely to aim his or her development at a lower price point when making design and investment decisions that are hard to change or roll back.

But once a property is built and ready for occupancy, and nearly all costs are sunk, I think the final sales market that prices it is pretty damn efficient. Developers are free to ask for a high price today then just drop the price tomorrow if they don't get any takers. We see this in condo sales through price drops and in rentals through sign-on incentives (stuff like months of free rent).

So yeah, uncertainty will cause developers to "hedge their bets" by not springing for those ultra-luxury finishes that they can't easily undo. But once the units are on the market, prices aren't very sticky. And another important detail here is that building in Boston today is very profitable. It's simply not the case that developers who have accomplished the task of jumping through every hoop to get their buildings up then have to worry about not selling them for a profit. They are all making good profit, so it's not as if they have to unload their properties ASAP in "fire sales" so as to not face holding costs that would push them into the red. This gives them the latitude to have a bit of patience in seeking the best price possible for their property.
 

tangent

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The follow-on market effects do take some time to percolate through. Many people in the area will be in existing leases. Many smaller landlords, ie people that own a triple/double decker or two, won't necessarily rapidly increase rents from year to year especially on existing or longer term renters.

And there is an apples to apples quality comparison where people are going to be comparing specific features and taking into account that these are brand new apartments.

Also, I think we forgot to mention that more subsidized housing could itself create an increase in the need for more subsidized housing via higher market rate prices and create a vicious cycle.
 

Arlington

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Also, I think we forgot to mention that more subsidized housing could itself create an increase in the need for more subsidized housing via higher market rate prices and create a vicious cycle.
Depends what you mean by "more". I can see "higher percent required affordable" definitely would have this effect: since it is effectively a tax on new construction fewer new units overall would get built, constraining supply.

More affordable units...if they were truly just 'more units" should be a good thing. They're supply.

I'd come back to taxing land (removing the disincentive to build new, removing the incentive to hold empty lots) and reducing taxes on built value (which discourages new construction)
 

dshoost88

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Few places make this shift more evident than the Somerville suburb of Boston.
I had no idea Boston was now a suburb of Somerville--things certainly are changing!
 

davem

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They had to do a bunch of electrical work around the site to power it up, and some structural work to the outside. Seems to be moving a lot faster now.
 

JumboBuc

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I walked all around Assembly the other night and had a few observations:

  • The childcare center building at Partners has its foundation (mostly) poured, and work is progressing there.
  • The retail pavilion buildings in the median outside of Partners are mostly complete. They don't look great. I'll give them the benefit of the doubt until they're totally finished, but as of now they don't look nearly as good at the JP Licks / River Bar building at the other end. I got a distinct "DPW garage" vibe, and not in a good way. One of the buildings will house a Cafe Nero.
  • There's a sign at the Partners garage with a count of open spaces. When I was there in the evening there were 1000+ open employee spaces and 500+ open visitor/public spaces listed. It was after work hours, but still... Every restaurant patio was packed and 500+ public spots were open in one of the many garages.
  • Most of the retail bays in the Partners building and the new Alloy/Montaje building are occupied / called for. There's still significant work going on upstairs in the condo building but multiple retailers are open for business at ground level. Retail spaces in the original four Assembly Row buildings are close to 100% occupied.
  • The Trader Joe's space is starting to look like a Trader Joe's, but I was surprised that it looks like its subdivided. The grocery store is "on the left", then there's a separate door leading to another new space carved out "on the right". Does anyone know anything about this? I thought maybe it could be a separate liquor section for licensing reasons?
  • The old Sports Authority space is holding a popup Restoration Hardware outlet for now, but still doesn't have a permanent tenant announced.
Every time I go to Assembly I'm surprised by how alive it is and also how much open space there still is to be developed there.
 

sm89

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I'm not sure if anyone mentioned it already, but Burlington Coat Factory is going in where Sports Authority was.
 

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