Millennium Tower (Filene's) | 426 Washington Street | Downtown

[bigeman312]

But housing is being built. Maybe not as fast as we want, but I think it's getting there. Seaport alone has almost 1800 units just completed or u/c and coming up in the next couple of years.

Not enough to meet demand. And if the housing being built does meet demand, then having housing "built for the rich" becomes a moot point, as there would be enough units for everybody!

 

[Boston02124]

 

[bigeman312]

...what projects like Millennium Tower essentially do is increase the scarcity of land thus limiting possible supply while not necessarily increasing the supply of housing units...

I could not disagree with you more. Millenium Tower is THE. SINGLE. DENSEST. RESIDENTIAL. BUILDING. IN. THE. STATE. Full stop. It is increasing our supply of housing by hundreds of units and taking up a very small amount of land. That is not debatable. If our world looked like the Millenium Tower everywhere (I'm not advocating for that), would we have a limited supply of housing? Of course not. What's interesting is that the opposite of what you said applies more here than anywhere else.

Basically you are calling the densest development out for not being dense.

 

[bigeman312]

^If units remain vacant due to the reasons I mention above, it decreases the density of the building. Creating and marketing the units as ultra-luxury makes that more likely.

So.....build more dense residential developments?

 

[dwash59]

what projects like Millennium Tower essentially do is increase the scarcity of land thus limiting possible supply while not necessarily increasing the supply of housing units. If a foreign investor purchases a unit in MT simply as a means to hold currency and no one lives there or uses it incredibly sparingly (so much so that renting a hotel room would be an option), it's essentially decreasing supply. Obviously this is much more of an issue in NYC, but I think that possibility is what Van is concerned with (please correct me if I'm wrong, Van).

Luckily, 75% of MT's sales have apparently been local.

http://boston.curbed.com/archives/2...er-70-percent-sold-mostly-to-local-buyers.php

 

[bigeman312]

Yes, more housing that's not ultra-luxury. The point is simply that a bunch of ultra-lux towers don't necessarily help alleviate demand in the housing market and may hurt the situation overall.

My point is that in reality, that is simply not true. And, as stated above, the premise of your argument isn't even true. I've seen your posts on here, I know you are pro-development and normally an objective guy. Take a step back and deconstruct your argument:

1. Ultra-luxury buildings will not be occupied by locals, False
2. Buildings that are not occupied by locals may hurt the housing market, Mostly false. The fact is that any market-rate unit is an increase in supply. The more we increase supply, the closer prices come to stabilizing. The reason I say "mostly" false is because if you are under-utilizing very valuable land (like if this development were 20 units or something) then it does hurt the situation through opportunity cost. That does not apply here - the densest residential development.
3. Therefore, ultra-luxury developments hurt the housing market False

 

[DBM]

"Skyscraper" condo buildings proposed, approved, under construction

* Millennium Tower
* One Dalton
* Copley Simon
* TD Garden

One Congress is a dense, mid-rise development, 1 Bromfield is 28-stories, TransNational might still be commercial ...

Why do you assume that the 2007 proposal for 1 Bromfield St., at 28 stories, means the 2015 proposal for 1 Bromfield St. will also be 28 stories? Isn't it quite likely, now that the developers have seen 60-story MTower rising on the opposite corner, that their revised proposal will include many, many more stories?

Also, you might be right about Winthrop Sq. Tower, but as I recall from skimming all 8 proposals, every single one included at least 100 units of residential, and some were up to 700 (!).

 

[HenryAlan]

The real problem is that more housing isn't being built. If you're smart (which I know you are), what you really mean is, "we need 20,000 units of housing. If only 2,000 units get built, we shouldn't cater it only to the richest of the rich, but rather a mix of income levels." To which I would respond that the problem is not who our limited new housing is being built for, but rather the problem is that there is such a limited amount of new housing being built.

The problem is that a lot of people aren't so well informed about these things. I can't tell you how often I come across people blaming rising rents on new construction. And they aren't talking about Millennium Tower, but about neighborhood infill projects with 20-40 units. No, the problem isn't that these buildings are going up, it's that not enough of them are going up. To build 20,000 units, every neighborhood in the city needs to build. We need hundreds of 20-40 unit buildings, and we have space for them, but we need to break through ill informed opposition.

 

[bigeman312]

The problem is that a lot of people aren't so well informed about these things. I can't tell you how often I come across people blaming rising rents on new construction. And they aren't talking about Millennium Tower, but about neighborhood infill projects with 20-40 units. No, the problem isn't that these buildings are going up, it's that not enough of them are going up. To build 20,000 units, every neighborhood in the city needs to build. We need hundreds of 20-40 unit buildings, and we have space for them, but we need to break through ill informed opposition.

+1. Come to the next relevant public meeting with me? This is exactly the attitude we need.

 

[JeffDowntown]

The problem is that it's unlikely that we will hit equilibria between supply and demand in the housing market in the near to medium term, and what projects like Millennium Tower essentially do is increase the scarcity of land thus limiting possible supply while not necessarily increasing the supply of housing units. If a foreign investor purchases a unit in MT simply as a means to hold currency and no one lives there or uses it incredibly sparingly (so much so that renting a hotel room would be an option), it's essentially decreasing supply. Obviously this is much more of an issue in NYC, but I think that possibility is what Van is concerned with (please correct me if I'm wrong, Van).

But a site like MT was never going to be affordable housing under any conceivable scenario. In fact it almost wasn't housing at all -- it was almost commercial.

I don't see how MT takes away from sites for more affordable units -- few are going to get built in the downtown core (exception is the new building near North Station, former Merano, but that is really rare and really hard to finance).

There is a ton of underutilized land out the Orange Line corridor, for example. But even there, with easy transit access, it seems really hard to get significant developments underway.

 

[JohnAKeith]

The city moves at glacial speed, just like every other city. The mayor is planning higher-density housing along Dorchester Ave and ... whatever the other location is ... but that's a drop of rain when we need a storm.

We are seeing more density in areas outside city-center, right now, which is encouraging, but who knows if that can alleviate demand. I'm thinking of apartment complexes in Everett, Chelsea, Somerville, outer-Cambridge, East Boston, etc., but who knows if that will help. (You're still paying north of $2,000 for a one-bedroom.)

We can't seem to get anyone to build moderate-to-high density housing outside of downtown Boston. I really don't understand why - it's the profit motive at work, or is it really that the neighborhoods won't allow it? The Eden team (or, whatever their name is) out in Allston seems to be successful building 100-200 unit projects without too much opposition; that seems to be a good model. And, I think he's going to make a bundle of cash. The development in Dorchester seems to be going forward, and that's moderate density.

Why aren't there hundreds of these? I dunno.

 

[KentXie]

Let me tell you how it can hurt:

If you are focused on building for the top 1% that pushes the price up for all apartments below that threshold due to a lack of new stock. This in turn keeps people who would normally buy a starter apartment renting and this forces the rents up for everyone below. I witnessed this first hand when working as a realtor in NYC. Granted I think Boston is more serious about dealing with affordable housing but it is still a huge problem.

Thank you. I said it multiple times, you have to build towards a certain demographic, not build as many as you can. If you build nothing but luxury towers, it won't help in any way in lowering the rent for the middle and lower classes.

 

[KentXie]

The real problem is that more housing isn't being built. If you're smart (which I know you are), what you really mean is, "we need 20,000 units of housing. If only 2,000 units get built, we shouldn't cater it only to the richest of the rich, but rather a mix of income levels." To which I would respond that the problem is not who our limited new housing is being built for, but rather the problem is that there is such a limited amount of new housing being built.

Not necessarily true. It would be better to do both, build more new housing, but also cater to a mix of income level. Here's example: if I produce nothing but lamborghini's, and flood the car market with it, do you think it would in any way, lower the cost a Toyota Camry? No, it will lower the cost of a lamborghini but nothing else. Why? Because a lamborghini caters to the rich, not the middle and lower class and there's a price floor at which you would sell on a lamborghini's and you won't sell it on a lost. So what happens? Producer will cut down on producing luxury cars. Would that in any way affect the price of Camry? No, again because it is in a separate market. Now replace the lamborghini and camry with luxury and affordable housing. Same problem.

 

[bigeman312]

Not necessarily true. It would be better to do both, build more new housing, but also cater to a mix of income level. Here's example: if I produce nothing but lamborghini's, and flood the car market with it, do you think it would in any way, lower the cost a Toyota Camry? No, it will lower the cost of a lamborghini but nothing else. Why? Because a lamborghini caters to the rich, not the middle and lower class and there's a price floor at which you would sell on a lamborghini's and you won't sell it on a lost. So what happens? Producer will cut down on producing luxury cars. Would that in any way affect the price of Camry? No, again because it is in a separate market. Now replace the lamborghini and camry with luxury and affordable housing. Same problem.

Car example: Mostly correct! But incorrectly applied. In this extreme example, the price of Lambos would drop until middle-class families could get a Lambo. Is that a bad thing? No. Would that ever happen? No, because it would no longer be profitable to produce Lambos (an expensive car to build). At a certain point (a point that would never be reached), Camrys would drop in price, because who's paying $24,000 for a Camry when Lambos are $22,000 (an extreme example, yes).

Back to the housing market: if enough luxury apartments were built, the price of luxury apartments would drop to the point that middle-class families could afford to live in a luxury apartment. Is that a bad thing? No. Would that ever happen? No, because it would no longer be profitable to produce luxury apartments (an expensive type of housing to build). At a certain point (a point that would never be reached), normal apartments would drop in price, because who's paying $2,000/month for the floor of a triple-decker in Everett, when a luxury apartment downtown is $1,800/month (an extreme example, yes).

-------MOST IMPORTANT PART OF ARGUMENT BELOW-----

Now, instead of extremes, let's apply this to a tangible reality: The reason mostly luxury-apartments are being built is because of the shortage of new housing. If the market is only going to produce 20%* of the necessary housing, the housing that gets built will be the ones with the highest profit margins: lux-developments. Similarly, if the car market were as restrictive, and only 20% of the needed cars were being built, you better believe that manufacturers would make Lambos and not Camrys. A Lambo that sells for $200,000 is going to have a much higher profit margin than a Camry that sells for $24,000.

In conclusion, protesting lux-developments like Millenium Tower due to them being lux- is missing the point. The reason we are seeing these lux-developments more often than normal, middle-class developments, is because of the lack of new housing. Using your car example, if only 20% of the necessary cars were being produced, and they were all Lambos, it would not be worthwhile to try to halt Lambo production, but rather to try to encourage Camry production! The Lambo/lux-development is not the problem, the lack of production is the problem, which leads to only Lambos/lux-developments and a lack of middle-class/Camry developments.

Do you agree?

*20% is just a number. We now that not enough housing is being built. I do not know by what degree.

EDIT: I have a very strong understanding of economics, but I do not drive. Forgive me if my car pricing was slightly off. The point 100% remains.

 

[FK4]

you can see this thing clearly from coolidge corner, looking right down beacon

 

[KentXie]

Car example: Mostly correct! But incorrectly applied. In this extreme example, the price of Lambos would drop until middle-class families could get a Lambo. Is that a bad thing? No. Would that ever happen? No, because it would no longer be profitable to produce Lambos (an expensive car to build). At a certain point (a point that would never be reached), Camrys would drop in price, because who's paying $24,000 for a Camry when Lambos are $22,000 (an extreme example, yes).

Back to the housing market: if enough luxury apartments were built, the price of luxury apartments would drop to the point that middle-class families could afford to live in a luxury apartment. Is that a bad thing? No. Would that ever happen? No, because it would no longer be profitable to produce luxury apartments (an expensive type of housing to build). At a certain point (a point that would never be reached), normal apartments would drop in price, because who's paying $2,000/month for the floor of a triple-decker in Everett, when a luxury apartment downtown is $1,800/month (an extreme example, yes).

Bigeman, your argument is contradicting. As you point out, luxury apartment will never drop to the point that middle class family can afford them and it's unlikely that a luxury apartment in downtown will ever hit $1,800/month. In other words, building luxury apartments will not affect the rent of normal apartments as they cater to different markets.

Now to your tangible reality. I agree with the problem that not enough housing in general are being built and I agree in the current economic market we live in, developers will go for the product that achieves the highest return on investment (i.e. luxury apartment). What I'm saying is that a more effective way to alleviate high rent in the middle and lower class is to build apartments that caters at every income level. Like you said, until the luxury apartment market is saturated, no developers would have any incentive to build cheaper apartments, hence why the government needs to provide subsidiaries, tax breaks, or quotas on apartments to "force" developers to build lower income apartments.

In addition, it is very unlikely that the luxury apartment market will ever be saturated for multiple reasons. Unlike the lower income demographic, luxury apartments cater to the wealthy, members of society that tends to treat these commodities as luxury items rather than necessity. If price drops enough, they would buy more than one luxury apartment. Furthermore, unlike normal apartments, luxury apartment attracts overseas investors. The cheaper it goes, the more demand you'll see from foreign buyers, especially if the apartment are located in world class cities such as Boston. Long story short, it can be said that the natural equilibrium point of luxury apartments is above where it can ever affect the rent of normal apartments.

Bigeman, you have a good understanding of economics but it's currently flawed because you're treating luxury apartments and normal apartments as the same and the consumers they cater to as having the same spending behavior when they do not.

 

[fattony]

Let me tell you how it can hurt:

If you are focused on building for the top 1% that pushes the price up for all apartments below that threshold due to a lack of new stock. This in turn keeps people who would normally buy a starter apartment renting and this forces the rents up for everyone below. I witnessed this first hand when working as a realtor in NYC. Granted I think Boston is more serious about dealing with affordable housing but it is still a huge problem.

With all due respect Van, I cannot follow your logic. How can oversupply at the high-end of the market bring up prices from down-market? That is precisely the opposite of normal supply and demand. There are some odd scenarios that contradict normal economic incentives, but they are rare and need detailed rigor to explain. You can't just wave your hands over such an outrageous contradiction.

We all share the gut feeling that there is something wrong with only seeing high-priced units developed, but BigE and HenryAlan have logic and supporting data on their side. There is nothing wrong with building enough lux to satisfy lux demand. The problem is in not building anything else. And there is no causal link between building new lux and the increasing price of existing housing stock.

The city could make it cheaper, faster, and easier to build workforce housing by upzoning just about everywhere. That would bring up the size of projects in cheaper markets and thus bring up the dollar value and ROI on those projects without requiring higher rents. But when land and FAR are made extremely scare through systematic under-zoning, the only way to get your value and ROI up are through high rents and/or sale prices. Since the market has thusfar supported the higher rents, there is absolutely no incentive for developers to leave money on the table.

It is an Occum's Razor problem. There are simple, rational arguments for the high cost of rents and there are convoluted, contradictory ones. If you want to support the more complicated explanation the burden is on you show the fallacy of the simple answer and supply the rigorous support for the complex one.

 

[bigeman312]

I feel like this is deviating too much from Millennium Tower, but is definitely a worthwhile debate. We can continue this on the affordable housing thread if you like.

Summary: We both agree with the market forces that are driving lux-development instead of middle-class development. We both think there needs to be more middle-class development.

KentXie believes that these luxury developments are hurting middle-class renters/buyers prospects, by taking a resources (land) and using it for a market that does not apply to them (lux instead of middle-class). He thinks the most pressing solution is for the government to incentivize middle-class development.

I believe these luxury developments are a step towards middle-class development and should be encouraged (as with all development). I believe that the more housing development we have, the sooner we can have developers choose to profitably develop properties that cater to the middle-class. I think the best solution is to remove barriers to development, so that all types of housing is profitable and thus being built quickly.

The debate is worthwhile, but it should probably be continued elsewhere.

Millenium Tower: the view down Newbury Street in Back Bay is my favorite. If I had a good camera, this would definitely be where I would be taking pictures. Also, Harrison Ave in the South End and Congress Street in the SBW are both great views of the MT as well.

EDIT: As all of us other than van agree, lux-development is not, in and of itself, a problem.

 

[fattony]

Now to your tangible reality. I agree with the problem that not enough housing in general are being built and I agree in the current economic market we live in, developers will go for the product that achieves the highest return on investment (i.e. luxury apartment). What I'm saying is that a more effective way to alleviate high rent in the middle and lower class is to build apartments that caters at every income level. Like you said, until the luxury apartment market is saturated, no developers would have any incentive to build cheaper apartments, hence why the government needs to provide subsidiaries, tax breaks, or quotas on apartments to "force" developers to build lower income apartments.

This I get.

In addition, it is very unlikely that the luxury apartment market will ever be saturated for multiple reasons. Unlike the lower income demographic, luxury apartments cater to the wealthy, members of society that tends to treat these commodities as luxury items rather than necessity. If price drops enough, they would buy more than one luxury apartment. Furthermore, unlike normal apartments, luxury apartment attracts overseas investors. The cheaper it goes, the more demand you'll see from foreign buyers, especially if the apartment are located in world class cities such as Boston. Long story short, it can be said that the natural equilibrium point of luxury apartments is above where it can ever affect the rent of normal apartments.

Bigeman, you have a good understanding of economics but it's currently flawed because you're treating luxury apartments and normal apartments as the same and the consumers they cater to as having the same spending behavior when they do not.

This I don't get. We have all of human history to observe the past performance of housing markets. Why is there suddenly a fundamental class divide in housing that didn't exist 10 years ago, let alone 100 years ago?

The prices of luxury apartments are on the high end of a spectrum of prices. There isn't a price chasm separating peasants and aristocrats. I would want to see some kind of data to support any argument that luxury housing and "conventional" housing are not part of exactly the same market. This is another case of an overly complicated scenario when a simpler one exists.

And if indeed there exists a special, inelastic market for housing among the global elite and Boston is part of it - how do you propose to get out of it? Shut the world class hospitals and universities? The same zoning that would stagnate the ultra-lux market would crush the conventional housing market even worse. I would argue that that is exactly the scenario we are in right now. We have stifled the high-end of the market and in turn have decimated the low-end.

 

[bigeman312]

The city could make it cheaper, faster, and easier to build workforce housing by upzoning just about everywhere. That would bring up the size of projects in cheaper markets and thus bring up the dollar value and ROI on those projects without requiring higher rents. But when land and FAR are made extremely scare through systematic under-zoning, the only way to get your value and ROI up are through high rents and/or sale prices. Since the market has thusfar supported the higher rents, there is absolutely no incentive for developers to leave money on the table.

It is an Occum's Razor problem. There are simple, rational arguments for the high cost of rents and there are convoluted, contradictory ones. If you want to support the more complicated explanation the burden is on you show the fallacy of the simple answer and supply the rigorous support for the complex one.

This is the best part of any post on the subject to date. This is the problem. This is what needs to be addressed.