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© 2021 The Somerville Times. All rights reserved.
By Joe Beckman
(The opinions and views expressed in the commentaries and letters to the Editor of The Somerville Times belong solely to the authors and do not reflect the views or opinions of The Somerville Times, its staff or publishers)
Since Mayor Capuano’s Affordable Housing Task Force in 1998, people have talked about a 1% transfer tax. Some see it as an “admission fee” to buy and move into Somerville. Some see a penalty for speculators. It was then. At that time, it was designed to support an Affordable Housing Trust Fund to finance rentals.
Since 1998, the focus shifted as different administrations explored the political reality of passing such a tax. Any transfer fee or tax will require a home-rule amendment to be approved by the Legislature and Governor, and the political atmosphere does not favor new taxes – or fees.
Faced with the current Legislative and Executive Legislature and Governor, a number of local advocates are considering a fund to guarantee private limited equity mortgages to families meeting fairly broad income requirements, rather than one to purchase or build housing. A loan guarantee could impact ten times the number of people at no higher net cost.
And such a fund would grow as the properties it guarantees grow in value. In other words, it’s an investment fund that need not last very long.
Looking at land trusts in Europe and the US – in Massachusetts, on Martha’s Vineyard and Nantucket – several different planning committees have made a case for ownership instead of rental investments.
A mortgage guarantees predictable costs, unlike leases. It also offers a mortgage interest tax deduction, which has a special impact in its early years, exactly when student loans eat up so much income. Mortgages also build equity for retirement, unlike rent, and are an incentive to maintain and update the owners’ property. Trusts that guarantee mortgages also become self-supporting, as mortgage holders build their equity and the risks of default decline.
And, with limited equity caps on pricing for resale, a backlog of eligible new owners sharply reduces the risk to an underwriter. Ultimately, as European example demonstrate, land trusts build equity for both the land trust and its clients, and gradually needs less or no additional income from a transfer fee. Such a fee could have a sunset clause with no risk to the trust or its participants.
The more years a city worker – for one very vulnerable demographic – pays into a limited equity mortgage, the more valuable that ownership becomes and attractive jobs in other cities drop in value. If city employment were a requirement of that loan guarantee, its impact on salaries as well as community stability might double its value.
In twenty years very few teachers, for example, would find a higher salary in another city is as profitable as a salary and an apartment in Somerville. Targeting beneficiaries like those city workers, long term residents, seniors, and others could actually produce hard data on the Trust’s impact on recruitment, on stability, on salaries and on other affordability measures.
Finally, we have yet to explore what this strategy contributes to making better use of existing city services for housing—lead paint removal, energy efficient heating and power systems, MassSave benefits, various home improvement loans and direct benefits, and, finally, the tax deferral available to seniors over 70 with less than $80,000 in annual cash income.
Each of these benefits are available to all in Somerville, but, if coordinated with a land trust and mortgage financing, could have much more significant impact in stabilizing the community, the city staff, and the housing in general. And none of these would need other additional investment to impact market conditions or housing costs beyond the trust.
The housing trust has additional value, beyond what it can deliver to limited equity owners. For new developers, for example, it could pre-sell several units and offer the developer a fixed cash down payment, making other financing easier, and securing affordable units in a mixed income building. Such projects have a very positive, but small scale, history in Somerville with developers like David Aposhian or with the 100 Homes program.
In other words, there really are some precedents, even though they are relatively small. A secure living situation for twenty to thirty years would be worth far more than many other affordability strategies – to owners, neighbors, and local businesses.
Too often Somerville forgets it is a real laboratory city – almost unique in its density, its variety of work and living styles, and in its transportation and commercial base. The size of the city makes it possible to reliably measure how the trust might impact such vulnerable populations as the Trust and condo benefits – statistically and with reliable data – in how it might impact other vulnerable populations – seniors, those with disabling conditions, retired city workers, etc. Those measurements could inform other cities, while, at the same time, the trust itself would need no further investment and the transfer fee could have a sunset clause at five to fifteen years.
This kind of a trust could also help local banks, incidentally, since insured mortgage holders at fixed rates of inflation represent a re-sale to later municipal employees. Banks underwriting the mortgages themselves would not only be insured, but guaranteed continuous customers.
One other feature of a housing trust worth exploring is whether it might underwrite the mortgage insurance to select reverse mortgages, and thereby empower seniors to offer discounted rents to caregiving young people. That benefit may require Congressional action, but Congressman Capuano, under whom the first transfer tax was initially conceived, is now Vice-Chair of that committee in the US. House of Representatives.
Fashioning a Home Rule amendment that other cities could study, could compare with their own systems, and could adapt to their unique or distinctive housing and population patterns, makes this kind of legislation much easier to imagine. And Somerville as a laboratory for creating community is why many of us live here anyway.
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This type of trust has worked elsewhere and I know it can work for us. Thanks for the well presented information.
What can you possibly know about land management, your house is a total mess. Since you bought it approx. 15 years ago you haven’t done anything to it. Your front porch which almost collapsed about 10 years ago still lies in your front yard. the remaining porch should be collapsing soon. Your yard is overgrown with weeds, which has NEVER been taken care of since you’ve owned the place.
Rebuilt the house in 1995; planted invasive wisteria in 1998; deleaded this year, again; and have had renovations pending with the city for over two years. Things get better, they just, sometimes, take time.
Dear Joe’s neighbor, be kind. He can help you with everything from
financial advice for a homeowner, to advice about services and resources
you can obtain from the City.
This was a good article about the real estate transfer tax trust fund
idea, and to get people from renting into ownership. Inclusionary
affordable housing doesn’t produce many units, nor does Somerville
Community Corporation, for two examples. I’m happy that there are
other possible opportunities like those which Joe talks about. I wish
him well in his advocacy for this important concept of housing. We
need some better ideas like these to combat gentrification.
I think this is a great idea worth exploring. Renter families are becoming extinct in this town. I’m one of them. But for the grace of “cool landlords”, families like mine can stay here. I see the impact of gentrification in the schools when my daughter’s classmates leave. I ask what happened and invariably the family got priced out and moved to someplace they can afford (Everett, Malden, Revere, the northern far suburbs like Billerica, etc.). Often the trigger that forces out renters who are paying below market rents is the sale of the building.
Jim. The general problem is speculation, not gentrification. Gentrification would at least bring in more families.
Speculation pushes families out as what family with one or two working adults could afford the same as four working 20 somethings?
The quickest way to bring prices back to family friendly levels and cut speculation would be to drop the current No More Than 4 rule to No More Than 2.
If you could only rent to 2 unrelated adults, the speculation by absentee landlords would be gone and prices would adjust back to what an average family might actually afford.
Jim, where I am may be an outlier, but I’m seeing more young kids in my neighborhood now than anytime in the past ten years. Most if them are living in owner occupied homes so rising costs don’t affect then like it would if renting.
I think we need at accept that the demand for housing is regional and that is what is driving higher costs. This can only be solved with a regionally coordinated plan.
Matt must live in West Somerville. Which is full of higher income professionals starting families while still trying to stay close to an urban-type area that’s reminiscent of their younger ‘edgy’ years.
Once their kids outgrow the tot-lot stage, and they realize that yes – they are middle-aged now – many of these people are going to be leaving Somerville for better schools, bigger yards and a quieter lifestyle. Meanwhile, people who were going to be in Somerville for the long haul will have been long kicked out, never to return.
It’s not housing supply. It’s about people who can more easily pick and choose where to live having their way vs. people who can’t.
Matt, I agree that the number of kids in my neighborhood has increased dramatically in the last 11 years that we have lived here. But as you say, most are in owner occupied homes and that is a reflection of gentrification. There are many perspectives to gentrification, some good and some bad. With respect to families in the neighborhood, gentrification has increased the number of families I see which I think is a good thing. Gentrification at first caused a decrease in families, that’s what I saw a decade ago. But as prices continue to increase, more families have moved in. Now, these are families on at a different economic status than those that were pushed out 10+ years ago and continue to get pushed out.
One of the biggest problems I see are the number of properties in Somerville and greater Boston that are being bought by foreign investors with VERY deep pockets who have no intention of making this area their home.
For Joe and Jessica R. : You never rebuilt that house in 1995, that is a total LIE. Your invasive wisteria is weeds, anybody is invited down and view the yard, if you get near the fence you can see the remains of the porch collapse 10 years ago. How long has the city been holding you up on that? You deleaded this year AGAIN. Did you delead before and paint with leaded paint after?
DATGruntled said, “Gentrification would at least bring in more families.” Really? How many more people do we still need to come here?
The whole problem IS gentrification. We are the most densely populated city in New England, and getting denser every day. Just look around. There are loads of people and cars everywhere you go. How is bring more people into the city going to make things better? Better for whom?
All that is happening here today is that properties are being rapidly bought up to renovate them into condos and apartment complexes. Nothing is being done here to encourage single family homes to be built, or single families to stay here. We have lost many long-time beloved businesses only to have them replaced by multi-unit living spaces.
We bought our single-family home in 1990, and were very lucky to pay it off in just about one year. No way could that happen today. We wouldn’t even be able to afford to buy one today, much less pay a mortgage off at all.
We get constant mailings from real estate brokers wanting us to sell our home. As long as we can afford to live here, we’re staying put. Bad enough trying to afford to find another single-family home, our current home would likely be renovated or torn down to make a condo or multi-family home.
There should be a limit to how much gentrification there can be in a city. Yes, improve the quality of life here by upgrading areas, but not to the point where it pushes out families to bring in more renters and landlords. Those who could live here affordably are now no longer able to live in those neighborhoods where they have been “gentrified”. Once your property values go up, so do your taxes and rents. There will never be enough “affordable housing” built to make up for what’s been lost.
As for Matt’s statement that owner-occupied homes aren’t affected by rising costs the way renters are, I disagree. Property taxes have increased a lot over the years, to where it sometimes feels like we are still paying a mortgage, even with the residential exemption. Fees keep going up all the time, and we can’t pass the costs onto someone else to make them up the way landlords do, so we’re not much better off than renters.
All of our favorite family businesses are now being replaced by trendy shops and so-called “artisan” stores. You’d be hard-pressed to find a long-term family-owned bakery or shop here now where families have come for several generations. That’s not an improvement in my book. I’m not against those types of businesses, but there should also still be long-time family-owned businesses to balance them off. We’re more like Newbury Street here now. I bet most kids here don’t even go to stores where their parents went when they were the same age because those don’t exist anymore.
It’s no longer about improving a city. It’s all about making a profit, and that doesn’t benefit a city or its people in the end if it’s at their expense.
LindaS, I meant families vs individuals.
One of the main points from the Somervision surveys was that residents wanted to see more families and children in the mix of people moving into Somerville.
The 4 (or often more) currently allowed pushes the rental market towards young single people willing to live four or more to a unit.
As each of them can contribute to the rent, it increases what landlords can charge. Even if each of them has a $15 an hour job, a Single working parent with three children would need to make about $150k or more to even come close to affording the same rent.
As for gentrification, it is happening, but more slowly than people seem to think. Looking at the average household incomes for the last decade, it is not going up much. I would also be hard pressed to find one house sold near me in the last five years that is owner occupied. All are owned and rented out by people who live in other towns.
And not one of those has a unit rented out to a family.
This is also not say that people at the bottom are not being pushed out, but it is more by people in the middle than by those at the top.
As for taxes. They have gone up. We are still cheaper tax wise than almost any other town around. All of my friend who own and live in Arlington, Medford, Malden, Belmont, Melrose pay a lot more than me, even the ones with houses appraised for less than mine. With the possible exception of Belmont I would say we get better service form our city for that money too. I have a friend in Salem MA who has a condo appraised at about half what my house is and they pay half again the taxes I do. In Belmont my friend’s house is appraised at twice what mine is and they pay almost four times as much in taxes. So while the increases can hurt, we are still no where near as bad off as our neighbors.
LindaS: Although there are a not a ton of single families, I have seen quite a few renovated single family homes being sold in recent years. They are $$$$ though. Also, I have seen that many of the condos being built are built with 3-4 bedrooms for families. They are $$$$ too. But the point is that new renovations/construction is catering to families a bit.
Your reaction to more families coming in was “how many more people do we still need to come here?” The families are not adding to the population. They are replacing people… often people without kids. My neighborhood has many more kids than it did 10 years ago… and kids of all ages babies, toddlers, preschoolers, elementary, preteen.. I haven’t seen too many teenagers though.
Cap, I love in Winter Hill, I agree that many of the people moving in are higher income, as you have to be to be able to afford a home priced at over 600k. Despite the prices going up year on year, we continue to see people clamoring for local property. This is for a few reasons – we are spitting distance to one of the biggest tech centers in the country. We have great commuter access to the city. There are great places to eat drink and hang out. All of these come together to drive the desirability.
Linda I use a different description of gentrification then you, mine is about cost of living and accessibility of the market to people. Right now, the costs are high and growing forcing people out. That’s my definition. As a home owner, this is way better than the opposite happening. And while we all decry the negative effects I think we’d be more upset if the city were in decline.
Datgruntled – I agree our taxes are relatively low but they have been going up very quickly, and I can’t say I’ve seen improvements in city services to match. So I’m happy with our relatively low taxes, but we must hold our local government accountable to their spending. Things like open ended tax increases to support one of the most expensive schools to be built in the state can’t go unchecked.
MarketMan,
I hope that it’s true that the city is trying to cater more to families, but if we are only “replacing” people and not bringing more in, then why the need to continuously build apartment and condo buildings here? Has anyone here seen construction going on to build a single-family home?
We need more open spaces, not boxes where we can cram even more people in. There should be incentives given to increase the amount of single-family homes built here, since they are what will encourage families to move here, not apartments and condos.
The “American Dream” has always been to own one’s own home, not to rent an apartment or have a family living in a condo.
There are just too many multi-unit buildings being encouraged here to ensure that families will come to replace those that have left; and those that have left may have done so simply because they are unable to find a single-family home they can have and pass down to their children.
DATGruntled, I don’t mean to sound rude, but to say that we are better off tax-wise than some surrounding cities, that really doesn’t make someone here feel better if they already feel they are having a hard time paying the taxes they have here. It only means they are stuck here because it costs even more outside the city to live.
I hardly think it’s any consolation knowing some are paying more than we are, especially when there continues to be more living spaces added here that aren’t affordable. I haven’t heard that those in surrounding cities are coming here in droves because we’re cheaper. Many people are paying more here than others to rent or own in our own city, so it’s of little comfort.
That being said, I appreciate all the replies and explanations. I just feel that there is not enough being done by the city to encourage an increase in families over individuals and temporary renters, and more to gain profits in taxes and fees by allowing more multi-unit buildings to be built instead. We’re losing too much of what made Somerville so attractive in favor of being a cookie-cutter clone of big cities like Boston.
It seems that nowadays it’s no longer a good thing to be a “small town”, and that’s just too bad.