Last spring, Belmont Office of Planning and Building Director Chris Ryan interviewed a group of 11 local real estate professionals with diverse backgrounds: some specializing in affordable housing, or mixed commercial-residential projects, or hotel/commercial, others from real estate investment firms. The goal of the session was to assess the level of interest in a rezoned Belmont Center with a potentially two-to-three time greater density than currently allowed, and to solicit advice on how to make the project attractive. (Note that the scale of allowable buildings has been reduced in most areas since this meeting.) The meeting transcript is 20 pages. The following is a condensed and lightly edited version of the highlights.
Chris Ryan, Question 1. “What is your overall assessment of the residential-commercial mixed use and hospitality markets right now, and a prognosis for the near term. What types of projects currently have the best feasibility? Any thoughts about Belmont specifically?”
Developer 1. “… the current environment makes everything challenging. There’s uncertainty. Even before the tariffs and trade war issues, it is very hard to make multifamily housing pencil out around Boston without government subsidy, which [there is] very little of… So I think that housing is probably the thing that’s most attractive right now and commercial, office, lab, hotel would all be more challenging today in Belmont.”
Developer 10.”… from an affordable housing developer standpoint, the market is very unsettled even though we [use] subsidy and public-private partnerships in our development efforts, we’re still seeing a lot of uncertainty. Going forward even the affordable deals are going to be a lot more challenging to close just because of the uncertainty in the capital markets.“
Developer 5. “… , at least in the short run, we don’t know what’s going on with the economy. Construction costs continue to go up. Supply chains are certainly going to be disrupted. And it’s like, where does the steel come from, where does the lumber come from, where does the electrical switching gear come from? How much does it all cost – the windows, all kinds of things that we might look for outside of the US? So, the immediate outlook is tough and uncertain. But looking forward I think your zoning changes will have an impact that extends for decades and that really will [matter], so I’d say go for it. And as an affordable housing developer, again, the resources that we request from the government are stretched.”
Developer 4: “… certainly what you’re doing, Chris, is great. Many communities have done this already, like Lexington has gone through a density modification a couple of years back. Burlington went through it like 10 years ago. Waltham’s done it. I think Belmont’s probably a little behind, I would say. But listen, it’s never too late.”
Developer 7: “I’m bullish on Belmont. I think we all are on this call. We’re all interested in this zip code because it’s a blue-chip zip code bar none. In my view, each of the asset classes is viable. Relative to your zoning, I think that the real [issue] is that size matters. Scale matters … I’ve seen a lot of the MBTA zoning bylaws happen where frankly, there’s just not enough density.
Chris Ryan, Question 2. “What are the minimum building heights required for a feasible mixed- use project in the current market?”
Developer 2. “Can I interject? I would just encourage if there’s some way to allow residential momentum to lead a little bit in this effort and sort of extend ahead of the commercial, rather than binding them together, I think that would be wise. And I say that only because residential is one area where we can all, I think, agree that Belmont has incredible strength.
Developer 1. “Chris, you alluded to the small lot sizes. I would say that’s probably the greatest impediment. I’ve seen that in other small villages and towns here in Newton, where you have a number of owners with different interests and agendas …. There’s no lack of retail availability right now in Belmont Center. I mean, you could walk down the street and [see] vacancies. So there’s not enough demand to fill the spaces you have … So unless there’s a way to somehow combine some of those smaller lots, I think that’s going to be the biggest impediment. … Maybe there’s got to be some incentive to combine smaller lots into larger ones to get to a viable project size. Twenty-unit apartment complexes don’t make sense. Forty to start, 50 is better, 80 is better, 100 is great, 200 is even better, but that’s beyond the pale, I’m sure, for Belmont Center.”
Chris Ryan, Question 3: “Belmont Center is interesting because, and tell me if I’m wrong, but Belmont Center is not a place where families with children are going to want to come. Not that that’s the purpose of the zoning, but the bottom line is that there’s a very different demographic profile that wants to live in a town center above stores.”
Developer 1. “What we found in multifamily housing in eastern Massachusetts is that you tend to have smaller households. They tend to be single people, divorced dads, couples. By the time you get to a couple … with two children, the rents on two-bedroom or three-bedroom apartments in eastern Massachusetts are high enough that that creates the demand for single- family housing. And so we don’t find a lot of children in our multifamily projects in and around Boston.”
Chris Ryan Question 4: “We do have a 15% inclusionary bylaw, that’s the top percentage. It starts at 10, goes to 12, caps out at 15%. So any project, I believe, over 20 units has to do the 15%. How does that impact a project?”
Developer 10: “We’ve used Friendly 40B in many cities and towns across the Commonwealth. It has been advantageous for density and redevelopment of existing structures. We do a lot of historic building renovation, reutilization. So that’s been a helpful tool and I think It’s important to educate communities that it’s not something to be nervous about or afraid of. It’s something to embrace and kind of work through collaboratively …. The projects we do are deeply affordable, so we look to utilize subsidy in all regards to create the types of family housing and senior housing and mixed income housing that we do. And I’m always [trying] to push those percentages [of affordable units]. But they do have real-world implications on the economics of the projects.”
Developer 1: “On the affordable side, I would say you just want to have a clear, predictable, transparent policy. The person who pays for the inclusion of affordable units is the landowner So if that becomes too burdensome, the conversion of an existing use to a new [affordable housing] use will stop. It’s not on the developer. It’s really on the landowner because if you take away too much of his value, by putting in place too much regulation, he won’t convert from the current use.”
Chris Ryan, Question 5: “What are your thoughts about parking, particularly in a town center that developed before cars?”
Developer 1: “I’d say leave parking to the developer who probably knows best. We’re building a project with one parking space per residential unit in Lexington.”
Developer 2: “Waymo is operating now [in five cities, with Boston on the horizon]. I think the incentives of developers on the parking question are [to get it right]; they do not want underutilized residential, commercial, or parking space. [Giving the developer control] allows for flexibility that, with rapid technological change, will be needed soon.”
Developer 11: “I’ve rarely seen a developer get this [parking] wrong. Where projects are over- parked, it is almost always because of a regulatory requirement.”
Developer 3: “I think that’s a great point. Allowing the free market to dictate what happens with parking is always the best bet. Nothing will kill a deal faster than forcing [too much] parking. We’ve seen that firsthand.”
Chris Ryan, Question 6: “Final question: What could we do as a municipality to make this plan really work, from a regulatory, policy or economic perspective?”
Developer 10: “ In a world of uncertain things, certainty is probably the best thing you could give a developer, and an open and inclusive process is part of that. And then a point of contact that knows exactly what is going on and is available.”
Developer 5: “Height is our friend, density is our friend.”
Developer 11: “Right now in the Boston area, like 70%-plus of retail space is going to food and beverage … and that’s a low-margin business. Who’s bearing the high build-out costs, especially for first-generation space? Often it’s the landlord, and that piggybacks on Developer 5’s point about density. A larger development can absorb some of the costs to make that happen. The real money is always upstairs in an environment like this. It just makes things much easier and much more possible. In Belmont Center, [if you’re adding one or two stories] is that enough extra value to actually redevelop the site? I think the less density you allow, the harder those numbers are to make work. In order to make the first-floor retail type environment that people in Belmont are going to want to see really pop, you need a lot of residential to support that. You need people to be coming in those doors. So even if your goal ultimately is more businesses, you [may need to] lead with residential.
Following the meeting one participant submitted written feedback on the draft bylaw, suggesting specific types of development for specific locations:
“Based on the parcels covered by this overlay, two general product types with some marketability are likely your workhorses:
- “Big Block” opportunities at five locations: 49-89 Leonard Street, Claflin Street parking lot, fire station plus adjacent Verizon building, 30-42 Leonard, and Concord Ave parcels. Highest and best use in today’s market = 5 over 1 wood-frame residential building with
retail below
- “Infill” opportunities = everything else. Highest and best use in today’s market: townhomes, single-stair residential, or triple-deckers.
Through the prism of those marketable products, the following observations came to mind as I read through the zoning document: Requiring commercial space in developments will act as a “brake” on projects in Belmont Center. The prospect of building residential in Belmont Center is exciting for any developer and investor. Unfortunately, these days, parts of Boston and East Cambridge are running office vacancy levels of 24% to 30% that break existing capital structures and render development infeasible. Since Belmont would likely have a tougher office market than downtown (outside of maybe very small quantities of boutique space), this would make projects much harder to “pencil.” From a principled standpoint, I think the case for removing this requirement (in spite of Belmont’s goals to improve the commercial tax base) would be that greater residential density will increase the health/viability of commercial enterprise.
Link to full transcript: https://www.belmont-ma.gov/DocumentCenter/View/10781/Focus-Group—No-ID
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