April 2, 2023
Commonwealth Magazine

WE ALL KNOW that New Bedford is facing a housing crisis that involves not only rising rents and home prices, but a severe shortage in housing options across all income levels. This housing production problem rests largely on the fact that construction costs in New Bedford rival Boston, but the rents that can be charged (i.e. the “return on investment” that developers can earn in New Bedford) are less than half of a Boston project.

Market-rate in New Bedford is equal to or sometimes less than what “affordable units” would go for in the Boston-metro area. That means developers have a difficult time making the numbers work to invest in New Bedford.

What happens? Our comparatively lower rents entice folks from higher cost of living areas to move into our city, but we have very little-to-no “middle-income” housing options to offer them. Middle-income housing primarily refers to young professionals and young families who are mid-career and looking for a launching pad. Without other options, the organically-affordable rents in our multi-family units draw their attention. Those small landlords see an opportunity, raise their rents or sell their property, and the current tenant, who works locally and has been living there for decades, cannot keep up with the rising rent and has to leave their home.

The Housing Development Incentive Program, or HDIP, works to address this critical lack of middle-income housing by using a tax incentive to make developing market-rate housing in New Bedford more financially viable. It addresses that financing gap by allowing us to do two important things: (1) leverage private investment in our city where financing has been historically difficult to secure, and (2) create mixed-income neighborhoods with a healthier balance of market-rate and workforce housing.

HDIP is not meant to be an affordable housing program. It was designed to meet a different need. HDIP is the only housing development program specifically targeted to meet the financial challenges of housing production in Gateway Cities, whereas there are many affordable housing programs and funding resources already in play and well-established in New Bedford.

Furthermore, the city of New Bedford, in its newly released comprehensive housing plan, is increasing rental assistance funding and low-income housing tax credits, as well as investing in nonprofits dedicated to affordable housing development and ending homelessness. HDIP can, and often does, work with these affordable housing options within the same project.

Salem has done this quite successfully. To replicate that model will require the city to become an active participant and partner in this discussion, particularly when it comes to exploring inclusionary zoning changes. HDIP is not an immediate solution to our affordable rental shortage, but it will have an important impact in the long-term by creating more options for newcomers and easing the pressure on long-time residents.

Housing is a complex issue, one that requires creative and innovative options, but we know that it comes down to creating more housing stock. If we are going to succeed and win this fight, the Housing Development Incentive Program is the best offense.

Link: https://commonwealthmagazine.org/opinion/hdip-addresses-need-for-market-rate-housing/