Real estate club hosts discussion on affordable housing
On Wednesday, the Real Estate Club presented “Tel Aviv and Boston: Two Perspectives on Affordable Housing.” This event brought a dynamic approach in thinking of affordable housing between two cities.
Prof. Edward Chazen (IBS), the club’s faculty advising head, introduced the event. Steven Schwartz, Esq. at Goulston & Storrs, presented on how the Boston area addresses affordable housing through law and legislation. Following, Chazen discussed housing in Tel Aviv.
Chazen introduced the event by presenting aerial and close up photos of buildings in Tel Aviv.
According to Chazen, Tel Aviv is a bustling acropolis, a dynamic city in a waterfront community of the Mediterranean. He also showed deteriorated and cracked buildings, explaining how the salt water corrodes and rusts the exterior of the buildings. Due to the poor conditions, the State of Israel encourages developers to renovate the buildings and add more housing to existing buildings.
Boston and Tel Aviv are cities “that have a lot of similarities in terms of demographic profile and some physical attributes,” Chazen said. He noted that both cities are waterfront communities, prioritize preserving historic buildings and are densely developed.
According to Chazen, there are over 4,000 buildings from the German Bauhaus architectural school in Tel Aviv built in the 1920s and ’30s and historic houses in the Back Bay and Beacon Hill built in the 19th century. Although the Bauhaus buildings are unique to Tel Aviv both cities have historic houses that have strict regulations under the governments.
Chazen said that in Israel there are “more engineers per capita than any country in the world. They have more patents issued per capita than any country in the world and more venture capital investment than any country in the world.”
He further noted that “Boston and Tel Aviv are more alike than unlike in many areas: in comparison to ratio of housing to income, student population, cost of living, median household income and city’s population. The only big difference is the median housing price and construction style.”
Schwartz counsels clients on development of multifamily rental housing in Mass., and discussed the similarities and differences between housing in Boston and in Tel Aviv.
“One of the big differences in terms of housing creation between Israel and the Boston area is that most of the development of multifamily housing in Israel will be condominiums for sale units,” he said. “Most of the multifamily development in Massachusetts is going to be rental.”
Schwartz presented housing statistics in Massachusetts in relation to the rest of the United States, which held that Massachusetts is the sixth lowest in capita in housing production, seventth least affordable state for renters, eighth in the country for income inequality, and is very high in the rate of homelessness in the state.
“Why is Massachusetts lagging so much in affordable housing and housing creation?” asked Schwartz, before answering his own question with three explanations.
The first reason he gave is that land in Massachusetts is extremely scarce, and the second reason was that construction costs are very high. For the third reason, Schwartz explained the regulatory barriers of the creation of housing.
According to Schwartz, there are 350 cities and towns in the state and each one has control over its own zoning rules, which means that zoning laws are able to keep out multifamily housing and provide much larger lot requirements for single family homes.
The U.S. Department of Housing and Development determines affordable housing based on area median income in a given location. Greater Boston area median income for a typical household is $98,208.
In order to qualify for a home, rents would be calculated at 30% of that maximum income. A $3,500 or $4,5000 2-bedroom apartment could be rented at $1,500, which is an “extremely good value for people who qualify for these units,” Schwartz told the audience.
In 1969, the Massachusetts legislature passed Chapter 40B, which allows a developer to request one single permit from the Zoning Board of Appeal in lieu of many permits.
This incentive requires the developer to have “at least 20% of the units need to be afforded at 50% of the median or 25% of the units need to be affordable at 80% of the median” said Schwartz.
Chazen then shifted the conversation from housing in Boston to Tel Aviv. According to Chazen, Massachusetts has more progressive policies than Israel.
“93% of all the land in Israel that is not developed is owned by the government, by the State of Israel Land Authority—that sounds like an enormous number but most of Israel is a dessert,” Chazen said. “Israel owns 49% of the land in Tel Aviv.”
Massachusetts also encourages production of housing through Chapter 40b; however, in Israel, there is no such thing.
In Israel, the demand exceeds the supply, and the country lacks in more housing developments.The only housing program Israel has is through Tama 38, program to renovate old buildings and add two or three floors.
According to Chazen, Tama 38 works to renovate buildings and put in elevators while having the people live in the building.Moreover, Tama 38 does not really help in solving the production problem of housing in Israel, Chazen said.
A brief question-and-answer session followed the presentation andChazen and Schwartz both fielded questions from the audience.