Workforce Housing 2.0
By Mark Fogarty
5 min read
MassHousing Initiative Planning Second Phase
As MassHousing works to commit the balance of a literally groundbreaking $100 million project to create workforce housing, the agency is already planning for its Workforce Housing Initiative 2.0.
Executive Director Chrystal Kornegay says the second phase of the project will have less financing, perhaps $30 to $35 million over three years, and will seek to leverage what MassHousing has learned from its first big foray into workforce housing.
Since the project started in 2016, the agency has committed $72 million for 31 projects in 16 municipalities, for a total of 797 workforce units of a planned 1,000. It is the largest state-funded middle-income fund in the country.
The program ensures workforce housing units are deed restricted as affordable for at least 30 years, according to MassHousing. Twenty percent of units at the development must be affordable for households earning at or below 80 percent of area median income.
Those eligible are renters earning between 61 percent and 120 percent of AMI.
“We use such a wide range because the state is really different in different places. In Greater Boston you might see folks eligible for workforce housing at 110, 120 percent AMI but there are also markets in western Massachusetts where we may not have to go so high,” says Kornegay.
Defining Workforce
“The challenge that everyone has around workforce housing is how you define it. Who gets it?” says Kornegay. “This is born out of modest income housing not being eligible for traditional affordable housing and having hot markets all across the country, particularly in large urban environments.
“You start to see a need for folks in the Greater Boston market, families that are making $70,000 to $80,000 that are not being served by the marketplace. That is your bus driver. That is your medical technician. You have got to have an economy and a community where they can all live. Seeing that rising rent costs are burdening those kind of workers and not having a solution for them is really what’s driving this.”
Predominantly, the fund has been used in creating mixed-income communities, the executive director says, though a handful of deals are workforce-only. Another handful of deals are workforce housing and market-rate. A lot of the activity so far has been in “buying” a workforce housing tier in a traditional affordable housing development.
“The ability to buy a workforce tier in a property that was planned to be mostly market-rate near a transit stop has been something this program is helpful in doing. Being able to match that with disposition of public land and a focus on transit-oriented development and zoning things related to smart growth, we’ve really been able to get deals focused on creating mixed-income communities,” says Kornegay.
Gateway North
A good example of this is Gateway North, in Lynn, MA, a community ten miles north of Boston. The first project to be funded and completed in the initiative, Gateway North included ten workforce units in its total of 71. Fifty-three are traditional affordable housing units and eight are market-rate. The units are one-, two- and three-bedroom apartments, with some ground floor commercial space.
Ground was broken for Gateway North in December, 2016, and it was completed in the summer of 2018. The $31 million financing included $1.6 million in the workforce initiative funds. The AFL-CIO Housing Investment Trust was the investor in $12.8 million of Low Income Housing Tax Credits.
The new housing, which is hoped to be a catalyst for the redevelopment of the City of Lynn’s Washington Street Corridor, was developed by Lynn Housing and Neighborhood Development (LHAND) and Hub Holdings LLC.
Another key player was the Lynn Economic Advancement & Development (LEAD) team, tasked with promoting community revitalization and aligning economic development initiatives in the City of Lynn. The team is comprised of federal, state and local officials, according to MassHousing.
Since its inception the LEAD team has worked to deliver strategic investments in the city, including market-rate, mixed-income and transit-oriented housing development projects.
Kornegay credits Massachusetts Gov. Charlie Baker with having affordable housing as a priority and looking for additional investment in it after he was elected in 2015. The workforce initiative launched in 2016, with Baker announcing it at the Gateway North site. “We used $100 million of operating surplus and created this fund to serve working families,” Kornegay says. The initiative is part of the MassHousing Opportunity Fund of $160 million.
“I think we’ll have spent the money by the end of this year,” Kornegay says. Deals have been done in municipalities like Lynn, Quincy and Worcester, a handful in Boston, and one on Cape Cod.
With version 2.0, projects are being planned that have a different kind of mix, she says.
“What we’re hoping for is having a more balanced mix of projects that represent mixed-income that includes a traditional affordable tier and more projects that are mixed-income where we are able to create workforce units in a market-rate deal,” she says.
Kornegay notes that in Boston, a family of four earning $100,000 might be eligible for workforce housing, and some question why people earning that much money need to be subsidized.
“What’s important is that we’ve got to have some more creative ways to serve that particular population,” the executive director says. “The market should be serving them.
“We’ve got to not get comfortable with the idea the only way to deal with this is through government subsidy,” she concludes.
Sources & Uses
Sources July 2016
MassHousing Permanent Loan……………………………. $9,981,000
MassHousing Opportunity Fund………………………….. $1,600,000
City of Lynn Section 108 Loan………………………………………….. $0
Tax Credit Equity……………………………………………… $12,814,695
Subordinate Debt
Affordable Housing Trust Fund……………………………. $1,000,000
CATNHP………………………………………………………………. $500,000
HOME and HSF………………………………………………….. $1,750,000
Lynn HOME………………………………………………………….. $891,000
TOD…………………………………………………………………….. $500,000
City Of Lynn Seller Note………………………………………… $602,618
Deferred Developer Fee……………………………………… $1,365,544
Total Sources…………………………………………………… $31,004,857
Uses
Acquisition Subtotal…………………………………………… $2,150,000
Construction……………………………………………………. $21,710,614
Subtotal: Gen. Dev…………………………………………….. $3,920,533
Capitalized Reserves…………………………………………….. $623,710
Developer Overhead and Fee……………………………… $2,600,000
Total Uses……………………………………………………….. $31,004,857
