Comments about Affordable Housing Project at 116 Vine
— Why I Voted No on Article 23, 2025 ATM —
Article 23 authorized the Select Board to issue an RFP for developers to propose an AH project on 30,000 sq ft that the town had set aside for this purpose. Based on an earlier plan submitted by LexHAB, it’s generally expected that a responding developer — perhaps LexHAB in its new role as an independent non-profit — will propose six AH units at that location.
Article 23 proponents predicted that the town would not incur significant cost for this development beyond contributing the land at a concessionary cost and possibly also negotiating a favorable deal on property taxes or “payments in lieu of taxes” (PILOT). Calculations below do not support that prediction.
In a message to TMMA List (8 Apr 2025), Elaine Tung (Affordable Housing Trust) and Sarah Morrison (LexHAB) noted that affordable rents at Avalon are currently $2771/month for a 3 bedroom unit. For calculations here, I am assuming that this will also be the affordable rent charged at 116 Vine.
In the Brown Book budget Appx C-5, P 271, as reported by Pam Lyons (TMMA List, 31 March), LexHAB’s cost for Vine Street was projected to reach $6M, on the assumption that LexHAB would provide the 6 AH units in two buildings located on the site. This very high cost was attributed to LexHAB’s status as a town entity subject to the town’s procurement rules. LexHAB has changed (or soon will change) its status to become an independent non-profit which presumably will enable them to complete the project for much less. While how much less is TBD, let’s assume for this rough calculation that LexHAB or another developer that responds to the RFP might be able to complete the project for, say, $4M rather than $6M.
According to online sources, the interest rate for a mortgage on a multifamily development is now between 5.4% and 5.7% https://apartmentloanstore.com/boston/massachusetts/multifamily-loan-rates. For purposes of this calculation, and for simplicity, let’s assume the developer pays 5% interest for a mortgage covering the entire project cost, or $200,000 per year in interest before amortization of principal.
SO… Affordable rent at $2771/month from each of 6 units would generate $16,628/month, or $199,512/year, which barely covers the $200K/year interest cost and none of the principal. In other words, affordable rents at 116 Vine would not enable the developer to recover any of their project investment, obviously not a viable situation. And that’s true even if they pay zero $$ for the land and no property taxes or PILOT $$, and they have zero maintenance costs.
I don’t see how 116 Vine can work for any developer, LexHAB or otherwise, unless they can get substantial rent supplements from the town — indefinitely, in amounts TBD, subject to the developer’s accounting — and/or substantial front end support in addition to getting the land for zero cost and paying no property taxes or PILOT $$.
Currently developers in Lexington are mandated to provide affordable housing equivalent to 15% of their projects’ market rate GFA, which costs the town nothing and will ramp up nicely as the MBTA multifamily developments get underway.
By contrast, the Article 23 Vine Street project appears likely to burden the town with unspecified but potentially significant costs.
Several sources suggest that Lexington may subsidize a Vine Street project by providing debt to the developer, and/or substantial front end seed money, and/or by supplementing AH rents:
- in the town’s contract with the AH developer of 40 AH units on 3.1 acres on Lowell St, at the intersection of Lowell St. and North St., there’s a provision for the town to provide $500,000 debt to the project, in case debt from other lenders is not sufficient.
- there’s also a provision for the town to take over the project if necessary, and then to attempt to sell it to another developer or failing that, to retain ownership. In the latter situation, I assume that the town would also become responsible for the project’s debt.
- one of the town’s FAQs about the Lowell St. project refers to multiple sources of funding for AH projects, but then adds that A local commitment is required to leverage these other funding sources.
- at the start of TM debate on Article 23, the head of the Community Preservation Committee told TM that Lexington’s Affordable Housing Trust has set aside $3M to $6M for the Vine Street project. I don’t have inside knowledge about AHT’s plans, but I believe that it is likely that AHT intends to provide funding to make the numbers work for a project at 116 Vine.
AHT has discretion to allocate however it wishes the funding it receives from the Community Preservation Committee, which derives from the Community Preservation Act surcharge on our property taxes. But these are real $$ that the AHT is allocating, paid by Lexington taxpayers, and AHT investments involve trade-offs.
I’m not against spending $4M on affordable housing. I’m against mis-using town resources for a project that is not well thought out, creating only ~6 units at extremely high cost, when those same funds could be put to much better use involving much larger numbers of AH units. Given that the property at 116 Vine will be owned by a non-town entity, I think it’s even less justified to over-spend on it.
Hundreds of AH units will be provided in the town’s new multifamily projects. While nominally affordable, the inclusionary rents in these developments may still be too high cost for many low income families. Rather than spending its funds for 6 units at 116 Vine, AHT could more productively subsidize inclusionary rents for numerous families in the multifamily developments.
Now that Article 23 has passed the Select Board will proceed with their RFP and await responsive proposals from developers. It’s unfortunate in my opinion that TM has removed itself from further involvement in whatever is negotiated between the town (Select Board), the developer (if one is selected), and AHT.