Housing Opportunity 2014 - Healthy Communities through Healthy Policy--A State and Local Perspective, Arthur Jemison

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Arthur Jemison, Massachusetts Executive Office of Housing and Economic Development

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  • Part of a team working in the office of the Secretariat and the housing agency DHCD on:

    Housing as part of economic development
    Affordable housing
    Land use policy
    Infrastructure

    Team is widely experienced –

    My personal experience is as a planning consultant & owners project manager for mission driven development
    Significant government experience at a city level in Boston & Washington
  • With the federal retreat from housing, states and cities become more important

    Cities and states are not faring that much better and have few new sources of capital or revenue

    So we have to innovate!

    We look at the ACA and the amount of money spent on health and we say

    Our Manhattan project is getting the resources from energy transportation and health industries into housing

    Focusing on the places our sectors meet.

    ---

    We present this select set of data to make the point

    Housing trends lines are headed down and there is not a reason to suspect significant change in these trends

    Health costs are heading up and

    Huge moment - ACA to address these costs and incentivize cost savings.

    Health Cost comparison made because even a small amount of incremental health spending on housing would be very significant.
  • The work we are doing in this area as it relates to health fall into the two categories as shown above.

    Measuring impact of the good planning we do to attract health and other resources. Emphasis on creating the information tools.

    Monetize the currently documentable value-add of the housing and use that to attract health and other resources.
  • An office park or Kendall Square restaurants, innovation center, apartments, subway and movie theatre, all within easy walking distance?

    This choice is an exaggeration, but conveys a basic truth. For decades, it has made sense for municipalities to pursue an economic development strategy that focuses on attracting employers who fill office parks and stores that go into shopping centers.

    Housing, on the other hand, has gone into the designated residential neighborhoods.

    That dynamic is changing—not because of state policy, but because of long-term demographic and market forces. Many of your communities are already responding to this shift.

    Not only is this shift a part of our economic development efforts – it is connected to our health discussion as well.

    I am going focus first on how it drives our MA economy and why housing is critical to our future success.
  • The Massachusetts economy is built on innovation.

    The pillars of this innovation economy are the state’s universities and research institutions, the rich cluster of innovation-based companies, and the sophisticated angel, venture capital and financial services communities that help fund and mentor the pipeline of entrepreneurs.

    At the heart are the skilled and creative people who choose to make Massachusetts their home. Their talent – from basic and applied sciences, software development and engineering, to precision manufacturing, design and marketing – is what attracts employers to Massachusetts and creates new start-ups every day.

    ---

    Two recent reports show that our innovation economy is strong and continuing to grow—and that we are being challenged by other states for the talented workforce that fuels our prosperity.

    The Massachusetts Technology Leadership Council’s February 2014 report said that almost 20% of Massachusetts jobs and 25% of payroll are in the technology sector. It also reported that attracting, developing, and retaining talent is perhaps the most critical issue threatening our ability to compete as a world tech leader.

    Meanwhile, the Massachusetts Technology Collaborative 2014 index continues to rate the Commonwealth as having the strongest innovation economy—but cautions that other states are very competitive and trying to attract the same talented young workers we are.
  • One of the reasons we are constantly emphasizing the importance of young workers to our innovation economy is that Massachusetts is one of the “oldest” states in the US.

    As the baby boomers exit the workforce over the next 10-15 years, the Commonwealth will become increasingly dependent on keeping and attracting Gen Y, those who are now 20-37 years old. Gen Y has, according to the 2010 Census, passed the baby boomers as the largest age cohort.

    They were also born with laptops, smartphones and streaming video.

    So, if attracting these young workers is important, what do they want?

    An Urban land Institute study last year found this: 76% want to live in walkable neighborhoods, 40% in medium to large cities, 62% close to shopping, dining and their workplaces.

    This confirmed a number of earlier studies saying that Gen Y is different from the last two generations—these younger workers would rather have a smaller house or apartment in a walkable neighborhood than a large single family home that requires a commute by car.

    These preferences are driven by lifestyle choices, but also by economics. Their income has gone down while living costs and college debt has gone up. The Pew Foundation reported in September 2012 that a record 40% of all households headed by someone younger than age 35 owed student debt in 2010. They can’t afford large homes on large lots and two cars.
  • In November of 2012, Governor Patrick called on the housing industry (market & affordable developers and municipal planners and leaders) to produce 10,000 multi-family homes a year through 2020.

    Market rate and affordable—we need homes for the entire spectrum of incomes.

    Why we do need to produce more?

    The Greater Boston area has the third highest rents in the nation. With two exceptions during the Great Recession, rents have risen every year since 2003. The gap between rents and incomes is increasing.

    Since the beginning of this year, home prices are rising as well.

    ---

    Earlier slides told you exactly why the Governor adopted the goal—10,000 multi-family units a year is what we need to meet the market demand that will keep and attract the young workers that fuel our innovation economy.

    In the months before the Governor announced the goal, we met with Tim and with Barry Bluestone at the Dukakis Center to understand the demographic data. That’s a key point: the goal is market-driven and doesn’t come from abstract government policy.
    This slide illustrates the second half of our thinking—10,000 multi-family units is ambitious but a realistic goal.

    We’ve reached 10,000 before and it is a number that we’ve met or exceeded on the single family side many times.

    This chart also shows how we did in the first year. Total multi-family housing starts for 2013 are nearly 3X those for 2011 (7,601 vs. 2,752)
    Strongest year since since 2006 for MF starts.



  • Earlier slides told you exactly why the Governor adopted the goal—10,000 multi-family units a year is what we need to meet the market demand that will keep and attract the young workers that fuel our innovation economy.

    In the months before the Governor announced the goal, we met with Tim and with Barry Bluestone at the Dukakis Center to understand the demographic data. That’s a key point: the goal is market-driven and doesn’t come from abstract government policy.
    This slide illustrates the second half of our thinking—10,000 multi-family units is ambitious but a realistic goal.

    We’ve reached 10,000 before and it is a number that we’ve met or exceeded on the single family side many times.

    This chart also shows how we did in the first year. Total multi-family housing starts for 2013 are nearly 3X those for 2011 (7,601 vs. 2,752)
    Strongest year since since 2006 for MF starts.
  • We have a strategy for partnering with communities to make not only housing but all of our land use work including jobs and infrastructure investment.

    The strategy has four key elements. I want to quickly illustrate how the four elements work in practice by providing specific examples.
  • Identify—we have been working with municipalities and RPAs to do regional plans. We started with the South Coast Rail Corridor, then moved to the 495/Metrowest Region and Merrimack Valley.

    The process involves identifying priority development and priority preservation areas. First, that’s done on a local basis, with community input. Then regional and state priorities are added.

    Our latest region is Metro North—nine communities, including two neighborhoods in Boston. This work will conclude in a few weeks with a set of confirmed Planned Development Areas.

    Many of these will be in so called gateway cities older formerly industrial cities across the commonwealth where many of the commonwealth’s poorest HHs are located. These places are however in good proximity to Boston and have some of the infrastructure needed to absorb new development. (Balance between growth for everyone: new comers and people who have been there for a long time.)

  • We are a Home Rule State so a significant part of our overall Planning Ahead strategy is creating prompt and predictable permitting.

    This requires both a comprehensive set of zoning tools that provide incentives to local communities and also changing the debate about multi-family housing.

    In the last 18 months we have made the case that multi-family housing is not just good for the state, but also in the best interest of individual cities & towns. We are saying that lively, walkable downtowns and neighborhoods with housing attract employers, strengthen local businesses and make it more likely you can keep your community’s character.

    We are constantly re-thinking our zoning tools to have something to match as many municipalities as possible. The details of the programs we have are not as important as the point that we try to have options for all community sizes and market circumstances.

    Briefly, I would summarize our tools this way.

    We have tools that provide incentives if municipalities are willing to adopt as of right districts. Chapter 40R involves incentive payments to communities. We have 33 districts, over 12,000 units allowed, and 2,048 homes now built or underway. Compact Neighborhoods is a new program that has non-monetary incentives and lower density and affordability requirements. We have just filed amendments to the 40R regulations that should strengthen the pedestrian and bike connections between future developments and nearby transit or city/town centers.

    We have an expedited permit program that we expanded in 2012 to include housing.

    Finally, we’ve had Chapter 40B since 1969, which allows developers to override local rules to build affordable units if the community doesn’t meet the state threshold (10% of each community’s housing stock must be affordable ). We developed a program that encourages municipalities to do a “friendly” 40B with a developer and agree on a site and density.

    Eligible locations
    As-of-right, including densities…
    Single-family: 8 units/acre
    Multifamily: 20 units/acre
    Affordability requirement (20%)
    Direct funding:
    $10K-$600K Zoning Incentive Payment upon based on District size
    $3,000/unit Density Bonus Payment
    Eligibility for school-cost reimbursement $ (Chapter 40S

    As for #4 MARKET – here I am to market to you!

  • Starting in 2011, MassWorks was created as a consolidation of several discretionary capital programs. Over the last three years, we have tried to be strategic, making public Infrastructure investments that are the key to unlocking private investment.

    In May, Secretary Bialecki announced two priorities for MassWorks and planning awards. One is multi-family housing in mixed use districts. The other is economic development in weak or distressed areas.

    When the awards came out in November and December, we had made a strong statement about our commitment to building multi-family housing. We funded 20 projects (out of 33) that supported the near creation of 2,518 multi-family homes.

    85% of spending went to projects with a mix of residential & commercial uses, and 72% were TOD

  • Healthy Community Design focuses on making our communities healthier places to live, work and play - where walking and biking are easier, and where being physically active is a natural part of your day. Healthy community design brings evidence-based health strategies into community planning, transportation, and land-use decisions (e.g. whether our homes are near schools, recreation areas, and businesses).
  • We want market developers want to take market risks on areas that although walkable may not be able to attract well priced capital. This fund would support those projects.

    NOTE: “Top-Loss” is effectively a grant resource that allows the other debt to be underwritten a lower rate or in case of loss, help maintain a minimum return to private investors.
  • Fund will help not-for profit developers and CDCs counter TOD pre-development barriers (including brownfields, transit related infrastructure unknowns among others)
  • 2012 State created $50M Social Innovation Fund (similar to new US HHS Incentive Fund)
    Fund “monetizes” documentable savings/cost avoidance from tested service innovations
    1st two targets are youth recidivism ROCA and SIF for Homeless Individuals
    There are costs per year of allowing person on street – these costs show up through emergency hospitalizations
    Tested service model – low threshold housing plus CSPECH (Health care model)
    Financing Closing in next 60 days!
    Obtain reform in system – more documentable outcomes
  • DHCD funds operating and capital for 40,000 state public housing units 30,000 of them are elderly
    $1B in deferred capital
    With 2008 reforms, we introduced a mixed-finance public housing capital pool to bring in new sources of capital (additional local funds, tax credits)
    Elder Affairs operate supportive housing initiatives with enhanced service package for elder public housing
    10 years of data suggest that SHI and services prevent unit turnover into LTC at a higher rate
    Higher rate is worth money to MCEs and MassHealth: each avoided year of LTC is valued at $30,000 for the state
    Plan to issue a procurement – offer mixed finance capital to LHAs which lower turnover
  • Applying the power of our innovation economy to health data could provide some real practical insights to many fields including planning.

    Many communities are looking at Hospital community benefits programs in light of ACA; there may be an opportunity to reset the relationships between cities and hospitals with an emphasis on housing.

    TIFs are familiar to us in the PPP and development fields. As better and better data is made available there may be ways to use avoided cost models to finance the environment needed to improve health outcomes.
  • Housing Opportunity 2014 - Healthy Communities through Healthy Policy--A State and Local Perspective, Arthur Jemison

    1. 1. HOUSING & HEALTH DIRECTIONS IN MASSACHUSETTS Executive Office of Housing and Economic Development Department of Housing and Community Development Housing Opportunity 2014: Healthy Housing, Healthy Places ULI Terwilliger Center for Housing May 14th, 2014
    2. 2. Our “Manhattan Project”: New Capital Where does housing add value? Energy; Transportation, Health Atom Collider, US DOE Oak Ridge Laboratory, 1943
    3. 3. Two Approaches • Measure and value the positive economic impact of living in dense, mixed-use places with public transit and complete streets: > Planning Ahead for Growth • “Value Capture” of incremental value added by housing to specific health problems to attract new investment in housing: > Housing & Health Initiatives
    4. 4. Innovation Economy – Talent is the Key
    5. 5. Lifestyle Shift?
    6. 6. Statewide Housing Production Goal 8  Reasonably dense, multi-family units  Reasonably located, near employment opportunities and transit nodes  Reasonably priced, for middle and moderate income families and individuals 10,000 multi-family units per year
    7. 7. The 4 Core Elements of Our Strategy 1 Identify Promising places for growth that have community support, are consistent with regional considerations and align with the Sustainable Development Principles 2 Create Prompt and predictable zoning and permitting in those places (both local and state) 3 Invest In public infrastructure needed to support growth 4 Market To businesses and developers interested in locating and growing in the Commonwealth
    8. 8. IDENTIFY - Areas to Develop and Preserve Metro North is a transit-connected region of cities and towns with the walkable “squares” & “corners” that can absorb growth – including Massachusetts “gateway cities”. Box District project in progress, Chelsea, MA, 2014 photo landscape architecture magazine
    9. 9. CREATE Comprehensive Zoning Tools 12 • As-of-right zoning incentives, with location and density criteria • Chapter 40R/Smart Growth • Compact Neighborhoods • Expedited local permitting (43D) • Comprehensive Permits (40B) • Overrides local rules if community has not produced enough affordable housing • Option for “friendly” 40B with community & developer working together
    10. 10. INVEST – MassWorks Program
    11. 11. Initiative: Healthy Community Design Health Impact Assessments (HIAs) are now being used in many Development Cabinet Agencies. Examples include: • MassDOT’s “Healthy Transportation Compact” through which three Secretariats collaborate and all transit development projects have HIAs. • The HIA on the new DHCD Community Investment Tax Credit. • MHIC’s Healthy Neighborhoods Equity Fund described next will also use an HIA.
    12. 12. Initiative: Healthy Neighborhoods Equity Fund The Commonwealth, through Mass Housing Investment Corp (MHIC) & Conservation Law Foundation is targeting TOD and Healthy Housing among market developers. MHIC is capitalizing a $30M equity capital fund for projects that would not take early risk without hedge. DHCD has supported this project with a $2M “Top Loss” resource. Health Impact Assessments component will put projects in a position to realize increased upside through health impact data as “value capture” opportunities start.
    13. 13. Initiative: Equitable TOD Accelerator Fund Local Initiatives Support Corporation (LISC) is capitalizing a $10M fund for pre-development for non-profit developers pursuing affordable housing at transit oriented development sites. EOHED considering allocation of $2M in MassWorks infrastructure funding for a “Top Loss” resource for this fund in manner comparable to the Bay Area TOD fund.
    14. 14. Initiative: Social Innovation Financing Commonwealth and intermediary partners are using a SIF Fund for “value capture” of avoided costs to re-invest in innovative service models. (Homeless veteran outreach Photo: Daily Hampshire Gazette, 2014)
    15. 15. Initiative: Aging-in-Place / State Public Housing DHCD / EOEA / MassHealth are exploring using mixed-finance capital resources to capture value of aging in place: current SHI program that prevents turnover into LTC helps to avoid $30,000 in State Medicaid costs. Elder service programming, Springfield Housing Authority, MA
    16. 16. Thank you Department of Housing & Community Development 100 Cambridge Street Boston, MA 02114 Arthur Jemison Deputy Undersecretary (617) 573-1112

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