The burden of proof is on luxury developers and the city to explain how the luxury building bonanza will benefit ordinary residents and neighborhoods
The luxury boom is in full swing, with thousands of new rental units and condos in the development pipeline. A decade from now, our city’s skyline and demographics will be fundamentally changed by decisions being made today.
Constructing luxury skyscrapers does create jobs and brings in additional tax revenue. And the city has done a diligent job negotiating for affordable housing set-asides and collecting funds for the city’s linkage fund, which helps finance affordable housing. But is it enough to offset the considerable risks identified in a new report that I co-authored with Emma de Geode, “Towering Excess: The Perils of the Luxury Real Estate Boom for Bostonians”?
Here are six questions Boston should grapple with before greenlighting thousands more luxury units:
- How will bringing in thousands of multimillionaires and billionaires reduce inequality in Boston and our unseemly racial wealth divide?
We live in one of the most unequal cities in the country, with a dizzying gap between the wealthiest 1 percent and everyone else. And the racial dimensions of these inequalities are staggering. According to a Boston Fed study, the median wealth for whites in Boston is $247,500. The median wealth for nonimmigrant blacks is $8 (not a typo) and for Dominicans it is zero. In other words, half of US-born blacks and Dominicans in Boston have essentially zero wealth; they owe as much as they own. In 2015, not a single home mortgage loan was issued for African-American and Latino families in the Seaport District and the Fenway, two Boston neighborhoods with thousands of new luxury housing units.
- How does the luxury boom help address Boston’s acute affordable housing crisis?
Luxury construction drives up the cost of land in central neighborhoods, with a ripple impact on the cost of housing throughout the city. Affluent, but not superrich, households in Boston find themselves pushed to outer neighborhoods, increasing competition for scarce affordable and moderately priced housing. A UBS Global Real Estate Bubble Index warned, “Soaring home prices come with a downside. They nudge low- and middle-income earners out of the market, increase the gap between rich and poor, and even lead to a rush to build homes that critics say can make us sick.”
- How will adding hundreds of “wealth storage units” purchased with cash by anonymous shell corporations prevent the flow of illicit funds and criminal activity into the city, a plague that luxury housing has brought to cities like New York, Miami, and Los Angeles?
There is a risk that Boston will become a new center of money laundering and wealth hiding. Over 35 percent of Boston luxury units are owned by shell companies and trusts that mask the real owners. With European countries now insisting on greater levels of corporate transparency, illicit cash is now cascading into the United States. And with greater criminal oversight of other cities, Boston is even more attractive for secret cash.
- How will these luxury housing projects help Boston meet its greenhouse gas emission targets?
Luxury projects such as the energy hog One Dalton Place require the construction of a new fossil fuel energy infrastructure at a time when Boston should be moving aggressively to transition toward 100 percent renewable energy in order to meet our clean energy commitments. As a sea level community, it is our interest to do our part to reduce carbon emissions and the possibilities of catastrophic climate change.
- How will towering gated communities contribute to Boston’s culture and neighborhood vibrancy?
These buildings reinforce trends of neighborhood apartheid—as luxury residents opt out of actual neighborhoods. As an Architectural Digest article that featured One Dalton Place observed, “Who Needs a Neighborhood When You Can Have These Wild Amenities?” What happens when the uber-rich denizens of Boston realize they are tired of paying property taxes for schools, parks, and public transit services that they don’t use? Will they use their oversized political resources to elect a tax-cutting mini-Trump like Toronto’s bombastic Rob Ford, or his Ontario premiere brother, Doug Ford?
- What will the city do to protect its nonwealthy residents and capture some of this global wealth to fund city services and affordable housing?
In exchange for providing a safe haven to global capital, Boston should tax real estate transactions on properties selling for over $2 million and dedicate revenue from that taxing to the city’s affordable housing linkage fund. Boston could discourage high-end vacant properties by taxing buildings that sit empty for more than six months a year. We can learn from other jurisdictions such as Vancouver and Washington, DC, that have created incentives to use their city’s housing stock to house people, not wealth. The city could require property owners, as part of recording deeds, to disclose the actual human being who owns the property. The city could also require all future luxury properties be state of the art “net zero carbon emissions” green construction, not requiring any additional fossil fuel inputs.
Now is the moment for a rigorous debate about whether the luxury building boom helps or harms Bostonians. We should question the assumption that the benefits of these luxury towers will trickle down to reduce inequality and expand affordable housing. The burden of proof falls on the city and policymakers to show there is no harm.
Join friends and neighbors to hear Chuck Collins speak about Financing Affordable Housing by Taxing Luxury Units on Sunday, Sept. 23, 4-6pm, St. Bartholomew’s Church, 239 Harvard St., Cambridge, near Central Sq. Chuck Collins is Director of the Program on Inequality and the Common Good at the Institute of Policy Studies and an author on economic inequality, including the new report “Towering Excess: The Perils of the Luxury Real Estate Boom for Bostonians.” Also joining will be State Rep. Mike Connolly and Cambridge City Councilor Sumbul Siddiqui. You can RSVP on Facebook.