One seemingly unlikely reason rents are going up | The Globe’s big blind spot when covering the Krafts’ soccer stadium plan | Nonprofit CEO and Healey pal’s staggering comp package | Former T chief eyes local comeback after forging national transportation empire |
Too much of a good thing? A push by Boston, and now, several suburbs, to mandate higher numbers of affordable apartments could backfire badly
Think rents are crazy now?
Well, just wait until a new wave of local affordability requirements kick in.
That’s because while the new rules could result in a small increase in the number of subsidized apartments being built, they could also send rents on other, market-rate units through the roof.
That’s the warning that David Stewart, a long-time local developer, has for local officials. Frustrated with eye-popping rents, officials are hoping to boost the number of reasonably-priced apartments by government fiat.
A growing number of suburbs, including Brookline, Concord, Lexington, Newton, and Wellesley, are requiring 15 percent or more of all new apartments and condos built be affordable set-asides, rented out at below-market rates.
This follows on the heels of Boston, Cambridge and Somerville, which have boosted their percentage of affordable units now required in every new building to the 17-20 percent range.
But here’s the rub: The units in question are not being subsidized by government money, but rather by the developers themselves.
The developers are forced to make up for losses in the below-market-rate units, pushing rents higher than they would otherwise in the market-rate apartments in the rest of the new building or high-rise.
That, in turn, can lead to a considerable amount of rent inflation.
“What I have recently discovered is that nobody looked at the effect this system had on the overall market, in terms of who is paying this subsidy, its magnitude and the effect it has on housing inflation,” writes Stewart, founder of Flat Rock Real Estate LLC.
How much? Try a 12-14 percent bump up in market-rate rents in buildings where local officials are requiring that 20 percent of all units be affordable.
That, in turn, could push the rent on a market-rate apartment to $4,500 a month, or an additional $630 a month.
Hit hardest by these rent increases, in turn, are younger professionals and other workers who make between $100,000 to $200,000 a year, or too much to qualify for the affordable units.
And it is just this group of relatively better paid, 26-45 year-olds who have been fleeing Massachusetts for states with lower housing costs, Steward said, citing a recent Boston University study.
Stewart has come up with a fitting name for this group - The Squeezed Cohort - noting they are being hit with “higher rent inflation” thanks to the affordable housing policies being pushed by local suburban and city leaders.
“The Massachusetts economy depends on this cohort staying here, raising their families here, growing companies here and paying taxes here,” said Steward, who took part in Contrarian Boston’s webinar last Thursday on the Bay State’s housing crisis.
“Our affordable housing policy needs to change, and quickly, so that we can lower housing costs and convince the Squeezed Cohort to stay,” he added.
Raking it in: Embattled nonprofit chief with ties to Healey takes home sky-high pay package
Remember that old saying, doing well by doing good?
Well let’s just say Elyse Cherry has given a whole new and rather unfortunate meaning to it.
The BlueHub Capital CEO popped up in the news recently, and for all for the wrong reasons, with State House bosses attempting to shield Cherry’s nonprofit from a deluge of lawsuits, per The Boston Globe.
This surely has been a major embarrassment for Gov. Maura Healey, for whom Cherry has raised loads of campaign cash.
But an even bigger controversy is to be found in Cherry’s outsized compensation package as head of a nonprofit that claims to save struggling homeowners from foreclosure, Contrarian Boston has learned.
Cherry’s total compensation for BlueHub and related ventures is decidedly more like that of a high-flying finance exec than a local nonprofit chief, according to IRS 990 forms reviewed by Contrarian Boston.
Cherry’s total comp crossed the $1 million mark 2022, the latest year available, including $320,000 in bonus and incentive payments.
That’s up from roughly 25 percent from 2018, when Cherry took home roughly $758,000 in total compensation - a number that was criticized at the time for being too high for a nonprofit chief.
A BlueHub Capital spokesperson defended the CEO’s comp package, noting BlueHub has $1.3 billion in assets under management and that executive pay is reviewed by a third party consultant.
For her part, Cherry goes back a long way with the governor, having served as a member of the governor’s campaign finance committee and having helped raise money for her for years going back to when Healey was state AG.
Healey also heaped praise on Cherry, a prominent LGBT activist, calling her a “trailblazer” in a Boston Business Journal profile.
Cherry, in turn, has contributed $1,000 - the maximum possible - to Healey’s campaign account, this year and in 2023, as well as in 2021.
But Cherry’s gold-plated compensation package - and her company’s quest for a legal shield from lawsuits by some of the homeowners it claims to have saved - has put the governor in a awkward position.
State House bosses tucked a seemingly obscure provision into a $4 billion state economic development bill that just passed, shielding Cherry’s Roxbury organization from consumer protection lawsuits, The Boston Globe reports.
BlueHub Capital has positioned itself as a savior of struggling homeowners facing foreclosure, buying their homes from the bank and then reselling them back to their owners.
But dozens of these homeowners who BlueHub claims to have rescued are now suing. They say they were never told the nonprofit would get a cut of the increase in the value of their homes over time, no small matter given what has happened with real estate values.
However, BlueHub paints a much different picture, saying that its foreclosure prevention program saves families an average of $734 per month in mortgage payments, and that families exit the program with an average of $150,000 in equity.
Healey hasn’t said what she’s going to do about the economic development bill or the provision in it that would provide a legal shield to BlueHub.
She could strike it from the bill, which, now that it has made headlines, seems likely.
For its part, BlueHub contends the legislation is needed to “ensure that foreclosure relief programs like BlueHub SUN remain accessible to families who are facing imminent danger of losing their homes.”
Still, one has to wonder what signals the governor or her aides were giving to state legislative leaders on the BlueHub proposal as the economic development bill was taking shape.
After all, these things just don’t miraculously appear out of nowhere - someone had to give it a green light.
Ready to take another swing: Having forged a private-sector transportation giant, a former MBTA chief eyes bid for the T’s multibillion-dollar commuter rail contract
Let’s just say it would be quite the comeback story.
James O’Leary was written off by local pundits back in 2014 after his firm lost the T’s then $2.68 billion commuter rail contract to Paris-based transportation giant Keolis.
Instead of packing it in, O’Leary, his son Paul, and COO Mike Mulhern, a former MBTA GM himself, went on to build a national transportation management empire from their headquarters in Boston’s Liberty Square.
Now O’Leary is eyeing a bid for the perpetually embattled transit authority’s commuter rail contract, with requests for proposals to potential bidders likely to go out early next year.
And O’Leary’s firm, Alternate Concepts, Inc. could prove to be a formidable competitor, coming off a series of a big wins for other major transportation contracts around the country.
“We always love to work in our hometown,” O’Leary told Contrarian Boston. “We’ll take a very serious look at it.”
Let’s just say O’Leary’s firm doesn’t lack for work right now, though.
Teaming up with Herzog Transit, O’Leary’s ACI has just landed a 15-year, $1.57 billion contract to manage New Jersey Transit's Hudson-Bergen Light Rail system.
It’s the firm’s sixth major US rail contract, with ACI also overseeing Valley Metro Rail streetcar service in Phoenix and Denver's Regional Transit District (RTD) commuter rail service, among others.
For his part, O’Leary got his start in transportation during a memorable stint in the 1980s as the MBTA’s chief during the Dukakis administration, when he oversaw the Harvard Square to Alewife extension of the Red Line and the Orange Line Southwest Corridor project.
O’Leary also helped crack down on then blatant corruption at the agency, foiling a contract kickback scheme involving top executives at the T.
On a spring day in 1981, the newly appointed T boss accidently opened an envelope stuffed with cash that was meant for the state’s transportation secretary.
O’Leary took the cash - and his suspicions - to then Attorney General of Massachusetts Attorney General Francis X. Bellotti.
The transportation secretary, Barry Locke, was later indicted and sentenced to 7-10 years in prison.
Blind spot: Globe’s coverage of insider wheeling and dealing on Kraft stadium plan leaves out a few details
There’s a problem with how the Globe writes about insider power politics in Boston, and it’s this: There is rarely if even any acknowledgement that the paper’s billionaire owner, John Henry, and his wife, Linda, are players in the game, whether they - or the paper - want to admit it or not.
And they deserve the same, if not more, scrutiny, as the Krafts, whose every step and misstep in their quest to build a soccer stadium for the New England Revolution on the waterfront in Everett has been extensively chronicled by the Globe.
The Globe’s Joan Vennochi in her column last week pulled the veil back on the insider politics around the Kraft family’s quest to build a soccer stadium in Everett, which just took a big step forward thanks to a provision in the $4 billion economic development bill that just got an ok on Beacon Hill.
She duly mentions that the owners of TD Garden have lobbied against the Krafts’ stadium push, fearing the loss of concert revenue. Intriguingly, she also mentions opposition by other unnamed concert venues.
Hmm. John Henry’s business empire includes the Globe, the Red Sox, and a $1.6 billion development slated to take shape next to Fenway Park, which is also a major hub for concerts.
Might those venues peeved about the Krafts’ stadium plans include Fenway Park and the MGM Music Hall at Fenway, one of the newest additions to Henry’s business empire?
Given the sorry state of the Sox, we can’t imagine Henry relishes the prospect of waiving goodbye to badly needed concert revenue as well.
Well, we don’t know since no other concert venues were mentioned in the Globe piece.
Nor, for that matter, is there any mention in the piece of either John or Linda Henry, who, along with being CEO of the Globe, is enmeshed herself in the city’s sports stadium politics.
Linda Henry is a limited investor in the new women’s soccer team that hopes to set up shop at decrepit White Stadium in Franklin Park.
Boston Mayor Michelle Wu is pushing a controversial, $100 million overhaul of the high-school stadium for the women’s soccer team - even she opposes the Krafts’ plans to build their own soccer palace in Everett.
Ok, it’s enough to make your head spin. But our point is that it’s a tangled web indeed and that you’ll only get a partial picture of it from reading the Globe.
Thanks Susan. I did a lot of reporting on the foreclosure crisis in Boston in the late 2000s when I was at the Herald. One of the common refrains from homeowners who were facing foreclosure after taking out mortgages from really terrible lenders was that they weren't aware of all the terms and conditions. BlueHub is hardly Fremont or Ameriquest. But were process mistakes made that have come back to haunt BlueHub? That certainly seems like a question that is going to be hashed out in litigation. I take your criticism on reading too much into social and political relationships and the potential for favoritism. That said, these are also fair question to raise.
Thanks Jacob. BlueHub offered some interesting points and stats which I got into the story about the number of homeowners helped and the savings. Clearly it works for some people. I think the issue seemed to be in the process - how or whether homeowners understood clearly they would giving up part of the equity they would gain. Not sure what the issue is there but hopefully BlueHub is looking or has looked its procedures. Got your point on pay. However, another reference point would be state authorities, where half a million is a lot for a chief executive.