11.18.2024

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.

David Stewart

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.

BlueHub Capital CEO Elyse Cherry

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.

James O’Leary

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.