By Tom Walker
Setting aside the RLF mall, how financially attractive is developing multi-unit housing in Lincoln’s village center? This is an important question that keeps coming up and has been raised again most recently on LincolnTalk. Some research I did back in November to inform my own choice before the State of the Town meeting may add some useful information to the ongoing conversation.
In November, I reached out to a developer I know who’s been involved in small and large projects around Boston for many decades. My concern was that if Lincoln’s village center is financially very attractive to developers under the HCA, it probably would make sense to err on the side of constraining multi-unit housing development opportunities there (i.e., zone for fewer units). My research led me to a different conclusion.
It turned out that my developer contact, who knows Lincoln well, owns several buildings in neighboring towns similar to Lincoln that he is evaluating for development under HCA. He was kind enough to talk me through the detailed financial analysis for one of these buildings and his analysis provides useful insights into the likelihood of development for properties (in Lincoln’s village center. His potential project involves a relatively large building (>100 units) in a town that borders Lincoln. The building provides reasonable economies of scale and already has sewer and water connections, parking, and adequate stormwater controls.
For the Lincoln village center properties, by way of contrast, parcels would need to be assembled to achieve scale economies, sewage treatment is challenging, parking is constrained, stormwater infrastructure is problematic and facing increasingly stringent state regulations. All these issues would make development in Lincoln substantially more complex and expensive.
Even with the economic advantages afforded the multi-unit housing project in the neighboring town development of the project under HCA turns out not to be financially very attractive. This is due primarily to high construction costs — besides high material and labor costs, the developer pointed to other incidental costs, such builders’ insurance, that have risen dramatically in recent years. Affordability requirements imposed by towns add to the cost. High interest rates and a pullback by lenders have also created real barriers to development. The financial analysis ultimately indicates that a developer would be just about as well off leaving his or her money in the bank as investing in this HCA development project.
While this is just one example, it suggests that development in Lincoln’s village center may not be the path to riches for developers that is sometimes claimed. Yes, lower interest rates will improve the profitability of projects. But the remaining challenges of assembling parcels to achieve scale economies, solving the septic, parking and stormwater issues, addressing affordable housing requirements, and navigating the general complexity of Lincoln’s bylaw and design guidelines all make multi-unit housing in Lincoln’s village center expensive and probably less attractive than opportunities for larger developments in other towns in the region.
Given this state of affairs, my own conclusion back in December was that an option providing the largest number of opportunities (Option C) in the village center maximizes the likelihood that Lincoln gets at least some multi-unit housing, although I’m not at all convinced that the economics will result in much actual building. In the intervening months, I’ve seen no information, data, or analysis that changes my view.
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