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Exploring Inclusionary Zoning in Revere

Rappaport Fellows Devise Strategies to Incentivize Developers to Build Affordable Housing

Nearly three quarters of a century after being among Greater Boston’s most bustling recreation and economic hubs – and, recently, rebounding from the impact of the pandemic – the city of Revere finds itself amidst a dramatic comeback.

While its rebirth has all the earmarks of a bright future, local officials are being mindful to proceed with caution to prevent current residents, who make up the vibrant fabric of Revere, to become unrooted as a casualty of the community’s own success.

With that in mind, Mayor Arrigo and his team turned to a resource they had worked with in the past, one they know well and respect highly: the Rappaport Greater Boston Field Lab at Harvard Kennedy School (HKS). As part of Professor Linda Bilmes’ class, a five-student team was asked to explore the financial feasibility of inclusionary zoning – a practice where developers are incentivized to build affordable housing – and how different variations of its implementation could impact the future of Revere.

The innovative students who undertook this research were: Lauren Craik, MIT City Planning and Transportation Science dual degree ’22; Avanti Krovi, Harvard Graduate School of Design (HGSD) ’21; Eve Lee (HKS ’21); Chris Musser (HKS ’22); and Bobby Wang (HGSD ’21).

“One of the things that makes Revere great is the richness of our incredibly diverse community,” said Reuben Kantor, the city’s Chief Innovation Officer. “It would be awful if the result of all this change is losing that. So, a big part of our goal is to figure out what the strategies are for not letting that happen.”

Ultimately, the goal was to determine the optimal parameters for a prospective inclusionary zoning policy that would maximize affordable units while keeping development financially feasible giving the ever-growing market trends in the city.

“There was a sense of increasing development being both an opportunity and a threat, and Revere wants turn it more into an opportunity,” Craik said. “The question was, how do we use all this development to do something good for the community, instead of just worrying about displacement and gentrification. The thinking was, let’s take action and harness the development.”

In tackling the challenge, the group’s initial strategy was to divide the project into three workstreams: a comparative analysis of peer cities overseen by HKS classmates Lee and Musser; market research undertaken by Lee and Krovi; and the financial analysis, led jointly by Krovi, Wang, and Craik.

Of the 15 cities that were asked to participate in that analysis, 13 agreed to be interviewed with the intent to learn from issues they had encountered in their work on affordable housing and inclusionary zoning. The team also asked about the specifics of IZ programs that had been put in place in these cities, including the percent set-aside required for affordable units, and the level of affordability required in each case.

Two trends stood out in the peer city review:

  • Any inclusionary zoning ordinance would need to be flexible, both allowing for some level of negotiation with developers and an ability to adjust the ordinance over time, as needed; and
  • No city interviewed said that their ordinances had been prohibitive to developers.

“That was one of our primary aims,” Musser said, “to find out whether or not this would cause developers to leave town or to avoid building in Revere. The answer unanimously across the cities we interviewed was no, as long as you do it the right way.”

Meanwhile, the market research team of Lee and Krovi looked at both housing demand and supply. On the demand side, they explored such socioeconomic variables as rent burden and median household income to determine what variations existed across the city and the team found greater rent-burdens in such areas as the beachfront, Shirley Avenue and in neighborhoods near downtown. On the supply side, meanwhile, most of the newer development was found clustered around the waterfront and the transit stations.

“We confirmed the special differentiations,” Lee said, “and that informed us that maybe some sort of differentiated IZ policy would be needed.”

Another significant finding was in terms of the rent affordability targets themselves. While Greater Boston has generally deemed between 50 and 80 percent of median income set for housing costs as affordable, Revere is on the lower end of that spectrum.

“We really geared our affordability analysis down to focus more on the 30 to 70 percent level,” Craik said. “I think that was a big finding here.”

As for the financial analysis, the goal was to build a model with multiple proformas for different types of development to determine feasibility at each level. It needed to be comprehensible, robust, and intuitive, the team agreed so that it could be handed off to the city for continued conversations once the students’ work was complete.

The financial analysis confirmed much of what Musser and Lee had discovered in the peer city review, most notably in terms of the number of set-asides and the affordability targets. It also affirmed what the group had learned in a literature review prior to its work:

  • Only the strongest markets in Revere could support such a policy; and
  • It is not easy to produce a substantial amount of deeply affordable units at scale.

“You could do it,” Wang said, “but you’re probably talking about a low single-digit percentage, and that’s what we confirmed.”

Ultimately, the team agreed that a tiered policy was the best approach to account for Revere’s spatial variation. The students also recommended minimum project sizes. “Hyper-small projects don’t necessarily work in this area,” Craik said. “And in the case of Revere, a lot of them are naturally-occurring affordable when they’re small and at a different scale.”

The team’s findings indicated that the best opportunity to help the largest number of families was to focus on rental development, simply due to the substantial cost and low turnover associated with home ownership.

“It’s one thing to talk theoretically about percent set-asides and 30 percent of the area median income, but it’s another thing to really think about the people behind these numbers, and what this kind of policy could really mean for a community. You could feel that same energy from Jerry and Phyllis Rappaport. You could tell they were very excited about it.”

Avanti Krovi, 2021 Rappaport Greater Boston Applied Field Lab Student

Based on development finance assumptions available at the time, the project’s financial model suggested that at Revere’s growth rate of 125 new units annually, inclusionary zoning could produce an estimated five to 25 affordable units per year three years after implementation.

“We think they could build up to 200 affordable housing units in the next 10 years,” Musser said. “And that just got me to thinking, who are these people? That’s 200 families that could be moving into these units in the next 10 years. It’s pretty powerful.”

It was a similar feeling throughout the group, as the five students reflected on what their exploration – and the resulting numbers – could mean in terms of the community.

“It’s one thing to talk theoretically about percent set-asides and 30 percent of the area median income,” Krovi said, “but it’s another thing to really think about the people behind these numbers, and what this kind of policy could really mean for a community.

“You could feel that same energy from Jerry and Phyllis Rappaport. You could tell they were very excited about it.”

These findings provided the basis for the continuation of this development policy exercise over the summer involving the City of Revere, the Metropolitan Area Planning Council, and student Bobby Wang. Wang was awarded a Rappaport Public Finance Summer Fellowship to advance the team’s analysis, working in conjunction with the MAPC team.

Kantor, as Chief Innovation Officer, and his colleague Tech Leng, the Chief of Planning and Community Development in Revere, were also interested to see what the students discovered. Both worked closely with the team throughout and agreed that one of the most significant outcomes of this Rappaport HKS field lab team was to dispel some myths about inclusionary zoning in terms of its impact on prospective developers.

“Entering into this analysis, we were sensitive to some internal assumptions that such an approach would significantly dampen development,” Leng said. “Through the students’ modeling and peer city research, those assumptions were not proven consistent with the policy in practice.”

The team’s work, as part of a 10-step plan weaved into the city’s broader strategic plan, is to be followed with a continuing community dialogue to discuss the issue of inclusionary zoning with residents and other stakeholders.

Kantor said the students’ exploration would play a significant role in that part of the process. “Once we have these conversations in public, we’ll learn about how people see these things and what their appetites are for this kind of change,” he said. “We’re trying to show the data, causes and reasons for why this change is going to make sense, and I think there’s a lot of justification.”

Leng, a 2016 Rappaport public policy fellow and a member of the Rappaport Foundation Advisory Board since 2018, said her career path was forged in large part by her experience with the Foundation.

“Prior to that 2016 stint, I had always wondered what it might be like to work in local government,” she said, “but the Rappaport Fellowship is what actually brokered that experience for me.”

Similarly, Musser said he gained profound new insight through the field lab.

“I hadn’t studied local politics at all before this, and it struck me how much potential for impact folks within a city’s administration have to influence people’s lives for good,” he said. “Now I could see myself doing something in local politics, and the spark will have been largely from this class. I’m super thankful to the Rappaports for that reason.”