Matt Frazier is the Founder and CEO of Jones Street Investment Partners and has over 25 years of experience in real estate.
As a developer, owner and operator of apartment communities throughout the Northeast and mid-Atlantic (NEMA), I am no stranger to the challenges of creating new housing. Outdated zoning regulations and pushback from residents have helped erect high barriers to new development, which in turn has fueled a chronic affordable housing shortage and an increasing cost-of-shelter burden for both homeownership and rental housing, whether in a single-family or multifamily residence. A dwindling supply of land, higher interest rates and more expensive construction materials and labor have exacerbated the difficulties.
Despite years of talk about the housing crisis, few solutions have emerged to make a dent in the problem. But that may be changing.
Multifamily Housing Initiatives In NEMA
In New York City, where the rental vacancy rate is around 1.4%, council members approved an initiative to create 80,000 new units in addition to what would have been built over the next 15 years. Known as the “City of Yes for Housing Opportunity,” the program seeks to catalyze new housing by increasing density generally and rolling back certain parking mandates for new construction. In particular, it eliminates a ban on certain apartment developments in low-density areas near transit stations.
When announcing the program, elected officials said the only way to solve the city’s chronic housing crisis was to build more housing. It is refreshing to hear leaders acknowledge that a dearth of supply is the fundamental driver of shortages, as I’ve found this reality is often ignored or even denied in many NEMA jurisdictions.
Massachusetts may be the best example of that. In 2021, the state adopted the Massachusetts Bay Transportation Authority (MBTA) Communities Act, which requires 177 designated Greater Boston municipalities to facilitate new multifamily housing by creating multifamily zoning near MBTA transit stations in communities. Most municipalities were required to comply by the end of 2024.
However, some municipalities have pushed back against the law. It’s been rejected in some well-known, affluent suburbs such as Milton and Weston. In Milton, this rejection attracted the attention of the Massachusetts Attorney General, who sought to enforce the law, resulting in a legal battle that eventually rose to the state Supreme Court.
In some cases, the MBTA Communities law is driving new apartment development. Along with New York City’s initiative, it is encouraging to see sweeping attempts at addressing housing shortages. But resistance to the efforts in Massachusetts illustrates how difficult it can be for developers, residents and elected officials to agree on solutions.
More recently, Massachusetts has been using funds raised through what is known locally as the “millionaires tax,” a 4% surtax on annual income exceeding $1 million, to fund critical education and transportation initiatives (paywall). Given the severe housing supply deficit in the state, I believe these types of funds have interesting potential to spur transit-oriented development. However, it remains to be seen if this is something that will be considered.
Paths Forward: Considerations For Developers
To make meaningful progress on this critical issue, I believe all stakeholders would do well to reframe the conversation and possible solutions. There are opportunities for developers, political leaders and citizens to come together on win, win, win solutions, and here are a few of my suggestions on how to get started:
Leadership
Solving multifamily housing problems in many NEMA communities requires parties with disparate motivations to find common ground. Too often, however, the temptation to blame individuals or groups for housing ills distracts from the actual debate and prevents all stakeholders from discovering their mutual interests. Today’s problems need leaders, including real estate developers, who can not only spearhead an honest dialog about the need for more housing but also keep the conversation free from irrelevant distractions.
Developers can take the first step simply by listening. Ask local communities and political leaders what they care about, and explore in those conversations where interests might align.
Then, developers should reframe age-old mental constructs of “winners” and “losers” and instead work toward solutions that are “wins” for all involved. Treat this seriously, and actively address community and political concerns and needs as a means of moving new development forward, providing all stakeholders with incentives for growth.
Engagement
Citizens’ concerns over the ways in which increased multifamily housing may affect traffic, schools and other local resources can be well-founded, or at least well-intentioned. On the other hand, access to multifamily housing can help drive economic growth, job creation and quality of life, all of which are in the best interest of communities.
Moving forward, it is imperative that developers, alongside public officials and citizens, reimagine the framework of the debate, establish trust and communicate honestly about how to balance costs and benefits. Doing so, repeatedly, is necessary for the establishment of strong foundations that can both preserve a neighborhood’s fabric while also providing new opportunities for young and working people to build their lives in the community.
Carrots More Than Sticks
From my perspective, developers can also advocate for regulatory solutions that build upon more effective engagement to establish consequences and, more importantly, provide rewards around compliance. Massachusetts’ MBTA Communities Law relies on the threat of withholding state funds to force compliance, and the results have been mixed. Conversely, New York City’s zoning initiative gained approval after the city, with a $1 billion assist from the state, pledged $5 billion for infrastructure spending, a housing fund and expenses.
I believe future solutions should be designed with incentivizes for all parties. For instance, federal or state funding could be used to ease pain points for local communities, such as paying for resources and services, which can then be passed on to developers in the form of property tax abatements to encourage new construction. This could help achieve housing production goals while providing each constituency with tangible, positive reasons to participate in the effort.
Conclusion
The NEMA region’s housing crisis will not improve without substantial new supply, which will require community residents, political leaders, developers and other stakeholders to recognize the problem and work together to lower barriers to development.
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