The purchase, the city and developer say, represents a replicable model for expanding the pool of affordable housing around here. While significant new development is needed to solve the region’s housing shortage, new construction is extremely expensive, and replacing old buildings with new ones can sometimes result in the displacement of longtime residents.
Buying older apartment buildings, fixing them up, and subsidizing rents is cheaper and quicker, and results in less turnover of residents. The acquisition also demonstrates a strategy for saving “naturally occurring affordable housing,” older apartment buildings that have cheaper rents because their units are less valuable.
Rents at Newton Gardens currently range from $1,500 and $2,700, with many units renting for below the market rates in the city, which averages $2,950 for a two-bedroom, according to real estate listing website Zillow. When the building went up for sale, Winn chief executive Gilbert Winn said, he saw the chance to try something new.
“The city pretty quickly said, ‘This is an extremely important project to keep affordable,’ when we came to them with the idea,” Winn said. “[The city’s perspective was]: ‘These people have been living here for decades. The rent levels are below the average of Newton, and if we can keep it from some market rate developer buying it, value-adding kitchens and baths and jacking rents by $500, we’re going to support you.’”
Perhaps the greatest challenge, Winn said, was that many moving parts had to come together quickly. Market-rate developers can quickly put together fully financed offers to buy land or existing apartment buildings, while affordable housing deals often take years to cobble together funding from dozens of private and public sources.
The City of Boston’s Acquisition Opportunity Program follows a similar concept, providing funding to nonprofits to buy apartment buildings that are put up for sale and stabilize rents for their tenants.
While there was some back-and-forth about spending millions to maintain a building from the 1960s, Newton’s Affordable Housing Trust, which was formed in 2021 to dole out funding to support affordable housing developments and acquisitions, offered up $4 million.
“A big selling point for us is that this is existing housing,” Mayor Ruthanne Fuller said. “Which means we don’t have the long delay of siting and permitting and financing and building, so that instantaneously housing can be provided with rents that are affordable.”
Winn was also able to secure $6.6 million from the state’s housing office and $5 million from MassHousing’s workforce housing initiative. Another chunk of money is coming from private investors.
All in, the project will cost about $44 million, and it will include some modest repairs to the aging buildings. That amounts to less than $400,000 per unit, perhaps $200,000 less than a comparably sized building would cost to build in Greater Boston.
That lower cost allows Winn to maintain residents’ rents at current rates, and when units turn over, they will reset to lower, income-restricted rents at income levels ranging from $39,700 to $141,592 for a two-person household.
At those rates, the project will be considered “workforce housing,” which generally means subsidized units for residents who make too much to afford traditional affordable housing programs and too little to afford market-rate rents.
That is a key feature of the project, Winn said, because workforce units cost much less to subsidize than traditional affordable housing, which requires deeper subsidies, and is a more difficult sell to investors.
“We can do these sort of units with modest contributions around the edges from the state and the city,” he said.
In the case of Newton Gardens, the project will require about $140,000 of public subsidy per unit, roughly one-third of the amount of subsidy typically needed to build a new ground-up affordable housing development.
“This should be a demonstration project for what can occur in high market areas,” Winn said. “I wanted to prove the thesis that if there were flexible enough public programs, we can keep middle-income housing middle-income.”
Andrew Brinker can be reached at andrew.brinker@globe.com. Follow him @andrewnbrinker.
