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  • Writer's pictureDylan Kelly

Housing Construction at Suffolk Downs on Hold Indefinitely: Financial Hurdles and Future Prospects

PC: Dominic - Creative Commons . Suffolk Downs MBTA station

The state of housing construction in Greater Boston is epitomized by the expansive open space at Suffolk Downs. This former horse racing track, straddling the Boston-Revere border, is poised to become the region's largest housing development, with plans for 10,000 units. The first building, a modern eight-story, 475-unit complex near the Beachmont Blue Line station, is set to open this summer. However, the rest of the site remains undeveloped, with construction on hold.

The Suffolk Downs Development Stalled

Three years after receiving city approvals, the anticipated flurry of construction activity at Suffolk Downs is conspicuously absent. The developer, HYM Investment Group, is grappling with a complex financing situation disrupted by an unstable economy. Despite high demand for housing in the region, the real challenge lies in securing the necessary funds amid rising interest rates and increased materials costs.

Economic Challenges for Housing Development

Tom O’Brien of HYM Investment Group highlights the shifting dynamics of housing finance. Since the start of 2020, materials costs have surged by 43%, and construction loan interest rates have more than tripled. Investors are now demanding higher returns, further complicating the financial landscape for new housing projects.

Impact Across Greater Boston

The difficulties faced at Suffolk Downs reflect broader issues affecting housing developers throughout Greater Boston. In Boston alone, nearly 23,000 units are stuck in the pipeline due to financing issues. Statewide, about 20,000 units developed under the 40B law are on pause, with many projects unable to secure the necessary funds to proceed.

A Regional Slowdown in Housing Production

The slowdown is evident in the number of building permits issued. In the first five months of this year, fewer than 5,000 units received permits across Greater Boston, marking a slight decrease from 2023, which was already the slowest year for housing production in over a decade. This slowdown in construction threatens to exacerbate the region's housing shortage, pushing rents even higher.

The Need for Financial Solutions

O’Brien attributes the halted progress at Suffolk Downs to the steep rise in interest rates and construction costs. For example, a residential tower that cost $680,000 per unit to build in 2017 now costs around $1 million per unit. To attract investment, developers need to cut costs and boost returns, but this often means higher rents, which have their limits.

Future Prospects and Solutions

HYM is working on a deal to construct a second apartment building at Suffolk Downs, but current costs are still too high. Simplifying building designs and reducing amenities are strategies being employed to lower costs and secure investment. However, turning on the "production switch" is a slow process, with new projects taking about five years from conception to completion.

Addressing the Housing Shortage

To mitigate the impending housing crisis, some developers support initiatives like MassHousing's proposed "momentum fund", aimed at filling financing gaps for mixed-income housing projects. This proposal, currently under legislative review, could provide crucial support for stalled developments.

The situation at Suffolk Downs mirrors the broader challenges facing housing construction in Greater Boston. With high materials costs, elevated interest rates, and stringent investor demands, developers are finding it increasingly difficult to move forward with new projects. As the region grapples with a severe housing shortage, finding financial solutions is essential to ensure the continued growth and development of housing in Greater Boston.

For more details on the development at Suffolk Downs, visit the official site. To learn more about housing development issues in Boston, check out the Boston Planning & Development Agency.


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