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Research&StrategicAnalysis

ANANALYSISOFRESIDENTIALMARKETPOTENTIALTheCityofSomerville,MiddlesexCounty,Massachusetts

January,2016

INTRODUCTION

InJanuaryof2015,theMayor’sOfficeofStrategicPlanningandCommunityDevelopment

submittedaproposedoverhauloftheSomervilleZoningOrdinancetotheSomervilleBoard

of Aldermen. To understand the implications of the proposal, the Board of Aldermen

requested a number of studies, including analyses to determine market rate housing

demand, the need for affordable housing, and the financial impact of affordable housing

requirements.Additionally,studieswererequestedforparkingandmobilitymanagement,

economicdevelopment,andfiscalimpact.Toprovideananalysisofthedemandformarket

rate housing, the City engaged Zimmerman/Volk Associates, Inc., a firm specializing in

usingthehousingpreferencesandeconomiccapabilitiesofpotentialfuturehouseholdsto

determine the depth and breadth of the potential future market for housing within a

municipality.

Thepurposeofthisstudyistodeterminethedepthandbreadthofthepotentialmarketfor

new and existing housing each year over the next five years in the City of Somerville,

Middlesex County, Massachusetts. This study will also determine the potential average

annualabsorptionofnewmarket‐ratehousingunitsinthecityoverthesametimeframe,

basedonannualcaptureratesinthreepotentialscenarios:lowgrowth,moderategrowth,

and high growth. The analysis of the potential market for housing in Somerville

incorporates the housing preferences, financial capacities, and lifestyle characteristics of

householdswiththepotentialtomovetothecity,Somerville’sgeographiclocationandthe

physicalattributesofitsbuiltenvironment,therentalandfor‐salehousingmarketcontext

ANANALYSISOFRESIDENTIALMARKETPOTENTIAL Page2TheCityofSomerville,MiddlesexCounty,Massachusetts

September,2015

ZIMMERMAN/VOLKASSOCIATES,INC.

in Somerville, and Zimmerman/Volk Associates’ extensive experience with urban

developmentandredevelopment.

Theextentandcharacteristicsofthepotentialmarketfornewrentalandfor‐salemarket‐

rate housing units over the next five years are identified using Zimmerman/Volk

Associates’ proprietary residential target market methodology. This methodology was

developedinresponsetothechallengesthatareinherentintheapplicationofconventional

supply/demand analysis to urban development and redevelopment. Supply/demand

analysis ignores the potential impact of newly‐introduced housing supply on settlement

patterns,whichcanbesubstantialwhenthatnewsupplymatchesthehousingpreferences

andeconomiccapabilitiesofpotentialhouseholdsthatmightmovetoSomerville inways

thatexistinghousingwithinthecitydoesnot.

In contrast to conventional supply/demand analysis—which is based on supply‐side

dynamics and baseline demographic projections—residential target market analysis

determines thedepth andbreadthof thepotentialmarket from thehousingpreferences

andsocio‐economiccharacteristicsofhouseholdsofadefinedpoolofpotentialhouseholds

(drawareas)thatmightmovetoSomerville.Becausetheanalysisconsidersnotonlybasic

demographiccharacteristics,suchasincomequalificationandage,butalsolessfrequently

analyzed attributes such as lifestage, mobility rates, lifestyle patterns and household

compatibility issues, the targetmarketmethodology isparticularlyeffective indefininga

realisticpotentialforhousingdevelopmentandredevelopment.

Basedontheresidentialtargetmarketmethodology,then,thisstudywilldetermine:

WherethepotentialrentersorbuyersofneworexistinghousingintheCityof

Somervillecurrentlylive(thedrawareas);


September,2015


Howmanyhouseholdshavethepotentialtomovewithinortothecityeachyear

ifappropriatehousingunitsweretobemadeavailable(thedepthandbreadthof

themarket);

What are the housing preferences of the potential market of households in

aggregate(thetypeofhousingdesired);

Whoarethehouseholdswithinthepotentialmarketandwhattheyarelike(the

targetmarkets);

What their housing preferences are in aggregate (rental or ownership, multi‐

familyorsingle‐family);

What are the existing housing options available for the potential market of

households(theSomervillemarketcontext);and

How much housing could be leased or purchased by households within the

potentialmarketoverthenextfiveyears(absorptionforecastsbasedonannual

captureratesofthepotentialmarketofhouseholds).

ThetargetmarketmethodologyisdescribedindetailinaseparateMETHODOLOGYdocument,

whichalsoincludestheappendixtables.


September,2015


ANNUALMARKETPOTENTIALFORTHECITYOFSOMERVILLE

Analysis of migration, mobility, and the geo‐demographic characteristics of households

currentlylivingwithindefineddrawareasisintegraltothedeterminationofthedepthand

breadthofthepotentialmarketfornewandexistinghousingwithintheCityofSomerville.

Historically,Americanhouseholds,morethananyothernation’s,havebeenextraordinarily

mobile.Nationally,onelingeringconsequenceoftheGreatRecession(officiallyDecember,

2007 through June, 2009) has been a considerable reduction in household mobility.

However, according to the American Community Survey, the City of Somerville—where

over21percentofthecity’spopulationmovedfromonedwellingtoanotherin2013—has

a considerably higher mobility rate than the national average. In general, household

mobilityishigherinurbanareas;agreaterpercentageofrentersmovethanowners;anda

greaterpercentageofyoungerhouseholdsmovethanolderhouseholds.

Thedrawareasidentifiedforthisreportarederivedprimarilythroughmigrationanalysis

(usingthelatestdataprovidedbytheInternalRevenueService,withadditionalsupporting

mobility data drawn from the 2013 American Community Survey for the City of

Somerville), but also incorporate feedback obtained from interviews with real estate

brokers, salesand leasingagentsandotherknowledgeable sources, aswell as from field

investigationconductedbyZVA.

Together,anunderstandingofdrawareahouseholdmobilityandmigrationtrends,along

withbothsocio‐economicandlifestylecharacteristics,providesthebasisfordetermination

ofthedepthandbreadthofthepotentialhousingmarketbyZimmerman/VolkAssociates’

proprietaryresidentialtargetmarketmethodology.


September,2015


1. WheredothepotentialrentersorbuyersofneworexistinghousinglocatedintheCityofSomervillecurrentlylive?

The most recent migration and mobility data for Middlesex County—as derived from

taxpayerrecordscompiledbytheInternalRevenueServicefrom2006through2010and

from the 2013 American Community Survey for Middlesex County and for the City of

Somerville—showsthatthehouseholdswiththepotentialtomovewithinortoSomerville

are coming from the following draw areas (reference Appendix One, Table 1 for an

itemizationofthenumberandoriginofhouseholdsmovingintoMiddlesexCounty):

• Theprimarydrawarea,coveringhouseholdscurrentlylivingwithintheSomerville

citylimits.

• The secondary internal draw area, covering households currently living in the

balanceofMiddlesexCounty.

• Theregionaldrawarea—coveringhouseholdswiththepotentialtomovetotheCity

ofSomervillefromtheadjacentcountiesofSuffolk,Essex,Norfolk,andWorcester.

• Thenationaldrawarea,coveringhouseholdswiththepotentialtomovetotheCity

of Somerville fromallotherU.S. counties (primarily counties inNewEnglandand

themid‐Atlanticstates).

Based on these migration and mobility data and the target market analyses, the

distributionofhouseholdsrepresenting thepotentialmarket forneworexistinghousing

(thosehouseholdswith thepotential tomovewithinor toSomervilleeachyearover the

nextfiveyears)currentlyliveinthefollowingdrawareas:

AnnualMarketPotentialbyDrawAreaCityofSomerville,MiddlesexCounty,Massachusetts

CityofSomerville(PrimaryDrawArea): 35.5% BalanceofMiddlesexCounty(LocalDrawArea): 35.4%Suffolk,Essex,NorfolkandWorcesterCounties(RegionalDrawArea): 13.6% BalanceofUS(NationalDrawArea): 15.5% Total: 100.0%

SOURCE:Zimmerman/VolkAssociates,Inc.,2015.


September,2015


2. Howmanyhouseholdshavethepotentialtomovewithinandtothecityeachyear?

Asdeterminedbythetargetmarketmethodology,whichaccountsforhouseholdmobility

within the City of Somerville, aswell asmigration andmobility patterns for households

currentlylivingelsewhere,anannualaverageof10,950householdsrepresentthepotential

marketofhouseholdsinterestedinnewandexistinghousingwithinthecityeachyearover

thenextfiveyears(seeAppendix1,Table1).Almost65percentofthesehouseholdswould

bemovingfromoutsideSomerville’scitylimits.

3. Whatarethehousingpreferencesofpotentialmarkethouseholdsinaggregate?

Thehousingpreferencesofthepotentialmarketofhouseholdsarecategorizedintofour

generalhousingtypesasfollows:

• Multi‐family for‐rent (along with multi‐family for‐sale, the highest‐density

housingtype;rentalapartmentslocatedwithinbuildingsthattypicallyinclude

twoormorestories);

• Multi‐family for‐sale (along with multi‐family for‐rent, the highest‐density

housing type; for‐sale apartments located within buildings that typically

includetwoormorestories);

• Single‐family attached (a medium‐density housing type; two‐ to three‐story

townhouses;duplexesortwo‐familyhouses;live‐workunits);and

• Single‐familydetachedhouses(rangingfromthehighest‐densitysingle‐family

housingtype,typicallydevelopedonsmalllots,withparkingaccessfromrear

lanes,alleysorauto‐courtsattherearoftheunits,tothelowest‐densitysingle‐

familyhousingtype,withparkingaccessfromthestreet).

Using these general housing types, the housing preferences of the 10,950 draw area

householdsthatrepresenttheannualpotentialmarketfornewandexistinghousingwithin

the city—according to tenure (rental or ownership) and general financial capacity—are

summarizedasfollows(alsoseeTable1):


September,2015


Tenure/HousingTypePropensitiesAnnualAveragePotentialMarketForNewandExistingHousingUnits

CityofSomerville,MiddlesexCounty,Massachusetts

NUMBEROF PERCENT HOUSINGTYPE HOUSEHOLDS OFTOTAL

Multi‐familyfor‐rent 6,165 56.3% (lofts/apartments,leaseholder) Multi‐familyfor‐sale 1,935 17.7%(lofts/apartments,condo/co‐opownership) Single‐familyattachedfor‐sale 1,820 16.6% (townhouses/live‐work,fee‐simple/ condominiumownership) Single‐familydetachedfor‐sale 1,030 9.4% (houses,fee‐simpleownership) Total 10,950 100.0%


Thepropensityformulti‐familyfor‐renthousingcanbeattributedtoaprotractedslumpin

home ownership rates since 2008. This slump has led to a measurable shift in market

preferences from home ownership to rental dwelling units, particularly among younger

households,yieldingahighershareofconsumerpreference formulti‐familyrentalseven

amongrelativelyaffluentconsumersthanwouldhavebeentypicallessthanadecadeago.

4. Whoarethehouseholdswithinthepotentialmarketandwhataretheylike?

For this analysis, the 10,950 households that represent the annual potentialmarket for

new and existing housing within the city are also segmented by income, based on the

Boston‐Cambridge‐Quincy,MA‐NHareamedianfamilyincome(AMI),which,asdetermined

bytheU.S.DepartmentofHousingandUrbanDevelopment(HUD)in2015,is$98,500,fora

family of four; this study examines household incomes based on the following general

incomegroupings:


September,2015


Households with incomes below 30 percent AMI (the majority of these

householdstypicallyqualifyonlyforpublichousingorolderexistingunits);

Householdswithincomesbetween30and60percentofAMI(thesehouseholds

typicallyqualify for affordable rental housingorheavily subsidizedownership

housing);

Householdswithincomesbetween60and80percentofAMI(thesehouseholds

also typically qualify for affordable rental housing or subsidized ownership

housing);

Householdswith incomes between 80 and 110 percent AMI (these households

typicallyqualifyforexistingmarket‐raterentalsornewworkforceoraffordable

for‐salehousing);and

Households with incomes above 110 percent AMI (these households generally

havesufficientincomestorentorpurchasemarket‐ratehousing).

Thecombinedtenureandhousingtypepreferencesandfinancialcapabilitiesofthe10,950

targethouseholdsareshownonthefollowingtable(seeagainTable1):


September,2015


Tenure/HousingTypePropensitiesbyIncomeAnnualAverageMarketPotentialForNewandExistingHousingUnits


.........HOUSEHOLDS........ HOUSINGTYPE NUMBER PERCENT

Multi‐familyfor‐rent 6,165 56.3% (lofts/apartments,leaseholder) <30%AMI 1,285 11.7% 30%to60%AMI 930 8.5% 60%to80%AMI 885 8.1% 80%to110%AMI 880 8.0% >110%AMI 2,185 20.0%

Multi‐familyfor‐sale 1,935 17.7%(lofts/apartments,condo/co‐opownership) <30%AMI 165 1.5% 30%to60%AMI 240 2.2% 60%to80%AMI 270 2.5% 80%to110%AMI 300 2.7% >110%AMI 960 8.8%

Single‐familyattachedfor‐sale 1,820 16.6% (townhouses,fee‐simpleownership) <30%AMI 245 2.2% 30%to60%AMI 245 2.2% 60%to80%AMI 240 2.3% 80%to110%AMI 275 2.5% >110%AMI 815 7.4%

Single‐familydetachedfor‐sale 1,030 9.4% (detachedhouses,fee‐simpleownership) <30%AMI 190 1.7% 30%to60%AMI 160 1.5% 60%to80%AMI 190 1.7% 80%to110%AMI 120 1.1% >110%AMI 370 3.4%

Total 10,950



September,2015


Thefollowingtablesummarizestheincomerangesofthe10,950householdsthatrepresent

theannualpotentialmarketfornewandexistinghousinginthecity:

IncomeDistributionAnnualAverageMarketPotentialForNewandExistingHousingUnits


.........HOUSEHOLDS........ INCOMERANGE NUMBER PERCENT

<30%AMI 1,885 17.2% 30%to60%AMI 1,575 14.4% 60%to80%AMI 1,585 14.5% 80%to110%AMI 1,575 14.4% >110%AMI 4,330 39.5% Total 10,950 100.0%


HOUSEHOLDTYPES

The households with the potential to move within or to Somerville can be grouped

accordingtolifestage,includingallincomes,intothreegeneralmarketsegmentsasfollows

(seeTable2formorecompletedelineationbyincome):

• Youngersinglesandchildlesscouples—(70.0percent);

• Traditionalandnon‐traditionalfamilyhouseholds—(19.5percent);and

• Emptynestersandretirees—(10.5percent).

Theanalysisshowsthatthelargestsegmentofthepotentialmarketofhouseholdsforthe

CityofSomerville,acrossallincomes,areyoungersinglesandcouples—70percentofthe

totalannualpotentialmarket.Thesehouseholds,youngadultsagedunder34yearsofage,

arepartofthe“Millennial”cohort,agenerationwhich,at87million,isnowthelargestin

U.S. history. The Millennials are demonstrating a strong preference for downtowns and

urban neighborhoods, particularly those served by transit, such as Somerville. Some

distinguishingcharacteristicsheldbyyoungersinglesandcouplesare:


September,2015


Ahighermobilityrate—youngpeopletendtomovemuchmorefrequentlythan

olderpeople;and

Astrongpreferenceforrentalapartments,inpartbecausemanyofthemdonot

havesufficientfundsforadownpaymentandinpartbecausethecollapseofthe

housing market has mademany of them skeptical about the value of owning

versusrenting.

Justover15percentoftheyoungersinglesandcouplesthatcomprisetheannualpotential

market for thecityhave incomes that fallbelow30percentofAMI. If theyareemployed,

thesehouseholdsworkinpart‐timeorlower‐payingjobs,includingentry‐levelretail,such

asstoreclerks,andserviceoccupations;manyarestudents.

Approximately42percentofthehouseholdsinthislifestagehaveincomesthatfallwithin

the three incomebandsbetween30and110percentof theAMI.These includeofficeand

retailemployeesandmedicalpersonnel.

Theremaining43percentoftheyoungersinglesandcoupleshaveincomesthatareator

above 110 percent of the AMI. These households are engaged in a variety of free‐lance

entrepreneurships; are mid‐ and upper‐level office workers; academic and hospital

affiliates;or artists and artisans.

IncomeDistributionYoungerSingle&CouplesSegmentofthe

MarketPotentialForNewandExistingHousingUnitsCity of Somerville, Middlesex County, Massachusetts


<30%AMI 360 12.9% 30%to60%AMI 355 12.7% 60%to80%AMI 420 15.0% 80%to110%AMI 495 17.7% >110%AMI 1,165 41.7% Total 2,795 100.0%



September,2015


Overhalfof theyoungersinglesandcouplesaremoving fromoneunit toanother in the

city; 35 percentwould bemoving to the city from elsewhere inMiddlesex County; 12.6

percent would be moving to the city from one of the counties in the region; and the

remaining10.1percentwouldbemovingtothecityfromoutsidetheregion.

Family‐orientedhouseholds represent 19.5 percent of the annualmarket potential for

new and existing housing within the city. An increasing percentage of family‐oriented

householdsarenon‐traditionalfamilies,notablysingleparentswithonetothreechildren.

Non‐traditional families,whichhavebecome an increasingly larger proportion of allU.S.

households since the1990’s, encompass awide range of family household types, froma

singlemotherorfatherwithoneormorechildren,anadulttakingcareofyoungersiblings,

agrandparentresponsibleforgrandchildren,tocouplesofthesamegenderwithchildren.

Inthe1950s,the“traditionalfamilyhousehold”comprisedmorethan65percentofallU.S.

households.Thatdemographichasnowfallentolessthan22percentofallU.S.households

and is even lower in Somerville at approximately 17.7 percent. Today, the majority of

householdswithchildrenarenowincreasinglydiverseandlargelynon‐traditionalfamilies.

One quarter of the family households that comprise the annual potentialmarket for the

CityofSomervillehaveincomesbelow30percentofAMIandaretypicallyspendingmore

than40percentof their incomesonhousing costs.Manyof thesehouseholdsare single‐

parent families struggling to make ends meet. Nearly two‐thirds are renters, not

homeowners.

Another46percentof the familyhouseholdshave incomesthat fallwithin the30to110

percent income bands; both parents in these households work, typically in upper‐level

blue‐collarorlower‐levelwhite‐collarjobs.

Theremaining29percentofthetraditionalandnon‐traditionalfamilieshaveincomesator

above 110 percent of AMI. These households are, in large part, dual‐income households,


September,2015


withmedicalcareers,academicpositions,andmiddle‐ toupper‐middlemanagement jobs

andprofessionalsinthefinancialandlegalsectors.


September,2015


IncomeDistributionFamilyOrientedHouseholdsSegmentofthe



<30%AMI 90 20.0% 30%to60%AMI 65 14.4% 60%to80%AMI 55 12.3% 80%to110%AMI 65 14.4% >110%AMI 175 38.9% Total 450 100.0%


Over22percentofthetraditionalandnon‐traditionalfamilyhouseholdswouldbemoving

from one unit to another in the City of Somerville; over a third are currently living

elsewhereinMiddlesexCounty,andjustover17percentwouldbemovingfromoneofthe

counties in the region. The remaining 27 percent of the annual potential familymarket

wouldbemovingtothecityfromoutsidetheregion.

Emptynestersandretireescomprisetheremainderoftheannualpotentialmarket(10.5

percent)fornewandexistinghousingintheCityofSomerville,asmallerthantypicalshare

of the potentialmarket, in part because they are the smallestmarket segment currently

livinginthecityandinpartbecausetheymovemuchlessfrequentlythanyoungersingles

andcouplesandfamilies.

Amajority of these households have grown childrenwho havemoved out of the family

home;anotherlargepercentageareretired,withincomelargelyfromsocialsecurity,and,

formany,supplementedbypensions,savings,andinvestments.UrbanEstablishmentisthe

largest empty nester and retiree market group and most of these householders are

currently livingeither in theCityof Somerville or inneighboringCambridge andBoston

(seeAppendixThree).


September,2015


In thismarket segment, just under 18 percent have incomes below 30 percent of AMI—

oldersinglesandcouplesstrugglingonlimitedincomes,mostlyfromsocialsecurity—some

ofwhomarelivinginhousingthattheycanbarelyafford.

Another47percentoftheolderhouseholdshaveincomesbetween30and110percentof

theareamedian.Thesehouseholdsoftenpreferdwellingunitsthatrequirelessupkeepand

maintenanceexpense,butifgivenappropriatehousingoptions,wouldchoosetoremainin

theircurrentneighborhoods.

Olderhouseholdswithincomesatorabove110percentofAMIcompriseover35percentof

theemptynesterandretireeannualmarketpotential.Theseoldersinglesandcouplesare

enthusiastic participants in community life and most are still actively involved in well‐

payingcareersinthemedical,legal,andfinancialprofessionsaswellasacademia.

IncomeDistributionEmptyNester&RetireesSegmentofthe



<30%AMI 80 16.3% 30%to60%AMI 60 12.2% 60%to80%AMI 70 14.3% 80%to110%AMI 85 17.3% >110%AMI 195 39.9% Total 490 100.0%


Just 15 percent of the empty nesters and retirees would be moving from one unit to

anotherwithintheCityofSomerville;nearly41percentwouldbemovingfromelsewhere

inMiddlesex County; 14.3 percent are currently living elsewhere in the region; and the

remaining29.5percentwouldbemovingfromelsewhereintheU.S.outsidetheregion.


September,2015


Thefullspectrumofallhouseholdgroupswithineachsegmentrepresentingthemarketfor

new and existing housing units in the city and their estimated median incomes and

estimatedmedianhomevaluesin2015areshownonthefollowingtable:


September,2015


HouseholdTypes(InOrderofMedianIncome)


HOUSEHOLD MEDIAN MEDIANHOME TYPE INCOME VALUE(IFOWNED)

EmptyNesters&Retirees OldMoney $137,400 $492,200 UrbanEstablishment $108,100 $507,700 CosmopolitanElite $97,500 $280,600 SuburbanEstablishment $89,000 $262,300 AffluentEmptyNesters $87,800 $278,800 CosmopolitanCouples $70,600 $284,000 Middle‐ClassMove‐Downs $64,600 $175,600 MainstreamRetirees $64,100 $204,800 No‐NestSuburbanites $62,500 $163,900 Middle‐AmericanRetirees $61,100 $155,600 Blue‐CollarRetirees $49,100 $130,600 SuburbanRetirees $43,100 $109,400 SuburbanSeniors $39,300 $117,000 HometownRetirees $35,100 $120,500 Multi‐EthnicSeniors $33,600 $102,600 SecondCitySeniors $33,200 $91,500

Traditional&Non‐TraditionalFamilies UniboxTransferees $105,100 $259,000 Full‐NestUrbanites $69,600 $267,400 Multi‐EthnicFamilies $65,200 $161,900 Multi‐CulturalFamilies $64,400 $230,100 Inner‐CityFamilies $41,200 $166,500 In‐TownFamilies $40,000 $111,900 Single‐ParentFamilies $33,500 $149,200

YoungerSingles&Couples TheEntrepreneurs $127,000 $388,000 e‐Types $109,500 $488,900 TheVIPs $92,200 $266,900 Fast‐TrackProfessionals $91,900 $294,500 UpscaleSuburbanCouples $83,800 $226,200 NewBohemians $68,500 $412,500 Twentysomethings $64,100 $189,200 SuburbanAchievers $60,700 $191,300 Small‐CitySingles $49,700 $143,300 UrbanAchievers $45,200 $279,300 Working‐ClassSingles $39,700 $130,600 Blue‐CollarSingles $36,400 $107,500 Soul‐CitySingles $30,700 $142,600

NOTE: Themarket,especiallybuyers, isexpectedtocomefromhouseholdswith incomesabove the median income for each target group. Median income and medianreported home value cannot be correlated.While both are current data, reported


September,2015


homevaluesareonlyforowner‐occupiedunits,andcanrangefromthesalespriceofanewly‐constructedunittothesignificantly‐escalatedvalueofaunitpurchaseddecadesago.


Detailed descriptions of these household types are provided in a separate document:

APPENDIXTHREE,TARGETMARKETDESCRIPTIONS

5. Whataretheexistinghousingoptionsforthepotentialmarketofhouseholds?

THEMARKETCONTEXT

—MULTI‐FAMILYRENTALPROPERTIES—

ThreerentalpropertieslocatedintheeasternandcentralpartofSomervillearethenewest

market‐rateapartmentstobedevelopedinthecity.(SeeTable3.)Twoproperties,Avalon

atAssemblyRowandAVASomerville,arenewAvalonCommunities’projectslocatedinthe

AssemblyRowredevelopmentareaof thecity.The third,WindsoratMaxwell’sGreen, is

situatedoffLowellStreet,andwithinwalkingdistanceoftheMBTARedLinetrainstation.

Avalon at Assembly Row on Great River Road opened in 2014. The property, which

contains195units,leasesstudios,andone‐tothree‐bedroomapartments;askingrentsat

the timeof thesurvey in January2015ranged from$1,975permonth fora451‐square‐

foot studio to$4,375 for an1,886‐square‐foot three‐bedroom/two‐bathapartment (with

per‐square‐footrentsbetween$2.32and$4.64).Twenty‐fouroftheunitsarereservedfor

low‐ and moderate‐income households. In addition to a clubhouse, fitness center and

businesscenter,AvalonatAssemblyRowprovidesresidentswithapoolandsundeck,aTV

lounge,picnicarea,storagearea,andbikeracks.

AVA Somerville, a half block southeast of Avalon at AssemblyRowonArtisanWay, also

openedin2014.Thepropertycontains250units,32ofwhichareaffordable,withasking

rentsformarket‐rateunitsrangingfrom$2,015fora403‐square‐footstudioto$2,975for

a1,246‐square‐foottwo‐bedroom/two‐bathunit(withper‐square‐footrentsfrom$2.39to


September,2015


$5.00); community amenities include fitness center, TV lounge, storage and picnic areas,

andcourtyards.

JustsouthofMagounSquareisWindsoratMaxwell’sGreen,with184studio,one‐tothree‐

bedroom apartments and townhouses. Rents range from $2,050 per month (for a 495‐

square‐foot studioapartment,$4.14per square foot) to$3,975permonth for the1,395‐

square‐footthree‐bedroom/two‐bathtownhouse($2.85persquarefoot). Inadditiontoa

clubhouse and fitness center, community amenities includea yoga studio, dogpark, roof

deck,theaterroom,networkcafé,andanelectricchargingstation.

Severalcomparablemarket‐ratepropertiesincludedinthesurveyarelocatedoutsidethe

City of Somerville, in the Charlestown area of Boston, in Cambridge, and in Medford.

Summaryinformationbybedroomsizefollows(seeagainTable3forgreaterdetail).

—Studios(11Properties)—

Rents for studios start at $1,829 per month at Lumiere on Mystic Valley

ParkwayinMedford.

Thehigheststudiorentis$2,825permonthatGatehouse75onWestSchool

StreetintheCharlestownareaofBoston.

Studios range in size from 329 square feet at Avalon North Point Lofts in

Cambridgetoapproximately700squarefeetatseveralproperties.

Studiorentspersquarefootfallbetween$2.94and$5.46.

—One‐BedroomUnits(15Properties)—

Rents forone‐bedroomunits start at $2,000permonthatWaldenParkon

WaldenStreetinCambridge.

The highest one‐bedroom rent is $3,797 permonth atWatermark Kendall

WestonThirdStreetinCambridge.


September,2015


One‐bedroomunitsrangeinsizefromapproximately560squarefeetat75SL

in Medford to 1,180 square feet at Arborpoint at Station Landing, also in

Medford.

One‐bedroomrentspersquarefootfallbetween$2.49and$4.91.

—Two‐BedroomUnits(15Properties)—

Rentsfortwo‐bedroomunitsstartat$2,530permonthatWaldenPark.

Thehighesttwo‐bedroomrentis$5,300permonthatWyethCambridgeon

RindgeAvenueinCambridge.

Two‐bedroomunitsrange insize fromapproximately887square feet fora

two‐bedroom/one‐bath apartment at Watermark Kendall West to 1,552

squarefeetatWyethCambridge.

Two‐bedroomrentspersquarefootfallbetween$2.40and$4.57.

—Three‐BedroomUnits(FourProperties)—

Rents for three‐bedroom units start at $3,469 permonth atMezzo Design

LoftsonCaldwellStreetintheCharlestownarea.

The highest three‐bedroom rent is $5,322 per month at Third Square on

ThirdStreetinCambridge.

Three‐bedroomunitsrangeinsizefromapproximately1,340squarefeetat

ArborpointatStationLandingtomorethan1,800squarefeettownhouseat

ThirdSquare.

Three‐bedroomrentspersquarefootfallbetween$2.31and$3.07.

AvalonNorthPointLofts inCambridge is leasing103,329‐ to701‐square‐footopen lofts

forrentsrangingbetween$2,120and$2,225permonth($3.17to$6.44persquarefoot).

Thepropertyhasafitnesscenter,pool,andsundeckforuseofitsresidents.

WalkScore,anumberbetween0and100denotingthedesirabilityofaparticularbuilding

orneighborhoodfromtheperspectiveofwalkability,hasbecomeanimportantrentalvalue


September,2015


criterionformanyrenters.Buildingsorneighborhoodswithscoresabove90aredescribed

as“Walker’sParadise,”whichmeansthatmosterrandscanbeaccomplishedonfoot. Just

twoofthe19propertiesincludedinthesurveyhadWalkScoresabove90:Gatehouse75on

West School Street in theCharleston area andWyethCambridgeonRindgeAvenue.The

twoAvalonproperties inSomervillehad thecomparatively lowWalkScoreof59,due to

their location in a redevelopment district, which has yet to establish the full range of

amenitiesthatwouldimprovetheWalkScore.

—MULTI‐FAMILYANDSINGLE‐FAMILYATTACHEDANDDETACHEDFOR‐SALEPROPERTIES—

Becauseoffinancingconstraintspost‐GreatRecession,newfor‐saledevelopmenthasbeen

very limited in Somerville. (SeeAppendix1,Table4.)However, an increasingnumberof

units arenow listed for saleon theMultipleListingService.At the timeof the survey in

September,2015,59condominiumunits,seventownhouses,and15single‐familydetached

houseswereon themarket inSomerville. Inaddition,44multi‐unitbuildings,containing

fromtwotoasmanyas17unitsperbuilding,werelistedforsale.

IndividualcondominiumsonthemarketinSomervillerangedinpricefrom$339,900fora

793‐square‐footone‐bedroom/one‐bathcondominiuminatriplex($429persquarefoot)

to $1,450,000 for a 2,084‐square‐foot duplex unitwith three bedrooms and three baths

($696persquarefoot).Condominiumunitsizesrangedbetween624squarefeetforaone‐

bedroom/one‐bathapartmentpricedat$359,000($575persquarefoot)and2,525square

feet for a two‐bedroom/two‐and‐a‐half bath apartment priced at $759,900 ($301 per

squarefoot,thelowestper‐square‐footpriceforacondominiuminthesurvey).Thehighest

pricepersquarefootwas$781,fora1,600square‐foottwo‐bedroom/two‐bathapartment

priced at $1.25 million. The weighted average asking price of all 59 properties was

$618,671,foraweightedaverage1,264squarefeetoflivingspace($506persquarefoot).

Individual townhouses on themarket in Somerville ranged in price from$499,900 for a

1,065‐square‐foot two‐bedroom/two‐bath townhouse ($469 per square foot) to


September,2015


$1,225,000 for a 2,621‐square‐foot townhouse with three bedrooms and two‐and‐a‐half

baths ($467 per square foot).). The highest price per square footwas $517, for a 1,200

square‐foottwo‐bedroom/two‐bathtownhousepricedat$619,900.Theweightedaverage

askingpriceofall seventownhouseswas$800,629, foraweightedaverage1,757square

feetoflivingspace($457persquarefoot).

Single‐familydetachedhousesonthemarketinSomervillerangedinpricefrom$349,888

for a998‐square‐foot two‐bedroom/one‐bathhouse ($351per square foot), the smallest

houseonthemarket,to$1,449,900fora2,550‐square‐foothousewiththreebedroomsand

three‐and‐a‐halfbaths($569persquarefoot).Thelargesthouseonthemarketcontained

3,500squarefeetforafour‐bedroom/four‐bathhouseandwaspricedat$1,365,000($390

persquarefoot).Thehighestpricepersquarefootwas$603,fora1,991square‐footfour‐

bedroom/two‐and‐a‐half‐bath house priced at $1,199,900. The weighted average asking

price of all 15 houseswas $843,339, for aweighted average 2,131 square feet of living

space($392persquarefoot).

Themajorityofthemulti‐unitbuildingsonthemarketareduplexes,withoneunitonthe

ground floor and another unit on the second floor, although 15 of the buildings contain

three or more individual units. The lowest asking price for a multi‐unit building was

$650,000.Twobuildingswereonthemarketforthatprice—atwo‐unitbuildingcontaining

sixbedroomsandtwobathsin2,737squarefeet($237persquarefoot)andathree‐unit

buildingcontainingsixbedroomsandfourbathsin3,020squarefeetoflivingspace($215

persquarefoot).

The most expensive multi‐unit building on the market contained three units in 3,468

squarefeet,with10bedroomsandfivebathsandanaskingpriceof$4,999,000($1,441per

square foot, thehighestpricepersquare foot in theSomervillemarketarea).The largest

multi‐unit buildingon themarket contained17 individual units in19,800 square feet; it

waspricedat$2million,or$101persquarefoot, the lowestpricepersquarefoot inthe

Somervillemarketarea.Theweightedaverageaskingpriceofthe44multi‐unitbuildings


September,2015


was$1,103,813,foraweightedaverage3,381squarefeetoflivingspace($358persquare

foot).

6. Howmuchhousingcouldbe leasedorpurchasedbypotentialmarkethouseholds

overthenextfiveyears?

Upto4,330ofthe10,950drawareahouseholdsthatrepresenttheannualpotentialmarket

fornewandexistinghousinginthecityhaveincomesatorabove110percentoftheAMI,

thethresholdqualifyingthemtopotentiallyrentorpurchasemarket‐rateunits.Thetenure

andhousingpreferencesofthesehouseholdsareasfollows(seeagainTable1attheendof

thisstudy):

Tenure/HousingTypePropensitiesAnnualAverageMarketPotential

ForNewandExistingMarket‐RateHousingHouseholdsWithIncomesAtOrAbove110PercentAMICityofSomerville,MiddlesexCounty,Massachusetts

NUMBEROF PERCENT HOUSINGTYPE HOUSEHOLDS OFTOTAL

Multi‐familyfor‐rent 2,185 50.5% (lofts/apartments,leaseholder) Multi‐familyfor‐sale 960 22.2%(lofts/apartments,condo/co‐opownership) Single‐familyattachedfor‐sale 815 18.8% (townhouses/live‐work,fee‐simple/ condominiumownership) Single‐familydetachedfor‐sale 370 8.5% (houses,fee‐simpleownership) Total 4,330 100.0%


ABSORPTIONFORECASTS

Absorption forecasts, using target market capture rates, have been established for new

market‐rate residential development, based on the number and characteristics of the

potentialmarket,themarketcontext,andSomerville’sproximitytoCambridgeandBoston.


September,2015


Three absorption scenarios are plausible within the target market methodology’s

parameters of feasibility: low growth; moderate growth; and high growth. The capture

rates of the potential market for new market‐rate rental development range from 15

percentlowgrowth;20percentmoderategrowth;and25percenthighgrowth.

Givencurrenteconomicconditionsandtheexpectationofcontinueddemandfornewfor‐

sale housing, Zimmerman/Volk Associates has determined that the capture rates of the

potentialmarketfornewmarket‐ratefor‐salehousing(multi‐familyfor‐sale,single‐family

attached, and single‐family detached for‐sale) range from 10 percent low growth; 15

percentmoderategrowth; and20percenthighgrowth.Zimmerman/VolkAssociateshas

also determined the capture rates of the potential market for new market‐rate rental

housingrangefrom15percentlowgrowth;20percentmoderategrowth;and25percent

highgrowth.

Thethreeabsorptionscenariosareshownonthefollowingtables:

Low‐GrowthScenarioAnnualCaptureofMarketPotential

HouseholdsWithIncomesAtOrAbove110PercentAMICityofSomerville,MiddlesexCounty,Massachusetts

NUMBEROF CAPTURE NUMBEROF HOUSINGTYPE HOUSEHOLDS RATE NEWUNITS

Multi‐familyfor‐rent 2,185 15% 328 (lofts/apartments,leaseholder) Multi‐familyfor‐sale 960 10% 96 (lofts/apartments,condo/co‐opownership) Single‐familyattachedfor‐sale 815 10% 82 (townhouses/live‐work,fee‐simple/ condominiumownership) Single‐familydetachedfor‐sale 370 10% 37 (houses,fee‐simpleownership) Total 4,330households 543units


Moderate‐GrowthScenarioAnnualCaptureofMarketPotential


September,2015






High‐GrowthScenarioAnnualCaptureofMarketPotential





Overthenextfiveyears,then,attheseforecastcapturerates,between2,715(lowgrowth),

3,795 (moderate growth) and 4,875 (high‐growth) new market‐rate units could be

absorbedwithinthecity.


September,2015


NOTE: Targetmarketcaptureratesareauniqueandhighly‐refinedmeasureoffeasibility.Target market capture rates are not equivalent to—and should not be confusedwith—penetrationratesortrafficconversionrates.

The target market capture rate is derived by dividing the annual forecastabsorption—inaggregateandbyhousingtype—bythenumberofhouseholdsthathavethepotentialtopurchaseorrentnewhousingwithinaspecifiedareainagivenyear.

The penetration rate is derived by dividing the total number of dwelling unitsplanned for a property by the total number of draw area households, sometimesqualifiedbyincome.

The trafficconversionrate is derivedbydividing the total numberof buyersorrentersbythetotalnumberofprospectsthathavevisitedasite.

Because the prospective market for a location is more precisely defined, targetmarket capture rates are higher than themore grossly‐derived penetration rates.However, the resulting higher capture rates arewellwithin the range of prudentfeasibility.

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