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ZIMMERMAN/VOLKASSOCIATES,INC.PostOfficeBox4907Clinton,NewJersey08809908735‐[email protected]•www.ZVA.cc
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
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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);
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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.
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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.
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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.
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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):
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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%
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
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:
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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):
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Tenure/HousingTypePropensitiesbyIncomeAnnualAverageMarketPotentialForNewandExistingHousingUnits
CityofSomerville,MiddlesexCounty,Massachusetts
.........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
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
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Thefollowingtablesummarizestheincomerangesofthe10,950householdsthatrepresent
theannualpotentialmarketfornewandexistinghousinginthecity:
IncomeDistributionAnnualAverageMarketPotentialForNewandExistingHousingUnits
CityofSomerville,MiddlesexCounty,Massachusetts
.........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%
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
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:
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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
.........HOUSEHOLDS........ INCOMERANGE NUMBER PERCENT
<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%
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
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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,
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withmedicalcareers,academicpositions,andmiddle‐ toupper‐middlemanagement jobs
andprofessionalsinthefinancialandlegalsectors.
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IncomeDistributionFamilyOrientedHouseholdsSegmentofthe
MarketPotentialForNewandExistingHousingUnitsCity of Somerville, Middlesex County, Massachusetts
.........HOUSEHOLDS........ INCOMERANGE NUMBER PERCENT
<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%
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
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).
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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
MarketPotentialForNewandExistingHousingUnitsCity of Somerville, Middlesex County, Massachusetts
.........HOUSEHOLDS........ INCOMERANGE NUMBER PERCENT
<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%
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
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.
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Thefullspectrumofallhouseholdgroupswithineachsegmentrepresentingthemarketfor
new and existing housing units in the city and their estimated median incomes and
estimatedmedianhomevaluesin2015areshownonthefollowingtable:
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HouseholdTypes(InOrderofMedianIncome)
CityofSomerville,MiddlesexCounty,Massachusetts
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
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homevaluesareonlyforowner‐occupiedunits,andcanrangefromthesalespriceofanewly‐constructedunittothesignificantly‐escalatedvalueofaunitpurchaseddecadesago.
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
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
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$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.
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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
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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
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$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
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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%
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
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.
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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
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
Moderate‐GrowthScenarioAnnualCaptureofMarketPotential
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HouseholdsWithIncomesAtOrAbove110PercentAMICityofSomerville,MiddlesexCounty,Massachusetts
NUMBEROF CAPTURE NUMBEROF HOUSINGTYPE HOUSEHOLDS RATE NEWUNITS
Multi‐familyfor‐rent 2,185 20% 437 (lofts/apartments,leaseholder) Multi‐familyfor‐sale 960 15% 144 (lofts/apartments,condo/co‐opownership) Single‐familyattachedfor‐sale 815 15% 122 (townhouses/live‐work,fee‐simple/ condominiumownership) Single‐familydetachedfor‐sale 370 15% 56 (houses,fee‐simpleownership) Total 4,330households 759units
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
High‐GrowthScenarioAnnualCaptureofMarketPotential
HouseholdsWithIncomesAtOrAbove110PercentAMICityofSomerville,MiddlesexCounty,Massachusetts
NUMBEROF CAPTURE NUMBEROF HOUSINGTYPE HOUSEHOLDS RATE NEWUNITS
Multi‐familyfor‐rent 2,185 25% 546 (lofts/apartments,leaseholder) Multi‐familyfor‐sale 960 20% 192 (lofts/apartments,condo/co‐opownership) Single‐familyattachedfor‐sale 815 20% 163 (townhouses/live‐work,fee‐simple/ condominiumownership) Single‐familydetachedfor‐sale 370 20% 74 (houses,fee‐simpleownership) Total 4,330households 975units
SOURCE:Zimmerman/VolkAssociates,Inc.,2015.
Overthenextfiveyears,then,attheseforecastcapturerates,between2,715(lowgrowth),
3,795 (moderate growth) and 4,875 (high‐growth) new market‐rate units could be
absorbedwithinthecity.
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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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