A communication transmitted from Yi-An Huang, City Manager, relative to Awaiting Report Item Number 24-10, regarding the data analysis included in the Economic Feasibility Analysis provided to EOHLC as part of Cambridge’s MBTA Communities final compliance submission

C I T Y O F C A M B R I D G E Community Development Department IRAM FAROOQ Assistant City Manager for Community Development Sandra Clarke Deputy Director Chief of Administration 344 Broadway Cambridge, MA 02139 Voice: [phone removed] Fax: [phone removed] TTY: [phone removed] www.cambridgema.gov To: Yi-An Huang, City Manager From: Iram Farooq, Assistant City Manager for Community Development Date: March 21, 2024 Re: Response to POR 2024 #25 regarding the data analysis included in the Economic Feasibility Analysis provided to EOHLC as part of Cambridge’s MBTA Communities final compliance submission. As requested by the City Council, attached is the final Economic Feasibility Analysis provided for Cambridge’s MBTA Communities compliance submission. It includes a narrative report and tables with assumptions and modeling data in the format requested by the Executive Office of Housing and Livable Communities (EOHLC). This analysis was conducted by Karl Seidman, the Community Development Department's real estate development economics consultant. The report reviews Cambridge's housing stock and current levels of affordability, highlighting the importance of the inclusionary housing program to provide affordable housing opportunities for Cambridge residents. The feasibility analysis concludes that as-of-right inclusionary condominium projects generally meet assumed financial return requirements in current market conditions. Regarding rental housing, the report concludes: “While multifamily rental projects do not meet assumed financial return requirements with Cambridge’s inclusionary zoning requirements, this result reflects the current challenging financial market conditions rather than the City’s inclusionary zoning requirements.” The report shows that inclusionary rental housing projects would be more feasible under market conditions with somewhat lower interest rates and capital returns. It also shows that today's uniquely high interest rates and investment returns make it difficult to finance multifamily rental housing regardless of whether or not inclusionary housing is required.