Science Is Real: Cambridge House Flipping & Cost Factors in Luxury Upzoning Building Height Choices

The results of the February 10, 2025 citywide luxury housing are now rolling in as we have been posting in our Updates and Summaries to our 6-Part YIMBY Blogpost series: HERE
And, the results are not good. This is just as we had anticipated, along with the Metropolitan Area Planning Council, and State Senator Pat Jehlen in her Letter to Constituents HERE: 

Indeed, it is our once lower income neighborhoods that are getting hit hardest with new, larger, and far more expensive homes – single family, duplexes, and three far larger more expensive homes replacing a current triple decker. The tallest of these new proposed structures are three stories, not four stories or higher. And tragically, every one of these new structures is replacing older more affordable housing in the neighborhood. Why are these new units costing more? As we read in a recent Medium post o housing costs “…new housing will pretty much always be more expensive than comparable old housing, in the same way that a 2025 car will be more expensive to purchase than a 2010 model of the same car — new things Just Cost More.” HERE
 
Why? The answer is in the science of building and related factors of cost which the pro-development political forces that brought this zoning petition to City Council never thought to look at. But others have and here is what they have to say: In the blog cited above,  “How Much Does it Actually Cost to Build Housing,”  the author writes: “Going from 3 stories to 4 stories fundamentally changes the type of building you are creating. You need different building practices…and lose building space to expensive things like elevators, which under ideal conditions do not housing anyone.” They add ““If you move into say, demolishing existing multifamily, that results in *much* higher land costs in addition to concerns of displacement and loss of naturally occurring affordable housing.” And for good measure they provide the following graph of the national average construction costs per story.

Above graphic shows the national average construction costs per story from “Returns to Scale in Residential Construction: The Marginal Impact of Building Height” by Michael D. Eriksen and Anthony W. Orlando, Real Estate Economics, 12 August, 2021.

Here as the Medium author who reposts this graphic showing the national average construction costs per story point out you will “Note the strong break points going from three to four stories, and from seven to eight stories. This explains why developers… love 3 story buildings — they’re far and away the most cost effective height for multifamily until you hit 7 stories….In fact, here’s a graph of national average construction costs per story. Note the strong break points going from three to four stories, and from seven to eight stories. This explains why developers in Denton love 3 story buildings — they’re far and away the most cost effective height for multifamily until you hit 7 stories….”

 In another Medium blogpost, titled  “Facts Matter in Housing or at Least they Should” (February 23, 2025) the same author notes why the science of building is so important to any housing discussion.  “Science is real.” HERE The author saliently observes that: 
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​ "If you care about protecting existing communities, I personally think the communities you should prioritize most are those most at risk of displacement and homelessness. This means poor communities. Poor communities largely live in existing multifamily. If your proposal to add more housing is to redevelop already multifamily areas, that means you want to displace poor people. Straight up. Go do a pro-forma  on redevelopment and get back to me. Research confirms this neighborhood level upzoning is basically the worst way you can do upzoning. Housing shortage hits hardest and fastest for the lowest income neighborhoods (see chart below), and that results in aggressive single-family-to-single-family redevelopment in poor neighborhoods, as displaced middle class people move into poor neighborhoods, but expect to live in a physical building that “suits” their income bracket. Middle class people, by and large, don’t want to live in a 900 sq ft home from 1920 in a poor neighborhood with limited city services. They’ll contemplate living in a 1500sqft new build home or a “flipped” 1200 sq ft home in a poor neighborhood with limited city services. This redevelopment/flipping process removes affordable housing from the market without even adding supply to improve broader market dynamics."

In brief: the new generation of home owners wants a size considerably larger than the earlier generation. So much of what is in play in the new zoning based Cambridge house flipping developer agenda is to make the same plot of land work harder to create larger units than were on the plot previously - to a net loss of trees and green spaces, impacting not only this property, but also the neighbors who are also key beneficiaries of them. 

Much the same thing in noted in the generally pro-developer journal Strong Towns in an article titled “Why are Developers Only Building Luxury-Housing” by Daniel Herriges (7.25.2018). He begins HERE with a direct assessment: “Stop me if you've heard this one before: 'Developers in my city are only building luxury housing. They're not building anything that ordinary people can afford." Under the sub-heading "New Construction is Expensive" we read: "It's not a new observation that construction cost alone situates brand new housing outside the budget of lower-income households. The same has been true in other eras. So how do these households afford housing at all?"

Under the sub-heading "Supply and Demand are Out of Whack" he takes up the terminology luxury housing:  "Understand that when you talk about 'luxury housing,' you're really talking about luxury locations. If you build almost anything in Tribeca or Beverly Hills or Back Bay, someone will pay top dollar for it. What makes a location a luxury location? Scarcity. It's when relatively few people can actually live there, in comparison to the number of people who would like to live there...." Cambridge would certain count in this group as well.

Further on we learn that "One consequence of this is the proliferation of single-family teardowns in desirable urban neighborhoods. If the land is valuable, and all you can build on it is a single-family home, why not build a very expensive single-family home? Sightline has documented the spread of large homes in Portland that don't add any net new housing to the city, but were the most profitable thing developers were allowed to build on their lots.

And towards the end he states that: “'Build, Baby, Build'-by-any-means cheerleading may be a too-simplistic answer—especially if, in the process of zoning for very targeted areas of high density to encourage more building, your city ends up inviting speculation by land owners hoping for windfall gains. (Such speculation drives up land prices and works against affordability.)."

And this is where the Cambridge situation becomes especially interesting, not only because we have so few vacant spaces to build new housing, and most lot sizes are so small that they only allow the expansion of the existing footprint of a structure. The author argues  that ending single-family zoning will rectify the situation in places like cambridge. He writes: "Neighborhoods composed of single-family houses are declared almost entirely off-limits to development. In the remaining areas, we thus make sure that intense pent-up market demand is concentrated like a fire hose, and that development is undertaken primarily at large scales (giant apartment complexes) and in needlessly expensive ways."  However for an array of reasons, including the science of building and factors around story heights, as well as the insatiable desire for more single family homes in Cambridge, this idealized  overly optimistic view of "supply/demand" functionality simply will not work. And in the mean time, housing costs are going up for everyone.

LESSONS LEARNED: Science is Real. The reason why we are seeing so many new three story structures with the upzoning (and luxury homes of this size generally) is because they are the least expensive to build and guarantee the highest returns to developers. The next "price point" where a developer can expect some viable returns is at 7 stories: NOT the 6 stories that are allowed in the new upzoning plans, and even then once one removes 20% inclusionary units (2 of 10) for affordable housing, most developers will back off entirely. We also learn that "house flipping" in Cambridge is based on the new market for much larger homes than a generation or two ago, meaning that the new larger units take up more space on the lot, with the concomitant removal of critically needed mature trees and green spaces. 
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