Wu's Policies Have Moved The Needle On Developer Diversity, But Minority Firms Still Face Growth Hurdles

Rev. Jeffrey Brown, a Black developer and co-founder of My City At Peace, was part of a team selected in late 2022 to develop a city-owned site in Boston’s Roxbury neighborhood.

Brown, in partnership with HYM Investment Group, plans to redevelop the Parcel P3 site in Roxbury with life sciences space, affordable for-sale and rental units and retail. The partnership is one of 11 teams that the city has selected since it began requiring teams to disclose their diversity when bidding to develop on city-owned land in 2018. 

In August 2022, Mayor Michelle Wu expanded that policy to ask development teams to share their diversity metrics for all project proposals going through the Boston Planning & Development Agency. Since then, 46 teams have submitted such disclosures, a BPDA spokesperson tells Bisnow.

The BPDA is in the process of analyzing these disclosures to understand how it can make the greatest impact, a spokesperson said. Wu described the goal of the policy in 2022 as helping the city "think carefully and intentionally about building teams and the representation and reflection of our community."

That policy is one of several Wu's administration has enacted over the last three years aimed at increasing the diversity of the teams that develop commercial projects in Boston. The city's data shows a meaningful increase in the percentage of minority- and- women-owned businesses benefiting from city real estate deals, but several developers tell Bisnow there is still a long way to go in leveling the playing field.

"We're making the kind of progress that we want to see," Brown said. "Now the question is, can it be sustained? Can we continue moving up that rung, and how difficult will it get? And what are the problems?"

The progress under Wu's administration has also manifested itself in the disbursement of city contracts.

Between 2014 and 2019, only 1.2% of the $2.1B in contracts awarded by the city went to Black and Latino-owned businesses, according to BBC Research & Consulting's 2020 Disparity Study.

In 2021, after Wu took office, the BPDA enacted its Equitable Procurement Plan to address the barriers that minority- and women-owned business enterprises face when participating in BPDA contracting opportunities. The city has since released an update on its efforts. In fiscal year 2023, it awarded $1B in contracts and $151M, or 14%, went to MWBEs.

That represents a 133% increase from three years earlier.

However, developers and policy leaders told Bisnow that minority developers still face obstacles to getting contracts and projects, especially as the development pipeline has slowed and obtaining financing has become more difficult.

"Frankly, it's gotten tougher to get anything done in the city. And I think some folks have reverted to past relationships and maybe are a little more risk averse to forming new partnerships and new relationships," ULI Boston/New England Executive Director Michelle Landers said. "That's a place where the city can keep its foot on the gas pedal and continue these efforts and not let people revert to the old way of doing things because it's more comfortable.”

Minority- and women-owned business enterprises have always struggled to thrive in Boston compared to similar metropolitan areas like Atlanta, D.C. and Chicago. In 2020, a study by the Urban Institute ranked Boston in the bottom third of large cities when it came to economic and racial inclusivity, according to WBUR. 

In October, the Department of Housing and Urban Development hosted the Developers of Color Summit in downtown Boston, where minority developers voiced their struggles with moving projects forward in the city.

“As an emerging developer, as you scale up, you need capital,” Adler Bernadin, president of Norfolk Design & Construction, said at the event. “You might be doing one-to-four-unit deals to get up to 20-unit deals, but if you don’t have the capital you can’t get there.”

Marie Morisset, principal at Boston Communities, said many minority developers aren’t aware of the federal and state funding they have access to.

“There are systemic requirements, but at the end of the day a lot of these big developers, especially on the affordable housing landscape, are using these public dollars to make money and really corner the market and exclude minority developers out of this process,” Morisset said at the event.

Chanda Smart, CEO of OnyxGroup Development and Realty, told Bisnow that the city's process isn't consistent and that more action needs to be taken to eliminate the gap in financing for minority and women developers.

"Boston needs to stop talking about it," Smart said. "We've done enough talking. Let's just put some actions in place and it will eliminate the gap. We know what it is. It's money."

She said minority and women developers aren’t afforded the same financing opportunities as their white male counterparts, which has made it difficult to grow their businesses.

"They've been going to their friends and their network on a handshake getting deals,” Smart said of male developers. “I couldn't get that kind of deal on a handshake if my life depended on it right now.”

Nationally, developers of color have faced issues with scaling their businesses, with only six Black developers and one Latino developer making an annual revenue between $17M and $49.9M, according to the Breaking the Glass Bottleneck report. The report found 382 white developers with revenues in that range.

Jonathan Garland, founder of the minority business enterprise J. Garland Enterprises, said there are still massive gaps and barriers that minority developers are facing, including acquiring the financing to be able to make these bigger projects work.

"The reason why minority developers have no choice but to partner with other more, let's say, well-off white developers is because it's been challenging to come by access to capital," Garland said.

He said that diversity in development teams is crucial, especially when developing in historically minority communities that have different needs.

In February, in partnership with Beacon Communities and Madison Park Development Corp., Garland's development firm submitted a proposal for the BPDA's Boston Water Sewer Commission Parking Lot RFP in Roxbury, calling for 383 income-restricted apartments and condos. Garland said he and his partners have an understanding of what residents want and need from this development because of their backgrounds and previous investment in the neighborhood.

Garland pointed to another recent step in the right direction, the $50M Equitable Developers Fund announced last month by MassHousing and Massachusetts Housing Investment Corp., which aims to provide financing to underrepresented developers in the state. The fund will begin to accept applications in the spring.

"I think it is going to be very helpful. Our team will apply for that and see where it goes," Garland said.

During Wu's 2023 State of the City Address, she announced the Welcome Home, Boston initiative, which aims to create more affordable homeownership opportunities on city-owned land.

Colleen Fonseca, executive director of the Builders of Color Coalition, said that through the first phase of the initiative, four development teams were selected, consisting of minority developers and community builders: African Community Economic Development Organization of New England, Boston Communities, Dorchester Design Collaborative and Norfolk Design & Construction.

"In that first round, the diversity on that project team was so promising and inspiring to see," Fonseca said.

These latest efforts aren't the first to address the racial disparities in Boston's real estate industry.

The city put forth its first MWBE program in 1978. It aimed to give contracts to a minimum of 15% of MBEs and 5% of WBEs.

The 37-story One Lincoln tower, the former headquarters of State Street and one of the most recognizable buildings in Boston's skyline, was developed under this program as one of the first minority developer partnerships in the city.

Cruz Cos. President John B. Cruz III was part of the team the city selected in the 1980s to construct the 1M SF building.

In partnership with New York-based Gale International, Cruz and a group of several other minority developers invested in a 15% stake in the project and completed it in 2003.

"It was significant because it got minority participation on a big office building downtown,” Cruz said.

But in 2003, Mayor Thomas Menino ended the MWBE program due to concerns over court challenges after a 2001 federal civil complaint by White-owned firm P.J. Gear & Sons challenged the program, the Bay State Banner reported.

It wasn't until Mayor Marty Walsh's second term in 2018 that new efforts spurred hope for the promotion of MWBEs in the city. These efforts have been accelerated under Wu's administration. 

The state has also taken considerable actions in the last decade that have sparked city-level change.

The Massport Model was born in 2015 after the port authority heavily weighed minority participation as part of its scoring when evaluating the competitive bids to build the Omni Hotels & Resorts in the Seaport.

The project set forth a precedent for all Massport-owned properties and became a blueprint for future city and state policy. McDermott Ventures' Pam McDermott, who was a part of the team that built the Omni Hotel, said it opened the doors for more discussion of diversity.

"There's dozens of BIPOC and women-owned real estate firms that have opened up since then," McDermott said.

She said that in the time since the Massport Model was introduced until now, there has been a change in the progress MWBE firms have made in the state and in the conversations that white developers are having as they put together teams for competitive bids.

"It's totally different," McDermott said. "We've been doing this for 30 years, and it may be that we bring it up but, oftentimes, I will get a call from majority developers saying, 'I really want to do this, and I have no idea how to do it.'"

Since the success of the Massport Model, Boston has moved forward with requiring its own diversity disclosure and weighing heavily on bids that bring on more diversity over others for city-owned land.

"That's just the start, we are far behind the eight ball," Cruz said of these efforts from the city. "For Black and brown folks that's just the ripple in the lake."

Boston has also sought to expand its impact with the CommonWealth Developers Compact, which it signed with other cities: Salem, Lynn, Somerville and Cambridge.

The compact built on Boston's efforts to ask private developers to voluntarily disclose their diversity plans in their development projects. However, in the high interest rate environment over the last two years, there has been a slowdown in the number of developments moving forward and submitting these disclosures. 

"We're seeing a lot less proposals and projects being put forth than we have years prior, so that has definitely had an influence and an impact on the volume of disclosures that we've received," Fonseca said. "But overall, it's been pretty promising and we've been able to put together best practices for cities."