Now, dozens of those old mills sit boarded up along the canal system and have been mostly vacant for decades. Some are close to collapsing, while others are covered in graffiti. Scattered across the center of downtown, the battered brick buildings are an untapped opportunity and serve as a constant reminder to city leaders of what could be.
In recent decades, historic mills and old industrial buildings in Gateway Cities across the Commonwealth have been renovated and converted into much-needed housing. The projects are often a way for cities to preserve their historic charm while creating modern residential units in high demand. They also help to revitalize post-industrial era cities that suffered from the long-term decline of manufacturing.
But while Eastern Massachusetts cities like Lowell and Lawrence have had success – with almost no former industrial buildings left to restore – cities farther west with weaker housing markets, which don’t enjoy the luxury of being connected to Greater Boston via the commuter rail, still struggle with an array of blighted properties that have yet to be developed. In these communities – like Holyoke, Springfield and Fitchburg – the housing market doesn’t support rents that attract developers for these projects.
State and federal funding is almost always needed, but those tax credits and payouts come slowly to only a handful of developers who are willing to invest years into a project before making a profit. But many aren’t willing to stick around, according to Aaron Vega, Holyoke’s director of planning and economic development.
“It’s hard to get state money. There’s a backlog,” said Cassandra Witthaus, associate director of real estate at The Neighborhood Developers, a nonprofit affordable housing developer in Chelsea, Revere and Everett. “It might take a year or two, sometimes longer than that, depending on the project.”
The stigma that comes with being a diverse, low-income city is another factor that stunts housing development in Holyoke. Small businesses that would otherwise promote growth and further development don’t want to open next to old, blighted buildings that are boarded up, Vega said.
“Developers seem to just pass Holyoke by, and that’s where the perception comes in,” said local resident and developer Denis Luzuriaga. “That whole perception of Holyoke being bad – plus developers just not seeing the right kind of projects here – I think we’re somewhat stuck. The question is, how long will it take? Will it be years, or decades?”
Even with a 10-year anchor tenant providing a stable source of revenue, most banks turned Luzuriaga and his brother Marco down when they asked for a loan to fund a small restoration project that ultimately created 18 market-rate apartments in an old wire manufacturing mill. Some said it was too risky because the brothers were first-time developers, according to Luzuriaga. Others said they wouldn’t loan the money because the project was in Holyoke.
The restoration project was lucky to receive funding from the state’s Housing Development Incentive Program – the only state tax incentive for market-rate housing in Gateway Cities. City officials say the program is essential in areas like Holyoke, where market conditions create barriers to private investment. But Marco Luzuriaga said competition for HDIP funding is high, and they were turned down for other projects despite having architectural plans and cost estimates.
These restoration projects are often seen as a cheaper and faster alternative to new housing construction, which developers say couldn’t be further from the truth.
Blighted properties and century-old mills often require extensive environmental clean-up and remediation efforts, which is time-consuming, expensive, and drives developers away. Five developers have backed out of restoring the 230,000-square-foot former Merrick Thread Mill because the cost alone to get the building “site ready” has been estimated between $12 million and $20 million. Half of the building needs to be torn down, and the lead paint, asbestos and other contaminants need to be abated.
“I joke about how much money has to go into a property before you even put up drywall,” Vega said.
MassDevelopment – a state agency intended to improve economic growth – offers site-readiness grants, but Vega said it isn’t nearly enough to cover the remediation costs in many of the mill buildings in Holyoke. The state will pay around $40,000 to cover deed research, an appraisal, a survey to ensure they have the right property lines, and hiring a structural engineer who can assess whether the building is stable – a far cry from the millions of dollars needed to get a building like the former Merrick Thread Mill ready for development.
In some cases, the stars have aligned – allowing a handful of historic mills and old buildings in Holyoke to be converted into market-rate or affordable housing. These bright spots are slowly helping to revitalize the city while serving as a model for other potential projects, but there’s still a long way to go.
WinnDevelopment, the housing construction arm of WinnCompanies that has championed mill restoration projects around the state, is now finalizing some 88 units of affordable housing in the old Farr Alpaca Mill – a five-story property covering over 161,000 square feet on the Holyoke canal that has been vacant since the 1970s. It was one of Holyoke’s largest and most run-down historic wool mills. The units will be ready for residents in a matter of weeks and will rent for around $1,200 per month.
Funded in part by federal and state historic rehabilitation tax credits, low-income housing tax credits, and other loans from the state – the project took 10 years to complete.
“Ten years to get 88 units of housing. We’re not solving the housing crisis at that rate anytime soon,” Vega said. “The state has great programs, but you don’t get everything all at once. An empty mill building that’s already been empty for 20 years – every year, every winter, every rainstorm, more water in the building – it just gets worse and worse. What might have been a $28 million project 10 years ago is now a $40 million project.”
But the requirements established by historic tax credit programs sometimes clash with building code requirements. For example, a historic commission might tell a developer to preserve an old stairway railing, while state building codes require it to be raised six inches, Vega said.
Unlike most other mill buildings in Holyoke, the city owned the property, which made acquisition cheaper and easier for Winn. The city also held the mill for 10 years so Winn didn’t have to pay taxes on it. WinnDevelopment counsel and project director Hagop Toghramadjian said Holyoke has remained patient – knowing that these types of risky restoration projects take time, and state funding trickles in ever-so-slowly.
“Other private sellers and cities aren’t as patient, which kills a project,” Toghramadjian said.
Unlike many other developers, Winn is mission-driven and in it for the long haul. Most would balk at a 10-year timeline, Vega said, but Winn typically holds on to their properties and is not looking for a quick return on investment.
“When you start, you have to have a really healthy amount set aside for unknowns,” Toghramadjian said.
While developing the property’s parking lot across the canal, Winn discovered an entire buried mill. Asbestos and other contaminants had been pushed underground where the drainage structure was meant to go, which required remediation and added a $1 million cost to the project.
The Brownfields Tax Credit Program offers credits to cover costs incurred during the clean-up of contaminated properties, but Toghramadjian said the state only provides that funding for the costs that developers know about before they start.
“So you have to know what you’re doing, but you’re always finding things in these buildings,” Marco Luzuriaga said.
A roof collapsed unexpectedly during the renovation, which required the installation of steel bracing from the outside and raised costs by another $1 million, Toghramadjian said.
The cost of housing construction is just as high in cities like Holyoke as it is in Greater Boston communities, but the rents that can be charged are much lower. This creates a funding gap when developers determine whether they can make a profit from a project.
“In Lowell, it’s a smaller gap. Here, the gap is tremendous. It’s enormous. It’s not just a little finger on the scale, it’s the entire project,” Toghramadjian said. “The rents pay for virtually nothing…the rents will get you further in Lowell.”
People earn higher incomes in Lawrence and Lowell than they do in Holyoke, allowing housing developers in those Eastern Massachusetts cities to bank on higher market rents to make projects work. In 2022, only a third of the units in Lawrence’s redeveloped mills were considered affordable, according to Jessica Andors – executive director of Lawrence CommunityWorks.
In cities like Holyoke where the housing market doesn’t support higher rents, developers opt for affordable housing to help close that gap upfront with low-income housing tax credits rather than wait to make a profit from market-rate rents. Vega said they need a mix of both to secure a healthy housing market that also attracts people with higher incomes to the city.
The state’s Historic Rehabilitation Tax Credit program covered 10 percent of Winn’s project in Holyoke – which made converting the historic mill more attractive than starting from scratch, said Toghramadjian. The program is less competitive than other low-income housing incentive programs, but it still takes a long time to be paid. Small amounts are committed to the project every few months, according to Toghramadjian.
He said the secret to developing more vacant, blighted properties in cities like Holyoke is to expand both the state and federal historic tax credit programs and deliver the funding faster. He pointed to other states like North Carolina, which have tax credit programs that are focused specifically on the development of mills.
(Photo by Hallie Claflin)
Large projects like Winn’s are few and far between in Holyoke, and the city is in need of more experienced developers to take on bigger projects. But that alone won’t solve the problem.
“Even if I had five big developers in Holyoke like WinnDevelopment, they are all going to be fighting for the same pot of money,” Vega said.
Private property owners are often unable to navigate the state and federal funding system, and some decide not to convert the mills at all. Vega said Holyoke largely relies on small, local developers that work closely with the city, are located nearby, and aren’t interested in making a fast profit. While these developers help to restore smaller buildings – such as 10 or 15-unit projects – they often lack the staff needed to navigate grants, tax credits, and regulations that accompany larger mill restorations.
“They’re really expensive to do, but their value isn’t just in the dollars and cents,” Toghramadjian said. The projects can, over the long term, be profitable, he said. But they’re also helping to “turn Holyoke around.”
This story first appeared in CommonWealth Beacon. Read the original here.
