The Politics of Housing

Why Harvard is in the Real Estate Business

Harvard is in the education business. With a faculty full of eminent scholars and a student body full of talent, the University is famous throughout the world for its work in the education business.

Harvard is also in the real estate business. With more rental units to its name than any other property owner in the city, the University and its management company, Harvard Real Estate (HRE), are famous throughout Cambridge for their work in the real estate business.

Turk says the tenants found it impossible to speak with responsible HRE officials about the matter.

Unfortunately for Harvard, that's not the only reason HRE has gained such notoriety among Cantabrigians--it's also noted for the many highly-publicized disagreements between the company and its tenants.

The most recent skirmishes between HRE and Harvard tenant groups have centered around capital improvements the University is making in its Cambridge rental properties. HRE has passed the cost of these improvements--plus a "fair rate of return" on the investment--along to its tenants.

The tenant groups contend that these expensive improvements are only necessary because Harvard allowed its rental properties to deteriorate during the 1960s and early '70s. Because of this, these capital expenditures are known as "deferred maintenance."

The tenant groups have argued that HRE should shoulder the cost of the work without passing it on to tenants because, in their view, it is Harvard's past negligence that has made the capital expenditures necessary.

David M. Rosen, HRE's spokesman, allows that in some cases the University "could or should have done more to preserve buildings," but adds that, for the most part, the properties have simply deteriorated because of their age. Many of Harvard's properties are as many as 100 years old. Rosen says.

In most American cities, all the tenants could really do about the rent increases is get upset. If they got upset enough, they could move away.

But since 1969, the Cambridge city government has regulated the rents landlords can charge. The rents in all apartments that fall under rent control are frozen at either their 1967 or 1970 levels.

Because the city's rent control ordinance gives tenants a chance to present their case to the board before it decides on a rent increase, a dispute between a landford and his tenants can become a public controversy.

HRE has often come before the board to ask for rent increases--many times on the grounds that they are needed to pay for capital improvements. The Harvard Tenants Union and its spokesman, Michael Turk, have been continuing adversaries to HRE in those has also stopped renting out apartments in the building, and the apartment complex now lies vacant.

In the year ahead, the moves could break that stalemate.

In August, the Cambridge City Council

In the meantime, the Rent Control Board's staff, opponents of the rehabilitation and HRE fire planning to hold private negotiation to try to resolve the improve.

Beyond the disagreements with Harvard capital improvement program, Turk and David E. Sullivan, HRE's nemesis on the city council, criticize the management company for generally poor relations with its tenants. They say that Harvard is often unaware of its tenants concerns and that tenants have difficulty meeting with HRE officials to discuss their complaints.

Turk says this problem is particularly acute when it comes to the capital improvements. He cites one incident in which tenants in a HRE building were upset about workers replacing windows in their apartments in the middle of the winter. Turk says the tenants found it impossible speak with a responsible HRE official about the matter.

"Tenants talk about the layers [of bureaucracy] you have to go through to get to anyone. Many of them regard [HRE President] Sally Zeckhauser as a myth," Turk says.

Both Sullivan and Turk see the problem as endemic to large landowners in the city, however they say HRE's hierarchical structure adds to the gap between large landowners and their tenants.

Despite their criticisms of HRE, for Turk and Sullivan see Harvard as landowner which overall is no worse than other large landlord, in the city. Turk admits that one of the reasons that Harvard is criticized so much for its real estate dealings is because local groups expect the University to act more responsibly than other investors.

Turk argues it is fair to ask more of Harvard than other landowners. Since Harvard benefits from the public through its tax-exempt status, the University should make its investments so that they will benefit the community as a whole as well as itself. Turk says.

HRE spokesman Rosen claims that HRE actually has done more for the community than other real estate developers. He says HRE has made an effort to keep a large number of apartments available for rent, which benefits not only Harvard affiliates but also everyone in the Cambridge housing market.

HRE Spokesman Rosen, however, says HRE should not be expected to meet any higher standard than landowners and particularly that the University should not be expected to operate its real estate holdings so that it receives a lower return on its investment.

"It's really irresponsible for Harvard to invest the money alumni donate imprudently," Rosen explains.

The city's five-member Rent Control Board must approve any rent increases in those buildings. The only increases allowed are a periodic citywide adjustment for inflation, and hikes to pay for proven increases in operating expenses or capital improvements.

hearings.

The most recent tiff between HRE and the tenants union involves Craigle Arms, an apartment building located on Mt. Auburn Street near the Loeb Theater.

Harvard wants to make multi-million renovations on the apartment building, and has received a $3.4 million mortgage from the Massachusetts Housing Finance Authority to pay for the improvements. In return for making those renovations, however, Harvard wants to take the 60 rental units in Craigie Arms off the rent control market.

In exchange for providing the low-interest loan, the financing authority is requiring HRE to keep one-quarter of the apartments in the building under rent control during the 15 years it will take to pay back the mortgage.

But the tenants union argues that Craigie Arms can be rehabilitated without such expensive renovations, and they therefore maintain that none of the apartments should be taken off rent control.

The tenants union has taken its case against the renovations to the Rent Control Board, and the board has repeatedly refused to issue the removal permit that would allow HRE to begin the renovations.

The tenants and HRE are in a stalemate. Harvard can't begin its renovations, but HRE passed an ordinance which makes it illegal for a landowner to keep a rent control property vacant for more than 120 days. That law takes effect on October 1, so Harvard must either remove the property from rent control or return it to the rental market by February 1.

The other break may come from the courts. The University may file a lawsuit challenging the city's right to prevent HRE from renovating the building.