Planning commission member Aaron Graves explains how a fifth‑story density bonus and 10% workforce set‑aside affect project feasibility

Aaron Graves, a member of the borough planning commission and a commercial real‑estate lender, told the Marlborough Borough Council at its July 2 workshop that small changes in project scale and financing assumptions can determine whether new multifamily construction "pencils" as a viable investment. Graves presented a step‑by‑step developer model and said adding a fifth story — and thus roughly 10 additional units on the same land footprint — can spread fixed land and soft costs and improve the project's "yield on cost." He cautioned, however, that returns are fragile when interest rates rise.

Why it matters: Councilors are considering zoning changes that would allow taller buildings in some districts in exchange for affordable or workforce housing. Graves' presentation illustrated the trade‑offs municipal policymakers face when trying to pair increased density with local affordability goals.

In his example, Graves said a four‑story project under his assumptions generated a yield on cost near 6.6%, a level he described as thin for attracting institutional equity. "When you build more units, you spread the land cost," Graves said, and in his model adding 10 units increased the incremental yield to about 7%, a change he characterized as enough to move a project from marginal to feasible under those assumptions.

Graves then modeled an inclusionary condition: in exchange for the extra units, 10% of units would be restricted to "workforce housing," which he described as "roughly focused about 80% of the area median income." That requirement, Graves said, reduced the top‑line revenue and, in his slides, cut incremental net operating income by roughly $44,000–$50,000. "You lose about $44,000 of NOI," he said in one slide commentary, later acknowledging the slide deck showed slightly different figures on adjacent slides.

Councilors repeatedly returned to sensitivity to interest rates. Several members observed that a modest change in cap rates or construction loan pricing can erase developer returns. One councilor warned, "If rates keep going up, it's unlikely you're gonna get development on that" (Council member). Graves agreed, noting cap‑rate and SOFR‑linked loan pricing make yields highly volatile and that some developers are waiting for a lower interest-rate environment before breaking ground.

Councilors also pressed on other cost drivers: parking and construction type. An attendee with construction experience explained that moving from wood‑frame to podium or steel framing (required as height/floor area increases) can sharply raise per‑unit hard costs, and that structured parking can add roughly $100,000 per space. Graves' model explicitly excluded structured parking costs; he said the example assumed surface parking and that adding a garage would materially change feasibility.

On implementation mechanisms, Graves reviewed financing and incentive tools used elsewhere — low‑income housing tax credits, payment‑in‑lieu programs, tax abatement and private capital — and urged council staff to study local permitting and administrative timing as a way to reduce soft costs and improve predictability.

Public input and next steps: During the public question period, resident John Monroe asked whether anyone else from Graves' firm helped prepare the presentation; Graves answered he presented in his capacity as a planning commission member and not as a firm representative. No formal zoning votes were taken at the workshop. Councilors indicated they will ask staff to refine Narberth‑specific assumptions, test alternate interest‑rate and parking scenarios, and return with numbers that would underpin any proposed density bonus or inclusionary requirement.

The council did not adopt policy at the session; the workshop closed by consensus at about 8:45 p.m.