Tuesday, September 20, 2022

Massachusetts Must Rely on Chapter 40B

 Robert M. Ruzzo

The dog days of August mark the 53rd birthday of M.G. L.c. 40B §§ 20-23 (“Chapter 40B,” the “Comprehensive Permit Law,” or the “Affordable Housing Law”). Even today, Chapter 40B continues to

punch above its weight in terms of delivering new housing throughout our Commonwealth. But, according to statistics recently updated by the Massachusetts Housing Partnership, the Affordable Housing Law may be edging toward premature retirement. Of the 101 communities within the Metropolitan Area Planning Council (“MAPC”) region, the total number of new housing units needed to achieve the magical “ten percent threshold” under Chapter 40B is less than 15,000 (subject to adjustment when the new 2020 census data is incorporated). Forty-three communities in the MAPC region are presently over that threshold. The only question now is do we congratulate ourselves, or do we come clean, admit we (arguably) got there by cheating, and repent? Given the projected need for 200,000 new housing units statewide over the next decade, do we really have any choice?

For a Commonwealth full of intelligent people, we in Massachusetts sure have a tough time counting. At least when it comes to counting affordable units on the state’s Subsidized Housing Inventory (“SHI”). The SHI is maintained by the Department of Housing and Community Development (“DHCD”) and is used to determine whether a municipality has met the most important of the three “statutory minima” under the Affordable Housing Law. Chapter 40B fans and foes alike know that 100 rental units built under a Comprehensive Permit (requiring 25 percent affordability) count as 100 units on the SHI, but an identical 100-unit condominium development built in the same fashion adds only 25 units to the SHI.

The lore behind this approach is that long ago in a commonwealth not far away, DHCD concluded that municipalities needed an incentive to accept rental housing developments. Actually, that’s not quite how things were at the very beginning. It was not until a 1981 Housing Appeals Committee (“HAC”) case, Cedar Street Associates v. Zoning Board of Appeals of the Town of Wellesley, that the HAC rejected, as “too zealous,” an existing regulation providing that “only those units … that are provided at below market rental or cost shall be counted…” for the purposes of the SHI (see footnote 17).

With the median house price for Greater Boston recently scraping the $900,000 mark, DHCD needs to re-examine this approach to counting. The Housing Watch does not advocate this change out of any animus against municipalities. To the contrary, if DHCD drives this shift, there is a reasonable possibility for an acceptable transition to “Chapter 40B version 3.0.” On the other hand, if litigation drives this change, expect the sort of chaos and confusion that followed the HAC’s decision in 1999 to recognize the New England Fund (“NEF”) of the Federal Home Loan Bank Board as a “subsidy program.” That decision sparked a Comprehensive Permit revolution and gave birth to what the Housing Watch calls “Chapter 40B 2.0.” All it took was more than a decade, a temporary shut-down of the program, the intervention of MassHousing, and the defeat of a referendum question to restore some sense of equilibrium to the Chapter 40B equation. No one needs a repeat of that.

And it does not take a genius to realize that litigation is coming. As fans of the Housing Watch (thanks to both of you, btw) know, the SJC considers the issue an open one, stating in Sunderland vs. Sugarbush Meadow (2013) (n.12), that “[w]e need not address whether the inclusion of non-subsidized housing units in the SHI is permissible under [Chapter 40B].” When the inevitable litigation comes, the language of the Comprehensive Permit Law won’t help a municipality’s case much. Section 20 of Chapter 40B provides that local requirements are “Consistent with local needs” if “low or moderate income housing exists which is in excess of ten percent of the housing units” in that municipality. That same section defines “Low- or moderate-income housing” as “any housing subsidized by the federal or state government.” It’s tough to argue that a $4,000/month rental unit in an NEF development is being subsidized by the government, but a $600,000 condominium unit in an NEF development is not, particularly when NEF funds are commonly not the cheapest source of financing, and developers have over the years consistently sought to drive down the percent of NEF funds required in their development financing plans.

As recent SJC cases involving Chapter 91—the Moot decision in 2010 and the Armstrong decision in July—demonstrate, even an agency with “a wide range of discretion in establishing the parameters of its authority” is subject to judicial oversight. DHCD’s current approach is entitled to deference to be sure, but the standard is “one of discretion, not abdication.” Counting the present way is the type of “arbitrary or unreasonable” interpretation that invites judicial intervention.

Make no mistake, municipalities will howl that DHCD would be “moving the goalposts;” point taken, but DHCD would only be moving the goalposts back to where they were originally, and even the hidebound NFL has done that. More to the point, kindly take a look around and please tell the Housing Watch if you honestly believe that the housing affordability goalposts haven't already moved in the years since the Cedar Street ruling. To ease the pain of transition, DHCD could phase the new counting rules in over a number of years. DHCD already has numerous regulatory mechanisms (Housing Production Plans, “Safe Harbor” Rules, etc.), that serve a similar function. Second, if DHCD still wants to promote rental housing, it could programmatically provide that affordability restrictions for ownership units “burn off” after a number of years, opening up real opportunity for individuals from underrepresented communities to enjoy the full benefits of homeownership. To promote adoption of “as of right” multifamily zoning districts in MBTA communities, DHCD could provide more favorable treatment to municipalities adopting such changes, or to those that do more than the bare minimum required by the new law.

If all of us are in this together, then there should also be a willingness to incorporate legitimate municipal grievances into any new DHCD approach, and to distinguish between good municipal actors and others. A municipality that plans for housing, closes a Chapter 40B hearing in an expedited fashion, and does not appeal if a developer successfully challenges an uneconomic condition at the HAC, can and should be treated differently from a municipality that takes a diametrically opposite approach. Greater discretion should also be exercised by the subsidizing agencies in denying project eligibility letters, since not every housing proposal in every community merits a project eligibility letter, an attitude that seems to have been lost in translation somewhere along the path from Chapter 40B 1.0 to Chapter 40B 2.0.

Changing DHCD’s approach to counting represents a momentous challenge for our incoming governor, even though it does not require any legislation. But litigation is almost certainly the alternative. And then everybody loses.

Co-chair of the REBA affordable housing section, Bob Ruzzo is a former Massachusetts Deputy Secretary of Transportation. He also served as the Deputy Director/Chief Operating Officer at both MassHousing and MassDevelopment.  His column, “The Housing Watch…” will be a regular feature in REBA News and on the REBA Blog He can be reached at bob@bobruzzo.com. The views expressed are solely those of the author.

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