A Hard Lesson Learned

 Jesse D. Schomer

 An adage that I have heard attributed to various sources goes

something like this: If the only tool you have is a hammer, it is tempting to treat everything like a nail. In other words, there’s a right (and wrong) tool for the job and it behooves the operator of the tool to know the difference.

 This is a lesson that was learned the hard way in SLV Bridgewater PO, LLC v. Town of Bridgewater (Case No. 24-P-1418). At issue was an apartment building developed under the Massachusetts Comprehensive Permit Statute, M.G.L. c. 40B, §§ 20-23. Several years after the building was built and occupied, the local building inspector issued a cease-and-desist order, claiming that some of the apartments constituted an illegal “lodging house” use because they were occupied by four or more unrelated persons. The developer unsuccessfully appealed that order to the local zoning board and then lost again on appeal to the Superior Court.

On further appeal, the Appeals Court reversed the judgment and directed that the cease-and-desist order be rescinded – lambasting the town for its “caprice” and accusing it of reducing the permit to a “hollow parchment promise.” The Court’s reasoning was that the approved architectural plans had conceptually depicted two beds in each bedroom – impliedly contemplating that a three-bedroom apartment might contain up to six residents. (The Court does not appear to have considered whether the presumptive occupants of these hypothetical beds were related to each other.) In other words, by approving these plans, the board also approved occupancy. Thus, although the developer did not request a waiver of the lodging house bylaw, the Court found that the board had impliedly approved one.

As an aside, the outcome directed by the Court effectively entails that the occupancy of apartments by four or more unrelated persons did, in fact, constitute a lodging house use, albeit one that would be allowed through the waiver of the bylaw forbidding this use. The Court did not delve into the thorny moral and legal question of whether a municipality should be allowed to favor one class of persons over another based on familial status, nor whether it is appropriate in the midst of a housing affordability crisis for that municipality to affix the decidedly pejorative epithet “lodging house” to someone’s home simply because the people who call it home happen to be unrelated.

While the Court’s decision, broadly speaking, yielded the correct result, a lesson to be learned from this case can be found in the adage cited above: it is important to use the right tool for the job. Chapter 40B development is highly complicated, requiring parties to navigate numerous pitfalls across an extended period of time. As this case illustrates, those pitfalls do not necessarily end when a project is occupied. A review of the underlying record suggests several suspects for how things went sideways. 

First, although the developer was represented by counsel with experience in Chapter 40B at some point during the entitlements process, the developer’s principals appear to have largely led the proverbial charge. This inclination towards self-help is contrary to the wisdom of Professor Bobrowski, who in his Handbook of Massachusetts Land Use and Planning Law, teaches us that permitting counsel should be the “maestro” of the permitting team in order to ensure completeness and procedural correctness – a task that “is usually enough to inject the attorney into the center of the storm.” Whether motivated by budgetary considerations or a developer’s self-assuredness, development under Chapter 40B is not the time for DIY.

Next, when the dispute at issue in this case arose, the developer opted to retain a local lawyer to respond to the cease-and-desist notice and handle the resulting litigation. (That litigation, for those keeping score in the grandstands, took more than five years, and counting, to resolve.) To be clear, local lawyers are a vital part of the legal ecosystem for countless reasons. In the context of Chapter 40B development, a local permitting counsel can be helpful due to their on-the-ground knowledge of the permitting environment and familiarity with the players on the field. But the violinist doesn’t lead the orchestra. The maestro does.

A 40B specialist would have known that there was a simpler, quicker, and more cost-effective option available: rather than (or in addition to) appealing the cease-and-desist order, counsel could have sent a letter to the zoning board alerting them that the project was being modified to include a request for a waiver of the local lodging house bylaw. (In its appeal of the cease-and-desist order, the developer apparently refused to this, arguing instead that a waiver was neither requested nor necessary because the bylaw didn’t apply; perhaps – but would you rather be right, or would you rather win?)

Had the developer taken the other path, the zoning board would have had twenty days to act on the notice of project change. Per applicable regulatory criteria, this change was undoubtedly insubstantial and thus did not even require the board’s approval. Had the board deemed the change substantial or denied it outright, the developer would have a right to take an expedited appeal to the Housing Appeals Committee, where the outcome almost certainly would have been a finding of insubstantial change. And, had the municipality opted to continue this fight, the HAC’s decision would have been subject to expedited administrative record review, rather than de novo review under Chapter 40A, Section 17. In sum, this would have been a faster, less costly way to accomplish the same outcome – and one with fewer opportunities for appellate authorities to get things wrong.

The lesson learned here is not exclusive to Chapter 40B, Massachusetts land use law, or even “dirt law” generally. Specialization exists in all fields for a reason: the right or wrong tool can make all the difference. As our clients’ trusted counsel, we must be unafraid to render this advice (and to learn this lesson even if it applies to ourselves).

A Co-chair of REBA’s Affordable Housing Section, Jesse Schomer is a director and shareholder in the Boston law firm of Dain, Torpy, Le Ray, Wiest & Garner, P.C.  His practice focuses on Massachusetts real estate development, land use, and zoning/permitting, with primary specialization is the permitting and development of affordable housing under M.G.L. Chapter 40B.

Jesse can be contacted by email at jschomer@daintorpy.com.

 

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MBM Principal Peter L. Freeman Prevails Before Massachusetts Housing Appeals Committee in Important G.L. c. 40B Safe Harbor Decision

Peter L. Freeman

The Massachusetts Housing Appeals Committee recently issued an important ruling reversing a claim of a “safe harbor” under M.G.L. c. 40B, ss. 20-23 (“Chapter 40B”) by the Town of Oak Bluffs Zoning

Board of Appeals (“ZBA”). The project, known as Green Villa, proposes to build 100 home ownership units on a 7+ acre site opposite Martha’s Vineyard Regional High School in Oak Bluffs.  The project also has a small commercial component.  On May 20, 2024, the developer filed an application under Chapter 40B for the project. The safe harbor claim would have allowed the Board to deny or defer action on the project for 2 years.

On June 13, 2024, the ZBA made its written assertion that the Board’s approval of the of the Southern Tier Comprehensive Permit, including sixty (60) units counting toward the Town’s Subsidized Housing Inventory (SHI), had created enough affordable housing units under the Town’s Housing Production Plan (“HPP”) to justify a certification from the Massachusetts Executive Office of Housing and Livable Communities (“EOHLC”) that Oak Bluffs had complied with the HPP annual goal and could thus claim a 2-year safe harbor.

Green Villa appealed the safe harbor claim to EOHLC.  On July 24, 2024, EOHLC denied the Town’s safe harbor claim.  The ZBA appealed the EOHLC ruling to the Massachusetts Housing Appeals Committee (“HAC”).  The Martha’s Vineyard Commission (“MVC”) moved to intervene, as the basis of the ZBA’s safe harbor claim was that the time deadlines under the Chapter 40B Regulations for claiming a safe harbor were stayed until the MVC completes its review of the project as a Development of Regional Impact and makes a decision. Green Villa challenged this assertion and is also challenging the jurisdiction of the MVC to review a Chapter 40B project. MVC was granted participation as an Interested Person limited to responding to arguments concerning the MVC.

On April 24, 2025, HAC issued a Summary Decision on Interlocutory Appeal, which upheld the EOHLC denial of the ZBA safe harbor claim.  HAC ruled that there could not be two separate time frames for a Chapter 40B project:

“For purposes of determining safe harbor eligibility, there can only be one operative date, uniformly applied to all 351 cities and towns of the Commonwealth, the determination of which is not dependent upon the MVC’s review of the project. Therefore, the operative date for determining whether a municipality subject to the MVC Act has achieved a statutory or regulatory safe harbor is the date of the comprehensive permit application. Accordingly, the date for determining the Town’s safe harbor status is the date on which the developer’s comprehensive permit application was filed with the Board, May 20, 2024.”

MBM Principal, Peter L. Freeman, who handled the case before HAC with co-counsel Jesse D. Schomer of Dain Torpy, noted that this ruling on timing was critical because as of May 20, 2024, based on the Chapter 40B Regulations, the 60 Southern Tier units that had been added to the Town’s SHI were no longer eligible to count as SHI units (because no building permit was issued within one year of the approval of the project), thus extinguishing the EOHLC certification of safe harbor.

Claims of safe harbor by municipal zoning boards are becoming more frequent, and this case is important for affordable housing developers because it affirms the integrity of the Chapter 40B safe harbor regulations and keeps the applicable time frames specific and concrete, as opposed to being a moving target if the ZBA position had prevailed.

Green Villa is now before the ZBA for substantive hearings on the merits of the project. 

Recent Developments in Chapter 40B: Housing Appeals Committee & Case Law Update and Summary of Regulatory and Policy ...

 

New Chapter 40B Financing Requirements

 Gregory R. Bradford

The Massachusetts Housing Finance Agency (“MassHousing”) recently announced changes to its lending requirements for certain

types of affordable housing projects. The changes will likely make it easier for traditional banks to extend construction loans for projects approved under the state’s Comprehensive Permit Act, M.G.L. c. 40B (the “Act”). 

The Act was enacted in 1969 to enable affordable housing developers to override certain local zoning and permitting requirements. MassHousing administers aspects of the Act, including the determination of whether projects are eligible for expedited permitting. MassHousing’s role stems from regulations and guidelines promulgated by the Executive Office of Housing and Livable Communities (formerly known as the Department of Housing and Community Development (“DHCD”)).

A key concept in the Act is the subsidy requirement. The Act defines affordable housing as “any housing subsidized by the federal or state government under any program to assist the construction of low or moderate income housing,” and DHCD’s regulations and guidelines, in turn, identify certain state and federal programs that qualify as a “subsidy” under the Act. One such program is the so-called New England Fund (“NEF”), which is made available through the Federal Home Loan Bank of Boston (“FHLBB”). This program is most commonly used when a developer needs construction financing from a bank. NEF proceeds can be advanced to FHLBB member banks, historically at below-market interest rates, and must meet certain parameters established by MassHousing.

Last month, MassHousing published modifications to its NEF financing requirements. Under MassHousing’s previous requirements (which stemmed from an iteration of the guidelines published by DHCD in 2005), any construction financing for a rental project needed to include a permanent loan term of at least five years, and at least 25% of the permanent loan needed to be obtained through the NEF program. Additionally, homeownership projects needed to pull 25% of the construction financing from the NEF program. These requirements created some unintended complications. With the five-year permanent loan requirement for rental projects, many lenders were surprised to learn that their proposed short-term construction loan actually triggered a seven or eight-year commitment. More unpleasant still was the occasional situation where a lender forgot to draw the NEF proceeds after the project achieved substantial completion – a hiccup that could delay the subsequent sale or refinancing of the project.

Furthermore, only banks that are members of the FHLBB can draw NEF funds – so many national lenders in the Boston market need to partner up with a local or regional bank familiar with the NEF program. While a few select Massachusetts banks have regularly assumed the NEF lender role, not all FHLBB member banks are familiar with the program or how to access it.

 MassHousing’s new, revised requirements provide for the following:

·  For rental projects: a minimum of 10% of the construction financing or 10% of the permanent loan must be obtained through the NEF program. If the permanent financing option is selected, then the NEF funds only need to be utilized for one year.

·   For homeownership projects: a minimum of 10% of the construction financing must be obtained through the NEF program.

In either scenario, if NEF funds are used for the construction financing, MassHousing requires that the funds be used for the entire duration of the construction loan (i.e., from the first loan advance, with the entirety of the 10% being disbursed up front).

Notably, MassHousing’s announcement also states that the agency is willing to modify existing 40B project approvals to incorporate these revised requirements. Any such modification will be deal-specific and could require amending the regulatory agreements and covenants recorded against the title, as well as certifications and commitment letters executed by the lenders – so the process will likely require some level of legal review.

Given MassHousing’s commitment to relax its financing requirements, a developer’s efforts to secure site approval for a new housing project will likely ease. More national lenders may be able to quickly issue term sheets for proposed 40B project loans, now that they can offer a more traditional construction and “mini-perm” loan term. Furthermore, more FHLBB member banks may be willing to assume the role of the NEF lender, given the greater flexibility for the NEF lender to refinance or transfer its interests after the minimum one-year commitment.

A partner in the Boston office of Nutter, McClennen & Fish LLP, Gregory is a member of the commercial and real estate finance practice group as well as the firm’s development, land use and permitting practice group. His practice focuses on commercial transactions, and he also advises clients on various aspects of complex development projects. Greg can be contacted at gbradford@nutter.com.

Massachusetts’ New Accessory Dwelling Unit (ADU) Law Now in Effect with Final Regulations

 Caroline E. Smith

 Section 8 of the Massachusetts Affordable Homes Act (Chapter 150 of the Acts of 2024) amended Section 3 of the Massachusetts Zoning

Act. This took effect earlier this month, requiring municipalities to allow ADUs (900 or fewer square feet) as of right in most single-family residential zoning districts, with some important limitations.

 The Executive Office of Housing and Livable Communities (EOHLC) published draft ADU regulations last December for a public comment period, to implement these amendments. The final regulations were published at the end of last month.

 These regulations are now in effect and are codified in 760 CMR 71.00.

 Within the regulations you will find definitions of the critical terms “Accessory Dwelling Unit”, “Protected Use ADU”, “Single-family Residential Zoning District”, and others.  You also will find a list of “prohibited” regulations and “unreasonable” regulations which a municipality cannot impose.

 Municipalities are required to keep a record of each ADU permit denied and approved and other data. The regulations span eight pages.

 The EOHLC also is developing model ADU Zoning provisions for municipalities to use as a template if they choose to further “reasonably regulate” ADUs. For municipalities which already may have local ADU zoning provisions, the EOHLC will be publishing a checklist to help municipalities identify whether the current ADU provisions are compatible with the new state law and regulations.

 With the new law in effect, we wait to see how municipalities, homeowners, builders, planners, architects, legal counsel and courts respond to it.

 We are keeping track of emerging issues such as whether ADUs are allowed by right in any zoning district that allows single-family dwellings under any condition (including by special permit or variance); whether an ADU can have a different owner than of the principal dwelling unit; whether an ADU (meeting the legal requirements) can legalize an illegal or non-conforming existing unit; whether an ADU can be added to an existing commercial, industrial, or agricultural building where the zoning is residential (or residential is allowed); what else beyond the new regulations may be considered “unreasonable” regulation by a municipality; and what cities and towns may enact in their special permit standards for extra ADUs.

 With this (some say) revolutionary change in Massachusetts real estate and land use law and our development landscape, some things are for sure:

• You may now apply for a building permit for an ADU in every municipality; and
• Municipalities are busy revising their zoning bylaws and ordinances to add their mandatory ADU provisions.

Caroline Smith, Esq. is an Associate at McGregor Legere & Stevens PC in Boston, and a member of REBA’s Environmental Law Section.  She can be contacted at csmith@mcgregorlaw.com.

Conveyancer’s Guide to Affordable Housing Units (Video)

 

What Homeowners and their Lawyers Need to Know about the New Accessory Dwelling Unit Law

 Caroline E. Smith

Massachusetts recently enacted a new housing statute that makes it easier for homeowners to create accessory dwelling units (ADUs) on

their residential properties. These commonly were called “in-law apartments” but the new law allows much more.

The new statute is known as the Affordable Homes Act. The Act is Chapter 150 of the Acts of 2024. The ADU provisions are part of the state’s broader efforts to address its housing affordability crisis and increase housing options, particularly in high-demand areas.

Essentially ADUs are now legal almost everywhere “as of right.” If you’re a homeowner considering adding an ADU or just wondering how this new law affects you, here’s a breakdown of the key features giving you new legal rights and how to proceed.

What is an Accessory Dwelling Unit?

In general, an ADU is a small, self-contained living space located on the same lot as a primary residence. It can take various forms, such as a basement apartment, garage conversion, house expansion, or detached house.

ADUs typically have their own kitchen, bathroom, and separate entrance. Now in Massachusetts they offer flexibility for homeowners to rent out the dwelling unit or use it for family members, such as aging parents or adult children.

Key Provisions of the New ADU Law

The new ADU provisions are Sections 7 and 8 of the Act. Section 7 amends the definition of accessory dwelling unit in the Massachusetts Zoning Act (M.G.L. c. 40A) and is effective now. Section 8 amends Section 3 of the Massachusetts Zoning Act and takes effect on February 2, 2025. These amendments require municipalities to allow ADUs as of right in most residential zoning districts, with some important limitations. Be sure to pay attention to this “small print.” Do not make any assumptions.

1. “By right” approval: ADUs allowed “by right” means homeowners no longer need special permits or zoning variances to build them (subject to some local regulations). This streamlines the process and makes it more predictable.

2. Size limitations: The ADU cannot exceed 900 square feet or 50% of the size of the primary dwelling, whichever is larger. This ensures that the ADU remains a secondary, subordinate structure on the property.

3. Reasonable Restrictions: ADUs are subject to reasonable restrictions such as compliance with Title 5 (septic systems), site plan review, dimensional setbacks, bulk and height limits, and restrictions on usage as a short-term rental.

4. No owner occupancy requirement: Neither the homeowner’s primary residence nor the ADU must be owner-occupied. This means the main building and/or the ADU can be occupied by anyone.

5. No off-street parking requirements: In many cases, the law eliminates the need for additional off-street parking spaces for ADUs, particularly if the property is near public transit or in a densely developed area.

6. Flexibility in ADU types: Homeowners can convert existing spaces, like basements or garages, into ADUs, expand existing houses, or construct entirely new structures, providing more options for creating additional housing.

7. Exemptions for certain areas: Some municipalities, particularly in rural or less densely populated areas, may be exempt from certain provisions of the law, though most communities are required to adopt ADU-friendly zoning codes.

Why is the New ADU Law Important for Homeowners?

1. More housing options: ADUs help alleviate the state’s housing shortage by increasing the number of affordable housing options available, especially in suburban or urban areas with high demand.

2. Rental income potential: By building an ADU, a homeowner can generate rental income, which can help offset mortgage payments or provide additional financial security.

3. Flexibility for multi-generational living: ADUs are an ideal solution for families needing extra space for aging parents, adult children, or other relatives, offering privacy while maintaining close family connections.

4. Increased property value: Adding an ADU to a property could increase its overall value. Many buyers are attracted to properties with income-generating potential or additional living space.

5. Supporting sustainable growth: The law encourages the efficient use of existing infrastructure and land by allowing homeowners to build ADUs, reducing the need for sprawling new developments.

What should Homeowners Consider?

While the new ADU law offers many advantages, homeowners should be mindful of several factors before starting a project:

1. Local zoning codes: While the state law sets a framework, municipalities have the authority to establish specific regulations regarding ADUs, such as limits on height, setbacks, or the design of the unit. Check with your local zoning bylaw or ordinance or consult a land use or real estate attorney to understand what rules apply to your area.

2. Building codes and permits: Even though ADUs are allowed by right, homeowners will still need to comply with local building codes and obtain necessary permits for construction. This ensures safety and ADUs meeting all required standards.

3.  Health and environmental rules: ADUs must comply with the usual laws about sewerage, water supply, wetlands, storm water, and similar non-zoning requirements.

4. Impact on property taxes: Adding an ADU could impact the property tax assessment. It’s a good idea to consult with a tax professional or local tax assessor to understand how an ADU might affect the real estate tax bill.

5. Financing the project: Constructing or converting an ADU can be a significant investment. Homeowners should plan carefully for the costs and explore financing options, such as home equity loans or construction financing.

Conclusion

Massachusetts’ new ADU law presents a valuable opportunity for homeowners to add housing options to their properties while benefiting from rental income, increased property value, and greater flexibility for family living.

With the “by right” approval process, reduced parking requirements, and flexibility in ADU types, it’s now easier than ever to create an additional dwelling unit on residential property.

However, it’s important to consider the specific zoning regulations in your municipality, comply with building, health, and environmental codes, and carefully plan for the costs of construction.

Consult a land use or real estate attorney, contractor or architect, and others familiar with the law to ensure good advice, careful planning, and proper permitting.  

Understand the ins and outs of the ADU law to determine whether an ADU is right for you, your existing house, and your lot.

 

A member of REBA’s Young Lawyers Section and Environmental Law and Sustainability Section, Caroline Smith is an associate at McGregor, Legere & Stevens PC.  

Massachusetts Must Rely on Chapter 40B

 Robert M. Ruzzo

The dog days of August mark the 53^rd 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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(Audio Only) Financing & Developing Workforce Housing in Massachusetts

Our guest speakers, Sarah Barnat, President of Barnat Development LLC, and Deborah Morse, Relationship Manager at MassHousing, discuss opportunities and challenges in financing and developing Workforce Housing in Massachusetts.

Foreclosing Lenders’ Duties to Holders of Affordable Housing Covenants

By Shannon F. Slaughter

Englander & Chicoine P.C. and foreclosure expert, Attorney Paul Collier, representing Boston

Redevelopment Authority d/b/a Boston Planning and Development Agency (“BPDA”), successfully defeated Motions to Dismiss filed by Boston Private Bank and Trust Company (“Boston Private”) and Janet Blake, Trustee of the 21 Warren Street Realty Trust (the “Trust”), in a recent case challenging the way a bank and a high bidder at a foreclosure auction colluded to terminate an affordable housing covenant on a handicap-accessible unit.

The handicap-accessible affordable housing unit was subject to a covenant restricting ownership to a qualified individual of moderate income.  The covenant also restricts the price any purchaser can pay for the unit to a below-market price set by a formula, referred to as the “Maximum Resale Price.” The covenant also required that the owner occupy the affordable unit as his or her principal residence.  The affordable housing covenant is eliminated by foreclosure if a bank acquires title to the unit. 

In this case, after the death of the owner of the affordable unit, her mortgage went into arrears and Boston Private sought to foreclose.  At the time of the foreclosure, the Maximum Resale Price of the affordable unit was $210,000.00.  BPDA announced the maximum resale price and the requirements of the covenant at the foreclosure auction. There were forty-two (42) bids at the foreclosure auction.  A private developer, Mikhail Starikov, submitted the highest bid at $385,000  to acquire the affordable unit as an investment property, despite the announcement of the covenant restrictions. Thereafter, Mikhail Starikov assigned the high bid to his son, Fred Starikov. After further notification of the restrictions by BPDA, the high bidder defaulted and did not purchase the unit.  Thereafter, Boston Private took title to the unit and then sold it for the price submitted by the high bidder to a supposed third party, the Trust—a procedure intended to nullify the affordable housing covenant.  

BPDA’s complaint alleged, among other things, that Boston Private, the high bidder, his son, and the Trust committed civil conspiracy in a scheme to nullify the affordable housing covenant.  BPDA also asserted that Ms. Blake was simply a straw for the high bidder, that Boston Private breached its duty to protect BPDA’s affordable housing covenant, and that Boston Private, the high bidder, and the Trust manipulated the foreclosure process for the purpose of eliminating the affordable housing covenant.  The civil conspiracy scheme by Boston Private, the Starikovs, and the Trust would enrich the private developers by approximately $300,000 and deprive the citizens of Boston of a valuable affordable housing asset. BPDA’s Complaint alleges that Boston Private’s acquisition of the affordable unit was invalid and, therefore, the foreclosure sale should be set aside.  

Boston Private and Blake sought to dismiss BPDA’s Complaint in its entirety, which was denied by the Business Litigation Session of the Suffolk Superior Court.  The Court held that as the party exercising the power of sale at the foreclosure auction, Boston Private owed BPDA a duty of good faith and reasonable care in executing its power of sale.  The Court explained, “[…] there is at least a plausible basis for the Court to conclude that Boston Private Bank’s foreclosure process was unlawfully tainted by the Bank’s decision to convey the Property to itself after the highest bidder defaulted, rather than giving the second highest bidder the opportunity to purchase the Property or selling the Property at another public auction.” The Court also allowed BPDA’s Motion to Amend its complaint to include claims for civil conspiracy and intentional interference with contractual relations against Mikhail and Fred Starikov based on the foregoing facts.

An associate with the Boston law firm of Englander & Chicoine, PC, Shannon Slaughter’s practice focuses resolving real estate and land use disputes, including real estate acquisition and complex title litigation, prescriptive easements and adverse possession claims, determination of ownership of tidelands, zoning and subdivision litigation, construction defects, fraudulent title and conveyances, and condominium disputes.  She can be reached by email at  sslaughter@ec-attorneys.com.

HUD's Rental Assistance Demonstration (RAD) Program

The New Opportunity Zone Program (Video)

  

Our guest speakers, Miriam Sheehan, a partner at Nolan Sheehan Patten LLP, and Nicholas Ratti, a Principal at CohnReznick, will discuss the new Opportunity Zone Program. 

The Opportunity Zone Program, created as part of the 2017 Tax Cuts and Jobs Act, allows investors to reinvest proceeds from a capital transaction in specially designated Opportunity Zones proposed by each state, which are generally low-income census tracts, and delay and ultimately avoid tax recognition of these gains.  In addition, the U.S. Treasury can certify Opportunity Funds which will be created to pool and deploy investment capital in Opportunity Zones for eligible purposes (e.g., stock, partnership interest, and business property).  This program therefore has the potential to increase investors' (including tax credit investors) returns on various community development projects. 

Standing in Plaintiff’s Shoes: Challenging a Personal Representative’s Standing Under 40A.

By Kathleen M.  Heyer

“The abutter doesn’t have standing” is a frequent, but often unsuccessful, argument made when a neighbor appeals a zoning board decision under G.L. c. 40A, § 17.  But what happens when

the named plaintiff passes away unexpectedly after filing an appeal?  How is standing determined? And, is it possible to challenge the standing of a personal representative of the plaintiff’s estate?  A recent Land Court decision, Zuk v. Pairseau, 2018 Mass. LCR LEXIS 15 (Land Ct. Feb. 8, 2018), demonstrates that the standing requirement passes on to the personal representative and that the standard must still be met.  In this case, the lack of knowledge of harm testified to by the personal representative to the abutting property even with the presumption of standing enjoyed by a direct abutter, the appeal was successfully challenged on standing grounds.   

The standard for standing is well-known.  To have standing, one must be a “person aggrieved.” G.L. c. 40A, § 17; Kenner v. Zoning Bd. of Appeals of Chatham, 459 Mass. 115, 117 (2011).  Abutters and abutters to abutters within 300 feet of the subject property are entitled to a rebuttable presumption that they are aggrieved within the meaning of the statute.  Marashlian v. Zoning Bd. of Appeals of Newburyport, 421 Mass. 719, 721 (1996).  That presumption is rebutted if the defendant(s) can provide evidence that the plaintiff is not aggrieved.  Marotta v. Bd. of Appeals, 336 Mass. 199, 204 (1957).  The presumption can be rebutted by demonstrating “that, as a matter of law, the claims of aggrievement raised by an abutter, either in the complaint or during discovery, are not interests that the Zoning Act is intended to protect,” 81 Spooner Road, LLC v. Zoning Bd. of Appeals of Brookline, 461 Mass. 692, 702 (2012), the offering of affirmative evidence that rebuts the presumption, id. at 703, by “by showing, in the negative, that the plaintiff lacks any factual foundation for asserting a claim of aggrievement.”  Kourouvacilis v. Gen. Motors Corp., 410 Mass. 706, 716 (1991).  “Once the presumption of standing has been rebutted successfully, the plaintiff then would have the burden of presenting credible evidence to substantiate the allegations of aggrievement.”  81 Spooner Rd., LLC v. Zoning Bd. of Appeals of Brookline,  703 n.15 (2012).

In Zuk v. Pairseau, an abutter appealed a decision of the Town of Danvers Board of Appeals approving a modification of a site plan of a long-existing nursing home which, among other changes, permitted additional parking spaces on the nursing home property with no increase in impervious pavement.  Shortly after the Complaint was filed, the abutter passed away.  His son, personal representative of the estate, was substituted as plaintiff several months later.  Defendants, who had unsuccessfully challenged plaintiff’s standing on account of his death, conducted discovery before challenging the son’s standing in a motion for summary judgment.  The defendants’ standing argument raised the following concerns: to what extent does the personal representative of an estate need to demonstrate individual standing?  Can a personal representative rely upon the aggrievement claimed by the deceased? 

To a certain extent, yes, the personal representative may adopt the position taken by the deceased, but, this does not provide a free pass guaranteeing court review of the appeal.  In Zuk, the son as personal representative of his father’s estate owned the abutting property, and therefore was entitled to a presumption of aggrievement.  However, the defendants successfully rebutted the presumption by demonstrating, after discovery, that the son had no reasonable expectation of proving a legally cognizable injury.  The son’s answers to interrogatories and deposition testimony demonstrated that, whatever aggrievement his father may have thought existed, his son was unaware of any potential harm to his property as a result of the Board’s decision.  Rather, to the extent that the son claimed aggrievement stemming from certain claimed procedural errors, he did “not articulate[] anything that could be interpreted as a harm to an interest protected by G.L. c. 40A or the bylaw.”  Zuk, at 13.  

To bolster his position, the son filed an affidavit in opposition to the defendants’ motion for summary judgment.  In this affidavit, the son adopted his deceased father’s statements of aggrievement, as set forth in the complaint and in the answers to interrogatories which his counsel had prepared, ostensibly based upon conversations with the deceased.  However, the affidavit was ineffective because a person cannot contradict by affidavit statements previously made under oath at deposition. O'Brien v. Analog Devices, Inc., 34 Mass. App. Ct. 905, 906 (1993).  The son explicitly testified at his deposition that he had no knowledge of any harm that would result from the Board’s decision.  The affidavit could not be used to contradict those statements; whatever knowledge the father may have had was not passed on to the son, who claimed “aggrievement on the grounds that the [Board] Decision increases the impact of the facility on the Zuk property and its inhabitants, with no more specificity.”  Zuk, at 14.  As the Court so aptly stated, this “does not go far enough to allege a harm to a legally protected interest.”  Id. 

Though the plaintiff lost in this instance, it is not unreasonable to expect that a similar situation may arise again.  When can the standing of a personal representative, substituted in for a deceased plaintiff, be subject to challenge: immediately after appointment?  In Zuk, after the death of the original plaintiff, agreed deadlines were set for discovery deadline and the filing of dispositive motions.  Though not an issue in Zuk, there could be conflict after the death of a party between the defendants seeking to move the case forward as quickly as possible and a personal representative plaintiff seeking additional time.   

Active in many REBA sections, Kathleen Heyer practices with the Andover firm of Johnson & Borenstein LLC.  She can be contacted at kathleen.heyer@jbllclaw.com. 

The Housing Watch…The Most Potentially Potent Footnote in Affordable Housing

By Robert M. Ruzzo

By all accounts, the so-called “GLAM Test” under Massachusetts General Laws Chapter 40B (“Chapter 40B,” the “Affordable Housing” Law, or the “Comprehensive Permit Law”), one of the

hottest topics in affordable housing over the past few years, is going to continue to attract attention in the coming months.  As affordable housing aficionados know, the “General Land Area Minimum” (hence, “GLAM”) test is one of three safe harbors provided for under the Affordable Housing Law.  Under Chapter 40B, this safe harbor exists when “low or moderate income housing exists… on sites comprising 1.5% or more of the total land area zoned for residential, commercial or industrial use.”

For years, this safe harbor was relatively unknown, particularly when compared to the widely recognized “10% test” under the statute.  Two years ago, even the Housing Appeals Committee (“HAC”) had to concede in Newton Zoning Board of Appeals v. Dinosaur Row LLC that:  “the General Land Area Minimum is a complex measure, which has not been addressed extensively during the 45 year history of the Comprehensive Permit Law.”  The third Chapter 40B safe harbor, the Annual Land Area Minimum, remains a veritable affordable housing “Sasquatch,” whose existence is alleged, but as yet remains unverified.

After an extensive internal review, the Department of Housing and Community Development (“DHCD”) published “Draft Guidelines for Calculating General Land Area Minimum” (the “GLAM Guidelines”) on its website on Friday, May 5, 2017.  The GLAM Guidelines are intended to provide straightforward assistance to municipalities.  In addition to the eight pages of guidance, which includes a new definition of “Group Home,” the GLAM Guidelines were accompanied by two appendices.  Appendix A consists of twelve pages of technical instructions, while Appendix B walks through an “Example Calculation,” complete with illustrations.  DHCD will be accepting written comments on the GLAM Guidelines (including the appendices) through July 5, 2017.

The publication of these eagerly anticipated GLAM Guidelines provides an appropriate opportunity to step back and reflect upon some of the larger issues surrounding the Affordable Housing law, and the statutory safe harbors in particular.

As noted recently in a cogent presentation by the Massachusetts Housing Partnership (“MHP”) at a meeting of the CHAPA Housing Production Committee, Chapter 40B has been the vehicle for the production of more than 70,000 housing units since 1969.  The future, however, is not as bright in MHP’s view, because the potential for “new 40B development is diminishing relative to projected housing need.”

Why?  According to MHP the “gap” (between projected housing need and the remaining Chapter 40B housing development potential) “is greatest in Metro Boston where 26 communities have permitted enough subsidizing housing” to cross the 10% safe harbor threshold.  According to MHP, the remaining development potential under Chapter 40B in the Metropolitan Area Planning Commission region is approximately 21,000 units.

Of course, under the 2007 Boothroyd v. Zoning Board of Appeals of Amherst decision, a municipality may nonetheless elect to grant a Comprehensive Permit even if it has satisfied the 10% test.  But that is a pretty thin reed to grasp in our current housing affordability wind tunnel.

To make your affordable housing day even brighter, a number of the ten communities identified by MHP as having the “most remaining Chapter 40B Development Potential” in the Metro Boston area are among the very communities that have recently asserted the GLAM safe harbor (Arlington, Newton, and Waltham).  For these municipalities and others similarly situated, however, an underappreciated danger lurks behind the assertion of the GLAM safe harbor based upon current Subsidized Housing Inventory (“SHI”) counting methodology. Such arguments may run headlong into the most potentially potent footnote in all of affordable housing.  

First, some full disclosure.  Your correspondent has previously suggested that the treatment of rental developments under the GLAM test may no longer make sense in era of smart growth and concentrated development.  Remember that under current SHI practice, rental housing and ownership units are treated very differently.  Assuming all other requirements to gain listing on the SHI have been met, all units in a rental housing development are counted on the SHI, while homeownership developments are counted only on a proportionate basis. The HAC politely questioned this approach as early as 2003, in footnote 6 of Arbor Hill Holdings Limited Partnership v. Weymouth Board of Appeals, stating “it would seem anomalous to count all of a very large [rental] lot containing only a very small number of affordable units.”  

But footnote 6 in Arbor Hill pales in comparison to the suggestion of the Supreme Judicial Court in footnote 12 of Zoning Board of Appeals of Sunderland v. Sugarbush Meadow, LLC, 464 Mass. 166, 178 (2013).  There, the SJC expressly left open the issue of how counting should be performed for SHI purposes, declaring:  “we need not address whether the inclusion of non-subsidized housing units in the SHI is permissible under the act…(emphasis added).”  Thus, the issue of SHI counting methodology under the 10% test remains an open question, as far as the SJC is concerned.

Certainly any counting methodology employed by DHCD over many years would be entitled to a great deal of deference.  Nonetheless, a judicial rebuke to such a long-standing regulatory practice would not be without recent precedent. As development lawyers learned back in 2007 in the Chapter 91 context, the SJC is not hesitant to let it be known that “the principle of according weight to an agency’s discretion” is “one of deference, not abdication” stating further that “this court will not hesitate to overrule agency interpretations of statutes or rules when those interpretations are arbitrary or unreasonable.”  Moot v. Department of Environmental Protection, 448 Mass. 340, 346 (2007).

By aggressively asserting the GLAM safe harbor, a municipality may raise the entire issue of SHI counting methodology before the state’s highest court for the first time.  So as we enter upon the “Summer of GLAM” remember, it may be time to re-examine the most important footnote in affordable housing as well.

“The Housing Watch” is a regular column from Bob Ruzzo,  senior counsel in the Boston office of Holland & Knight LLP.  He possesses a wealth of public, quasi-public and private sector experience in affordable housing, transportation, real estate, transit-oriented development, public private partnerships, land use planning and environmental impact analysis. Bob is also a former general counsel of both the Massachusetts Turnpike Authority and the Massachusetts Housing Finance Agency; he also served as chief real estate officer for the turnpike and as deputy director of MassHousing.”  Bob can be contacted by email at robert.ruzzo@hklaw.com.