Revisions Tweak 40B Without Undermining It

Published on: February 22, 2003

Municipal officials have been grumbling for years about Massachusetts General Laws Chapter 40B – the state’s anti-snob zoning statute. But last year, they mounted an aggressive and very nearly successful campaign to undermine it.

The law allows developers of new projects with an affordable housing component to short-cut the local approval process, by obtaining one, all-inclusive local permit from the Zoning Board of Appeals in communities where affordable housing constitutes less than 10 percent of the overall housing stock. Local officials have long chafed at a process that, they say, rides rough-shod over their development controls and often forces communities to accept projects that ignore community design sensibilities and overburden local services.

Some of those complaints are justified. It is certainly possible to find examples of developments that were inappropriate for their sites, or out of place in the communities in which they were developed. But the campaign against 40B exaggerated the problems the law has created, while downplaying the good it has done. The fact is, since its adoption in 1969, the statute has facilitated the construction of tens of thousands of units of affordable housing in scores of communities that would have been unlikely to produce this housing, or encourage its production, on their own.

The shortage of housing that is affordable to low- and moderate-income residents, a perennial problem in Massachusetts, has reached crisis proportions in the last five years, as the housing boom has pushed prices in many communities beyond the reach of the teachers, firemen, policemen, and government employees working there. A shrinking supply of federal housing assistance has exacerbated the problem, making 40B more important than ever, and making last year’s assault on the program all the more disturbing.

Strange Bedfellows

The anti-40B movement gained traction in part because it produced strange political bedfellows: Liberal environmentalists allied with traditionally conservative “not-in-my-backyard” neighborhood groups, to support proposed legislation that would have considerably blunted the law’s ability to force construction of affordable housing in resistant communities. On the other side, traditionally liberal housing advocacy organizations joined hands with conservative (and traditionally anti-government-regulation) housing developers in opposing the effort to gut 40B. The legislature ultimately approved a bill last summer containing many (although not all) of the concessions sought by the anti-40B forces.

Although former Gov. Jane Swift vetoed the measure, the state Department of Housing and Community Development (DHCD) took the campaign against 40B seriously and adopted new regulations addressing some of the community complaints that had driven the initiative. The hope, and it’s a reasonable one, is that tweaking the law in significant ways will ease the pressure to marginalize it or eliminate it entirely.

Breathing Space

The revised rules allow communities to reject 40B applications as long as they have increased their affordable housing supply by at least .75 percent of their total housing stock in the past 12 months. This sets a higher new production standard than the vetoed legislation, which would have required only a .5 percent annual increase in the affordable housing stock to qualify for the temporary 40B relief. But it provides the “breather’ requested by communities that complained they were being overrun by 40B projects. Communities can continue to block 40B projects as long as they continue to meet the DHCD’s base-line affordable housing goal.

The new rules also allow communities to count affordable housing constructed under the Community Preservation Act and long-term housing for the mentally ill toward their affordable housing goal. This responds to community complaints about the difficulty of reaching the 10 percent target, but it does not go a far as the House version of the 40B legislation, which would have counted mobile homes and Section 8 developments in the affordable housing tally.

Saving the NEF

The DHCD has also taken steps to address another threat to 40B involving the Federal Home Loan Bank of Boston’s New England Fund (NEF). Since its creation in 1991, the NEF has emerged as the primary source of private financing for 40B housing developments. Under the program, participating FHLBBoston member banks provide construction financing directly to developers, offering an alternative to the financing programs available from state and federal agencies.

The Town of Barnstable challenged the FHLB program a few years ago, arguing that the NEF did not legally qualify as a housing subsidy program or meet other requirements for funding under 40B. The state Housing Appeals Committee ruled otherwise in Stuborn Ltd. Partnership v. Barnstable Board of Appeals, finding that the NEF qualified as an approved 40B subsidy program and that FHLBBoston member banks had the authority to issue “project eligibility” or “site approval” letters on the projects they financed. That ruling apparently produced an increase in the number of NEF projects and triggered a backlash from community officials, who complained that the banks’ site approval procedures were haphazard and far less rigorous than the reviews conducted by the Massachusetts Housing Finance Agency (MHFA) and other governmental agencies.

In response to those complaints, the DHCD issued proposed rules last summer under which the FHLBBoston itself would be required to issue the site approval letters – a proposal FHLBBoston President Michael Jessee greeted with a notable lack of enthusiasm. “The DHCD’s action would place the bank, a federal instrumentality, in the untenable position of acting in a regulatory and compliance role for a state program,” Jessee wrote in an August 9 letter to the state, announcing that he was suspending the NEF, effective immediately.

Try Again

Responding quickly, the DHCD drafted another rule, this time proposing that an unspecified “public entity authorized by DHCD” would issue the site approval letters and provide the public oversight that communities say 40B projects need. Since then, the MHFA has stepped into the breach, offering to play that supervisory role.

“Mass Housing has a time tested, respected, and thorough site approval process,” Thomas Gleason, the agency’s executive director, stated in an article in Massbuilder. “Developers have worked with [the MHFA process] for years,” he added, noting that the process “both requires and respects input from the communities.”

Although the FHLBBoston has not yet reinstated the NEF, Jessee has indicated that he is prepared to do so, to the immense relief of housing developers who have come to rely on that funding program.

The NEF fix and other 40B compromises the DHCD has fashioned won’t please everyone, but they do address the most serious objections municipal officials have raised, smoothing some of 40B’s rougher spots without dulling its edge or seriously reducing its effectiveness as an affordable housing prod. History suggests that this prod has been effective. The state’s widening affordable housing gap confirms that it is still needed.