SJC Decision Shifts Balance of Power Under 40B

Published on: June 22, 2002

Comprehensive affordable housing permits issued under Chapter 40B (the state’s anti-snob zoning statute) have always involved a tug-of-war between developers seeking to build the housing and local communities that want to limit or prohibit it. But a recent state Supreme Judicial Court (SJC) decision has significantly shifted the balance in those contests and possibly altered the way developers and communities will approach 40B proposals in the future.

 The decision in Zoning Board of Appeals of Wellesley v. Ardemore Apartments Limited Partnership, arose from an attempt by the owners of a subsidized apartment complex, built under a 40B comprehensive permit, to convert the affordable units to market rentals. The 40B process allows affordable housing developers to bypass local zoning restrictions in communities where affordable housing represents less than 10 percent of the total housing stock – the minimum standard the statute requires. The financing agreement for this project required the developer to maintain affordable rents for 15 years, but the 40B permit did not specify a minimum affordability period. The town argued that the permit’s silence on that point meant the units must remain affordable as long as the zoning requirements the permit overrode remained in effect – essentially, for the life of the building. The owners contended that absent a contrary agreement between the developer and the town, the financing terms should control. To the surprise and dismay of the development community, the court sided with the town.

Legislative Intent

“Where a comprehensive permit itself does not specify for how long housing units must remain below market, the [40B] Act requires an owner to maintain the units as affordable for as long as the housing is not in compliance with local zoning requirements, regardless of the terms of any construction subsidy agreement….As cities and towns are not parties to the construction subsidy agreements,” the court added, “we think it unwise to read into the legislation a requirement that they be bound by those agreements.”

The problem with the owners’ argument, the court said, is that it sets up an endless cycle in which communities fall into and out of compliance with the statutory affordable housing requirement, leaving them perpetually vulnerable to 40B overrides of local zoning rules, without ever achieving the stable affordable housing supply the state law envisions.  

“It is anomalous to suggest, as the owner does, that the legislation provides a temporal, short-term fix of insufficient affordable housing at the expense of local autonomy,” the court held in its majority opinion. “We see nothing in [the statute] to suggest that the Legislature intended to override local zoning autonomy only to create a fleeting increase in the affordable housing stock, leaving cities and towns vulnerable to successive zoning overrides, and the issuance of a never-ending series of comprehensive permits.”

Restoring Local Control

Communities will welcome that interpretation, because it returns at least some of the autonomy they had lost under the 40B approval process and restores an element of certainty to the local planning process. Local officials can know that affordable units built under existing 40B permits – at least, the permits that do not specify an affordability time period – will not fall out of the local affordable housing stock.

But the decision also turns conventional wisdom about 40B on its head. Developers can no longer assume, as they have traditionally, that the financing agreement under which a project is built will dictate the limits of its affordability requirements. If the comprehensive permit does not specify a time limit, there isn’t one. As a result, many developers – and it is not yet clear how many –who built 40B projects expecting to convert the affordable units to market rentals, will find that they are unable to do so. For existing 40B projects without time limits in their permits, the Ardemore decision represents “game, set and match.” The affordability restrictions they thought would be temporary are going to be permanent. For developers seeking future 40B permits, including a time limit in the comprehensive permit will now be an obvious priority. But they will find that this SJC decision has significantly strengthened the negotiating position of cities and towns, making the permitting process somewhat less of a cakewalk for developers than it has been for some of them in the past.

Permit Approval Process

The 40B approval process works like this. A developer seeking to build multi-family housing in a community that falls below the 10 percent affordable housing minimum, submits a request for a single comprehensive permit to the local zoning board, instead of filing separate applications with all of the local boards that would have jurisdiction over a nonconforming project. If the zoning board rejects the application or imposes conditions that make the project “uneconomic,” the developer can appeal to a state Housing Appeals Committee. If the committee finds that the project is “reasonable and consistent with local needs” – a virtually automatic finding if the community does not meet its affordable housing requirement – the HAC can overrule the zoning board and approve the development.

Because developers have known they could pretty much count on HAC approval, they have not cared too much whether a town approved their comprehensive permit or not. But following Ardemore, developers will want towns to include an affordability time limit in the permit, while communities, for their part, will want to extend the affordability requirement for new projects indefinitely. And the HAC, with its bias toward maintaining affordability, is likely to side with the communities on this issue.

This fundamentally shifts the balance of power in 40B negotiations. Communities, which have felt themselves to be somewhat at the mercy of developers, will be able to demand concessions they could not have expected to win the past. And instead of waiting for developers to initiate a 40B override, forward thinking communities trying to meet their 10 percent requirement may now approach developers and invite them to construct affordable housing, offering to include affordability time limits in the permit as an incentive for the developer to locate the project in an area the community deems appropriate.

No Carte Blanche

Developers confronting this revamped 40B landscape will have to recognize that while 40B is a strong statute for them, it does not give them carte blanche to do whatever they want. They will have to be more sympathetic and responsive to community concerns than many have been in the past.

Although the Massachusetts legislature enacted 40B more than 30 years ago, only 50 of the state’s 124 cities and towns currently meet, or come close to meeting, their statutory affordable housing goals. By forcing developers to be more realistic and more accommodating in their negotiations with communities, and by encouraging communities to be less defensive and more proactive about addressing their affordable housing needs, this SJC decision may finally produce the affordable housing progress that 40B was designed to achieve.