Massachsetts Law Links - Chapter 40B Information

Unlike private for-profit developers proposing to build market-rate housing in Massachusetts, "public agencies, limited dividend and non-profit organizations" proposing to build "low or moderate income housing" are subject to "affordable zoning" under G.L. Chapter 40B. G.L. c. 40B, sec. 21 Chapter 40B defines "low or moderate income housing" as housing "subsidized by the federal or state government...." G.L. c. 40B, sec 20 Examples of Massachusetts affordable housing subsidy programs that qualify under Chapter 40B include the Housing Starts and Affordable Housing Trust Fund programs provided by MassHousing, the state's housing finance agency. Other examples of such subsidy programs include the Housing Development Support Program provided by Massachusetts Department of Housing and Community Development, the Permanent Rental Financing Program of Massachusetts Housing Partnership Fund, and the Homeownership Development Program provided by the Cape Cod Commission, as agent for the Barnstable County HOME Consortium. Each of these programs contains detailed eligibility requirements, including limits on the developer's profit margin and minimum levels of affordability for the project. For example, the Housing Starts program limits developer profit on homeownership projects to twenty percent (20%) of total development costs, and requires that twenty-five percent (25%) of the homes be sold to homebuyers earning no more than eighty percent (80%) of the area median income.

Under Chapter 40B, a developer of affordable housing who has received a "site approval letter" indicating that the project is eligible for such a subsidy program, may submit a single application for a "comprehensive permit" to the Zoning Board of Appeals, “in lieu of separate applications to the applicable local boards,” and the ZBA will have “the same power to issue permits or approvals as any local board . . . who would otherwise act with respect to such application,” including the power to make conditions relating to “height, site plan, size or shape, or building materials.” G.L. c. 40B, sec. 21 In addition, the ZBA will have the authority to “override local requirements and regulations that are inconsistent with local needs.” Hanover v. HAC, 363 Mass 339, 354 (1973). The statute defines “consistent with local needs” as “reasonable in view of regional need for low and moderate income housing” and “the need to protect the health or safety of the occupants or of the residents of the city or town, to promote better site and building design in relation to the surroundings, or to preserve open spaces….” G.L. c. 40B, sec 20. According to the Court, this standard requires the ZBA to “balance the regional need for low and moderate income housing against any objection to the details of the proposed plan." Hanover v. HAC, 363 Mass. at 365. As to any conditions that might be imposed on the permit, the Court also requires that the ZBA determine whether such conditions will make the project “uneconomic.” The statute defines an “uneconomic” condition as, for example, one that would make it impossible for a limited dividend organization to make a “reasonable return.” G.L. c. 40B, sec. 20. Accordingly, a Chapter 40B application should not be denied (either explicitly or effectively by imposing conditions that would make the project "uneconomic") unless it is not "consistent with local needs."

Chapter 40B also provides that a developer may appeal to the Housing Appeals Committee if the application is denied or “granted with such conditions and requirements as to make the building or operation of such housing uneconomic.” G.L. c. 40B, sec. 22. According to the Supreme Judicial Court, HAC is then charged with conducting a de novo review of the evidence and making its own determination of how the balancing test should be applied to the facts of the particular case. Hanover v. HAC, 363 Mass. 369. The procedure before HAC is similar to a civil trial, see 760 CMR 30.00 (HAC's procedural regulations), and it is up to the ZBA to prove that there is a valid health, safety, environmental or other local concern which supports the denial of an application (or the imposition of “uneconomic” conditions) and such concern outweighs the need for affordable housing. 760 CMR 31.06(7) (One of HAC’s Criteria for Decisions). According to HAC’s regulations, the weight of the local concern will be commensurate with the degree to which health and safety is “imperiled,” the environment is “endangered,” or the design is “seriously deficient” and the degree to which the local requirements bear a “direct and substantial relationship” to the protection of the concern. 760 CMR 31.07(2) (Another of HAC’s Criteria for Decisions). If HAC disagrees with the ZBA’s decision, HAC is empowered to “vacate such decision” or “modify or remove” any “uneconomic” condition, and direct the ZBA to issue the requested permit to the applicant. G.L. c. 40B, sec. 23.

Because the developer has the right to have the ZBA's decision reviewed de novo by HAC if the application is denied, it is important for the ZBA to be able to demonstrate to HAC that any conditions it has imposed are "bona fide," Cooperative Alliance of Massachusetts v. Taunton Zoning Board of Appeals, No. 90-05, slip op. at 8, n. 12 (Mass. Housing Appeals Committee April 2, 1992); that the Board has acted "fairly and reasonably," MacGibbon v. Board of Appeals of Duxbury, 356 Mass. 635, 638 (1970); and that there is a "reasonable factual and legal justification" for each condition, Peppercorn Village Realty Trust v. Hopkigton Board of Appeals, No. 02-02 (Mass. Housing Appeals Committee January 26, 2004). "Conditions unrelated to the concerns cognizable under c. 40B, unreasonably or arbitrarily imposed, or based on legally untenable grounds should not be allowed to stand," Archstone Communities Trust v. Woburn Board of Appeals, No. 01-07, p. 20-21 (Mass. Housing Appeals Committee June 11, 2003); and conditions that are “founded [only] on broad considerations of the general public welfare” are also beyond the authority of the ZBA. Middlesex & Boston St. Railway Co. v. Board of Aldermen of Newton, 371 Mass. 849, 857-858 (1977). However, bona fide conditions that have sufficient evidentiary support and are properly crafted to address specific local concerns, should be upheld unless the developer can show that the conditions render the project "uneconomic."

Because HAC is also empowered to decide whether any conditions imposed by the ZBA make it "uneconomic" for the developer to move forward, it is also incumbent upon the ZBA to be able to rebut any claim that the developer cannot satisfy the conditions and still make a "reasonable return." In the recent case of Rising Tide Development, LLC v. Lexington Board of Appeals, No. 03-05 (Mass Housing Appeals Committee June 14, 2005), HAC explained that the proper procedure for homeownership housing is to conduct "an analysis of the Return on Total Costs (ROTC)...." However, it also conceded that "not only is the ultimate projection of total profit merely an estimate, but in addition, nearly all of the factors on which the calculations based are themselves estimates." In addition, "different experts approach the nuances of profit analysis in slightly different ways." As a result, the process of determining whether conditions make a project "uneconomic" is far from an exact science. What is most important is the credibility of the expert witnesses who testify on behalf of the parties and the soundness of the pro forma financial statements the parties introduce into evidence at trial. If the developer can persuade HAC that the ZBA has affectively denied the application by imposing conditions that make it "uneconomic" to move forward, HAC will modify or remove the conditions unless they address a local concern that is serious enough to outweigh the regional need for low and moderate income housing.

An example of the relatively rare circumstances where the denial of a comprehensive permit was upheld because the local concern involved outweighed the need for affordable housing can be found in the case of Lexington Woods, LLC v. Waltham Board of Appeals, No 02-36 (Mass Housing Appeals Committee February 1, 2005). The developer in Lexington Woods sought a comprehensive permit to build a 36 unit condominium development on 6.6 acres of land in Waltham, Massachusetts. Access to the site was to be provided solely by a long, narrow roadway that wound upward from the main road increasing in grade to 10% as it approached the top of the hill where the site was located (there would be no secondary access road). At the trial, the ZBA introduced evidence that the design of the roadway, and the lack of any secondary access road, raised serious health and safety concerns. Among other things, the presence of "reverse curves," which could cause a motorist to lose control of his vehicle, and the lack of any "tangent" or straight area between the curves, where a motorist could attempt to recover control, could make the road unsafe for motorists. Also, the roadway could become blocked, preventing emergency vehicles from gaining access to the property. After reviewing the evidence, HAC agreed that these health and safety concerns outweighed the regional need for affordable housing, and affirmed the Board's denial of the comprehensive permit.

Because the ZBA's authority under Chapter 40B is so limited, it is incumbent upon the ZBA work with the affordable housing developer to create conditions that address local concerns but do not render the project "uneconomic." In a sense, the conditions function as custom tailored zoning requirements that are applicable only to the project involved in the application. "Affordable zoning" under Chapter 40B is flexible zoning that addresses local needs in a cost-effective manner. The statute requires that the housing be affordable and, in a way, it requires that the zoning be affordable too.




AFFORDABLE ZONING UNDER CHAPTER 40B Unlike private for-profit developers proposing to build market-rate housing in Massachusetts, "public agencies, limited dividend and non-profit organizations" proposing to build "low or moderate income housing" are subject to "affordable zoning" under G.L. Chapter 40B. G.L. c. 40B, sec. 21 Chapter 40B defines "low or moderate income housing" as housing "subsidized by the federal or state government...." G.L. c. 40B, sec 20 Examples of Massachusetts affordable housing subsidy programs that qualify under Chapter 40B include the Housing Starts and Affordable Housing Trust Fund programs provided by MassHousing, the state's housing finance agency. Other examples of such subsidy programs include the Housing Development Support Program provided by Massachusetts Department of Housing and Community Development, the Permanent Rental Financing Program of Massachusetts Housing Partnership Fund, and the Homeownership Development Program provided by the Cape Cod Commission, as agent for the Barnstable County HOME Consortium. Each of these programs contains detailed eligibility requirements, including limits on the developer's profit margin and minimum levels of affordability for the project. For example, the Housing Starts program limits developer profit on homeownership projects to twenty percent (20%) of total development costs, and requires that twenty-five percent (25%) of the homes be sold to homebuyers earning no more than eighty percent (80%) of the area median income. Under Chapter 40B, a developer of affordable housing who has received a "site approval letter" indicating that the project is eligible for such a subsidy program, may submit a single application for a "comprehensive permit" to the Zoning Board of Appeals, “in lieu of separate applications to the applicable local boards,” and the ZBA will have “the same power to issue permits or approvals as any local board . . . who would otherwise act with respect to such application,” including the power to make conditions relating to “height, site plan, size or shape, or building materials.” G.L. c. 40B, sec. 21 In addition, the ZBA will have the authority to “override local requirements and regulations that are inconsistent with local needs.” Hanover v. HAC, 363 Mass 339, 354 (1973). The statute defines “consistent with local needs” as “reasonable in view of regional need for low and moderate income housing” and “the need to protect the health or safety of the occupants or of the residents of the city or town, to promote better site and building design in relation to the surroundings, or to preserve open spaces….” G.L. c. 40B, sec 20. According to the Court, this standard requires the ZBA to “balance the regional need for low and moderate income housing against any objection to the details of the proposed plan." Hanover v. HAC, 363 Mass. at 365. As to any conditions that might be imposed on the permit, the Court also requires that the ZBA determine whether such conditions will make the project “uneconomic.” The statute defines an “uneconomic” condition as, for example, one that would make it impossible for a limited dividend organization to make a “reasonable return.” G.L. c. 40B, sec. 20. Accordingly, a Chapter 40B application should not be denied (either explicitly or effectively by imposing conditions that would make the project "uneconomic") unless it is not "consistent with local needs." Chapter 40B also provides that a developer may appeal to the Housing Appeals Committee if the application is denied or “granted with such conditions and requirements as to make the building or operation of such housing uneconomic.” G.L. c. 40B, sec. 22. According to the Supreme Judicial Court, HAC is then charged with conducting a de novo review of the evidence and making its own determination of how the balancing test should be applied to the facts of the particular case. Hanover v. HAC, 363 Mass. 369. The procedure before HAC is similar to a civil trial, see 760 CMR 30.00 (HAC's procedural regulations), and it is up to the ZBA to prove that there is a valid health, safety, environmental or other local concern which supports the denial of an application (or the imposition of “uneconomic” conditions) and such concern outweighs the need for affordable housing. 760 CMR 31.06(7) (One of HAC’s Criteria for Decisions). According to HAC’s regulations, the weight of the local concern will be commensurate with the degree to which health and safety is “imperiled,” the environment is “endangered,” or the design is “seriously deficient” and the degree to which the local requirements bear a “direct and substantial relationship” to the protection of the concern. 760 CMR 31.07(2) (Another of HAC’s Criteria for Decisions). If HAC disagrees with the ZBA’s decision, HAC is empowered to “vacate such decision” or “modify or remove” any “uneconomic” condition, and direct the ZBA to issue the requested permit to the applicant. G.L. c. 40B, sec. 23. Because the developer has the right to have the ZBA's decision reviewed de novo by HAC if the application is denied, it is important for the ZBA to be able to demonstrate to HAC that any conditions it has imposed are "bona fide," Cooperative Alliance of Massachusetts v. Taunton Zoning Board of Appeals, No. 90-05, slip op. at 8, n. 12 (Mass. Housing Appeals Committee April 2, 1992); that the Board has acted "fairly and reasonably," MacGibbon v. Board of Appeals of Duxbury, 356 Mass. 635, 638 (1970); and that there is a "reasonable factual and legal justification" for each condition, Peppercorn Village Realty Trust v. Hopkigton Board of Appeals, No. 02-02 (Mass. Housing Appeals Committee January 26, 2004). "Conditions unrelated to the concerns cognizable under c. 40B, unreasonably or arbitrarily imposed, or based on legally untenable grounds should not be allowed to stand," Archstone Communities Trust v. Woburn Board of Appeals, No. 01-07, p. 20-21 (Mass. Housing Appeals Committee June 11, 2003); and conditions that are “founded [only] on broad considerations of the general public welfare” are also beyond the authority of the ZBA. Middlesex & Boston St. Railway Co. v. Board of Aldermen of Newton, 371 Mass. 849, 857-858 (1977). However, bona fide conditions that have sufficient evidentiary support and are properly crafted to address specific local concerns, should be upheld unless the developer can show that the conditions render the project "uneconomic." Because HAC is also empowered to decide whether any conditions imposed by the ZBA make it "uneconomic" for the developer to move forward, it is also incumbent upon the ZBA to be able to rebut any claim that the developer cannot satisfy the conditions and still make a "reasonable return." In the recent case of Rising Tide Development, LLC v. Lexington Board of Appeals, No. 03-05 (Mass Housing Appeals Committee June 14, 2005), HAC explained that the proper procedure for homeownership housing is to conduct "an analysis of the Return on Total Costs (ROTC)...." However, it also conceded that "not only is the ultimate projection of total profit merely an estimate, but in addition, nearly all of the factors on which the calculations based are themselves estimates." In addition, "different experts approach the nuances of profit analysis in slightly different ways." As a result, the process of determining whether conditions make a project "uneconomic" is far from an exact science. What is most important is the credibility of the expert witnesses who testify on behalf of the parties and the soundness of the pro forma financial statements the parties introduce into evidence at trial. If the developer can persuade HAC that the ZBA has affectively denied the application by imposing conditions that make it "uneconomic" to move forward, HAC will modify or remove the conditions unless they address a local concern that is serious enough to outweigh the regional need for low and moderate income housing. An example of the relatively rare circumstances where the denial of a comprehensive permit was upheld because the local concern involved outweighed the need for affordable housing can be found in the case of Lexington Woods, LLC v. Waltham Board of Appeals, No 02-36 (Mass Housing Appeals Committee February 1, 2005). The developer in Lexington Woods sought a comprehensive permit to build a 36 unit condominium development on 6.6 acres of land in Waltham, Massachusetts. Access to the site was to be provided solely by a long, narrow roadway that wound upward from the main road increasing in grade to 10% as it approached the top of the hill where the site was located (there would be no secondary access road). At the trial, the ZBA introduced evidence that the design of the roadway, and the lack of any secondary access road, raised serious health and safety concerns. Among other things, the presence of "reverse curves," which could cause a motorist to lose control of his vehicle, and the lack of any "tangent" or straight area between the curves, where a motorist could attempt to recover control, could make the road unsafe for motorists. Also, the roadway could become blocked, preventing emergency vehicles from gaining access to the property. After reviewing the evidence, HAC agreed that these health and safety concerns outweighed the regional need for affordable housing, and affirmed the Board's denial of the comprehensive permit. Because the ZBA's authority under Chapter 40B is so limited, it is incumbent upon the ZBA work with the affordable housing developer to create conditions that address local concerns but do not render the project "uneconomic." In a sense, the conditions function as custom tailored zoning requirements that are applicable only to the project involved in the application. "Affordable zoning" under Chapter 40B is flexible zoning that addresses local needs in a cost-effective manner. The statute requires that the housing be affordable and, in a way, it requires that the zoning be affordable too.

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AFFORDABLE ZONING UNDER CHAPTER 40B