Kenneth Forton*

Abstract:  The United States is in an affordable housing crisis; the problem is particularly acute in Massachusetts. Local zoning—especially in the form of density controls—is probably the most significant cause of the crisis. To mitigate the power of local zoning Massachusetts passed the Comprehensive Permit Law, which allows local zoning boards of appeals to override local zoning if certain requirements are met. One of those requirements, a government subsidy to the developer, has in some instances hindered the construction of affordable housing. Typically, a subsidy is required as an incentive to builders; otherwise their projects would not be profitable enough for them. In localities where real estate values are high, however, a density bonus (being able to develop more units on the same piece of land) may be enough to incentivize builders. In areas where subsidies are not necessary, project oversight, now largely performed by subsidizing agencies, should be performed by the Department of Housing and Community Development or local housing authorities.


The United States has been in an affordable housing crisis for at least thirty years.1 An increasing percentage of very low income households spend more than half of their incomes on housing.2 Al[*PG652]most half of very low income renters paid more than half of their incomes in rent.3 While welfare–to–work programs have been successful in some ways, working will not get low income people out from under the burden of these unreasonably high housing costs.4

Though an important planning tool, local zoning is the most visible, and probably the most significant, cause of the affordable housing crisis.5 Density controls, such as large minimum lot sizes and height and multi–family restrictions, make affordable housing development especially difficult.6 Density controls make it far less lucrative for developers to build lower–cost homes or apartment buildings than to build market–rate residences.7 Furthermore, profit margins on affordable housing are generally lower than at–market housing, and thus market forces also drive developers to build larger and larger suburban houses.8

While the nation as a whole has made a half–hearted effort to build more affordable housing, Massachusetts has taken the problem more seriously by passing a far–reaching affordable housing statute, the Comprehensive Permit Law (also known as the Anti–Snob Zoning Act or 40B).9 If less than ten percent of a town’s housing stock is subsidized, 40B allows local zoning boards of appeals to override local zoning and grant comprehensive permits to build affordable housing under a variety of subsidy programs.10 In the past decade, two “shallow” subsidy programs have been instrumental in getting affordable units built in the face of decreasing government funding.11

Part I of this Note describes the problems 40B has attempted to address and the history of the statute’s passage. Part II explains how 40B works. Part III discusses the implementation of 40B. Part IV notes the shift in affordable housing financing from command–and–control [*PG653]programs to more market–driven programs. Part IV also explains 40B’s government subsidy requirement and two more market–driven programs which fulfill the requirement: the Local Initiative Program and the New England Fund. Part V advocates for the repeal of the government subsidy requirement and argues in favor of government agency oversight in its place.

I.  Working Toward a Solution to the Affordable Housing Crisis: Passing Chapter 40B

A.  The Historical Problems 40B Attempted to Address

As far back as 1890, the United States was in a housing crisis.12 Finally, Congress passed the Housing Act of 1949,13 promising “a decent home and a suitable living environment for every American family.”14 In the thirty years after the Housing Act was passed, however, the crisis only grew worse.15 By the 1960 Housing Census, 113,000 households (which accounted for more than 300,000 persons) in the Boston metropolitan area were living in substandard housing.16 Furthermore, a 1964 report found that the housing problem was “a metropolitan problem” because over half of the substandard units were in Boston’s surrounding area and not the central city.17 Less than two percent of all units in the metropolitan area both met building codes [*PG654]and were vacant, and the vacant units were relatively small and expensive.18

This shortage of affordable housing has been partially caused by racism.19 In the midst of racial upheaval and attempted integration of Boston’s schools and public housing, the Massachusetts Advisory Committee to the U.S. Commission on Civil Rights and the Massachusetts Commission Against Discrimination issued a report on housing discrimination in the Boston metropolitan area.20 The report found that suburban development policies increased racial isolation.21

Suburban Boards of Appeals have been afraid to build affordable housing partially because they fear that minority residents will decrease property values.22 Rather than publicly state this fear, more savvy suburbs have followed a double standard in approving housing development.23 Affordable housing requires community approval and strong community support.24 Even if an affordable housing development receives some support, the Report found, community leaders and public officials can mask their true motives by “discovering” drainage, water, and traffic problems.25 These tactics delay construction and increase costs to the developer, thus effectively making affordable housing far more difficult to build than market–rate hous[*PG655]ing.26 Market–rate or luxury developers, on the other hand, are given more latitude.27

In addition to being racially discriminatory, suburban development policies have worked against families and children.28 Education is largely financed by local property taxes; generally, these taxes are levied on all non–government land, whether residential, commercial, or industrial.29 Only residential land, however, generates children to be educated.30 Thus, to the extent that the town reduces or limits the number of children that must be educated, the lower it can keep property taxes.31

Near–Boston suburbs embraced this logic while the new Route 128 was being built.32 During that period towns generally used two methods to limit the number of children in their communities.33 Some towns promoted a heavy concentration of less desirable industries, while others boosted minimum residential lot sizes.34 Towns prefer industry because it does not increase the number of children in a town, and fewer children live on a two acre estate than in a 150 unit apartment building built on two acres.35

Compounding the problems of racial and family/child exclusion, the Boston Metropolitan area’s attempts at urban renewal made no allowances for creating new housing units to replace the ones demolished for the construction of the new Route 128 and other highway projects.36 Boston’s West End, for instance, an Italian–American working class neighborhood, was completely razed in the late 1950s to [*PG656]build the Government Center complex.37 Urban renewal planners naively predicted that the suburbs would help absorb the thousands of dislocated low income households by allowing construction of affordable units scattered in small developments among the suburban towns.38 Exclusionary zoning in the suburbs, however, made these predictions moot.39

Suburban local zoning has probably been the most significant cause of the affordable housing crisis.40 Local zoning practices, especially the use of large minimum lot sizes and height and multi–family restrictions, make building affordable housing units financially infeasible for developers.41 To build more units of affordable housing, then, developers needed a way to override exclusionary zoning practices.42 Developers also needed subsidies to make construction of affordable units more financially feasible.43

B.  Passing the Comprehensive Permit Law

In 1969, the Massachusetts Legislature provided developers a zoning override in the form of the Comprehensive Permit Law (40B).44 Under 40B, if the state or federal government provides a subsidy to a developer, 40B provides a zoning override.45 Passage of the 40B was extraordinary, given New England’s strong tradition of local control and town government.46 Furthermore, Massachusetts’s recently passed Home Rule Amendment had given municipalities further local control.47

Massachusetts’s cities and suburbs were also in conflict over de facto school segregation in Boston and other cities.48 In 1966, liberals in the Legislature, many of whom were from the suburbs, helped pass a state racial imbalance law, which, if it was actually implemented, [*PG657]would have forced cities to integrate their schools.49 City legislators who represented white working class neighborhoods, especially those from Boston, opposed the racial imbalance legislation.50 The city legislators resented these “limousine liberals” in the suburbs who, it appeared, were forcing their views on the cities.51

In 1969, these resentful working class democrats formed a coalition with pro–housing liberals, including some Republican suburbanites, to pass 40B.52 It was ironic that city legislators supported 40B, since many of them had fought against affordable housing in their own cities.53 One of 40B’s primary supporters later described this coalition as a “one–shot deal . . . for better or worse, a rather unholy alliance.”54

Against this background, 40B became law on August 23, 1969.55 Unlike the New York Urban Development Corporation (UDC), 40B was a passive program.56 The UDC gave New York the power directly to redevelop its cities and attempt to distribute affordable housing through new development and fair share allocations.57 Perhaps because it was so directly confrontational, the UDC was eventually eviscerated when villages and towns were given the power to disapprove any UDC projects.58

The Comprehensive Permit Law, on the other hand, was more passive than the UDC.59 In passing 40B, the legislature intended to [*PG658]provide relief from exclusionary zoning practices that prevented the construction of much needed low and moderate income housing.60 Specifically, 40B sought to create new units of affordable housing in suburbs where large lot requirements and multi–family and height restrictions made building affordable units nearly impossible.61 The statute provides a streamlined procedure whereby a developer may obtain a comprehensive permit to build, rather than forcing the developer to file separate applications with each local agency or official having jurisdiction over various aspects of the proposed project.62

II.  Chapter 40B, The Comprehensive Permit Law

A.  Application for a Comprehensive Permit Under Chapter 40B

Under Chapter 40B, a public agency or any non–profit or limited dividend organization with preliminary subsidy approval for the construction of low or moderate income housing63 can submit an application for a comprehensive permit to a local zoning board of appeals.64 Next, the zoning board of appeals will approve the application or approve it subject to conditions that do not make the project “uneconomic.”65 Conditions are “uneconomic” if they make it “impossible for a public agency or nonprofit organization to proceed in building or operating low or moderate income housing without financial loss, or for a limited dividend organization to proceed and still realize a reasonable return . . . .”66 The board of appeals may also deny a comprehensive permit application or approve it with conditions which make the project uneconomic, but only if the local decision is “consis[*PG659]tent with local needs.”67 Under 40B, conditions which make a project uneconomic can only be “consistent with local needs” if the town’s housing stock is at least ten percent affordable or the proposed site is exceedingly large.68

B.  Appeal to the Housing Appeals Committee

If a comprehensive permit is denied or if a developer thinks uneconomic conditions have been imposed upon the development, she may appeal the zoning board’s decision to the Housing Appeals Committee of the Department of Housing and Community Development (HAC).69 Other aggrieved persons, abutters for instance, may intervene in the HAC proceedings or appeal the zoning board’s decision to a state court.70 When a developer appeals the board’s decision to the HAC, the HAC conducts a de novo review of the application.71 Where the decision is not consistent with local needs, the HAC is empowered to vacate or modify the decision and to order the issuance of a comprehensive permit.72

Proof that a municipality does not satisfy the statutory minimum of ten percent low and moderate income housing creates a rebuttable presumption that the regional housing need outweighs local health, safety, design, or planning concerns.73 Where a municipality rebuts [*PG660]this presumption, the HAC applies a balancing test, weighing local planning concerns against the regional need for housing.74 In balancing the local planning concerns against the regional need for housing, the HAC bases the regional need for housing on the proportion of the municipality’s population consisting of low income persons.75 The HAC bases the local planning concern on

the degree to which the natural environment is endangered, the degree to which the design of the site and the proposed housing is seriously deficient, the degree to which additional open spaces are critically needed in the city or town, and the degree to which the local requirements and regulations bear a direct and substantial relationship to the protection of such local concerns . . . .76

Under these strict standards, local planning concerns rarely outweigh a town’s regional housing need.77 In short, 40B gives a town almost no chance of denying a developer’s application without the HAC vacating its decision and directing the local board to issue a comprehensive permit.78

If the local board imposes conditions on a development and the developer appeals to the HAC, then the HAC may either uphold the conditions or modify them.79 When the HAC reviews a local board’s decision to impose conditions on a development, four results are possible.80 First, if the conditions are uneconomic, and they are not consistent with local needs, then the HAC will modify the conditions.81 Second, if the conditions are uneconomic but they are consistent with local needs, then the HAC will uphold the conditions.82 Third, if the [*PG661]conditions are not uneconomic and are consistent with local needs, then the HAC will uphold them because, under title 760 of the Massachusetts Regulations, section 31.06(3), if a condition does not make a project uneconomic, then the developer has not sustained its burden of proof and no further inquiry into consistency with local needs is necessary.83 Finally, if the conditions are not uneconomic, but they are still not consistent with local needs, the conditions should be upheld because they are consistent with the legislative intent of the Act—to permit affordable housing without undue intrusion on local prerogatives.84

Because most towns’ subsidized housing inventory is well below ten percent, when a decision is appealed, it is likely that any uneconomic conditions will be modified by the HAC because the conditions will not be considered consistent with local needs under the statute.85 The HAC, however, will probably uphold any conditions that a non–compliant town imposes, as long as they are not uneconomic under 40B.86 For instance, to protect a town’s water supply, the board of appeals may be able to force a developer to install sewer and drainage lines for a proposed development so long as they do not make the project uneconomic.87 If the conditions do make the project uneconomic, then the town may argue either that the development endangers the environment or that the town has a valid planning concern.88 In practice, however, the HAC rarely finds valid planning concerns or danger to the environment for purposes of issuing comprehensive permits under 40B because most towns do not enforce their planning and environmental concerns equally against subsidized and market rate housing.89

[*PG662]III.  The Implementation of 40B

The implementation of Chapter 40B can be divided into four historical phases.90 First, from 1970 to 1973, the constitutionality of the law was established.91 In these early years, nearly all comprehensive permit applications were denied and none of the seventeen proposed projects were built.92 In the second phase, a track record for 40B was established.93 During this period there were dramatic decreases in the number of comprehensive permit denials because municipalities were more likely to approve permit applications with conditions.94 Progress was still slow: in the 1970s, only 40% of the projects and 30% of the units for which permit applications were filed were built.95 At the same time, federal and state housing policy changes made building subsidized units more difficult.96 Despite these unfavorable conditions, affordable units almost doubled from 85,600 in 1972 to over 165,000 in 1983.97 But, the available data from a study by the Citizens’ Housing and Planning Association shows that only approximately 4400 units could be attributed to 40B.98

The third phase from 1983 to 1989 saw an explosion in housing programs and, unfortunately, in rents and home prices as well.99 Still facing local opposition, the Legislature created the Massachusetts Housing Partnership Fund (MHP) to administer programs to pro[*PG663]duce more affordable housing and broaden homeownership in general by creating Local Housing Partnerships (LHPs).100 LHPs, informal coalitions of local legislators, planners, builders, clergy, business people, and the like, were encouraged to solve housing needs locally.101

In 1986, the MHP developed the Homeownership Opportunity Program (HOP), which provided below market mortgages to lower–income first time buyers in state–approved units.102 HOP was created to be used by LHPs, but rising real estate market prices attracted many for–profit developers who could earn a quicker return and let the state oversee long–term affordability.103 Localities were flooded with “unfriendly” comprehensive permit applications—ones with no community support—so HOP changed its application process to take local concerns into account.104

In 1987, still not appeased by HOP, communities supported twenty–four different bills to repeal or amend 40B.105 In response, a Special Commission was created to study 40B, evaluate its progress, and make recommendations for the future.106 The Commission’s 1989 report recommended that 40B not be changed, but that the definition of “subsidized unit” be expanded to include developments sponsored by municipalities without traditional state and federal subsidies.107 Thus, the Department of Housing and Community Development (DHCD) created the Local Initiative Program (LIP), which allows affordable units built under local control to count toward the municipality’s affordable housing inventory.108 Under LIP, “subsidy” is defined as state technical assistance and oversight, thus allowing the use of a comprehensive permit.109 This note will discuss LIP in detail in Section IV.

Finally, in the early– and mid–1990s, comprehensive permit applications decreased due to major cuts in traditional state and federal [*PG664]subsidy programs, a move to shallow subsidy programs, and a weaker housing market.110 The 1990s also saw a significant change in the model of affordable housing development.111 “Shallow subsidies and market–driven development,” says Werner Lohe, Chairman of the Housing Appeals Committee,

have replaced the deep subsidies of the 1970s and 1980s. In the past, large grants or loans that constituted significant proportions of total development costs were provided . . . under a “command and control” model. That is, in return for the subsidies, state or federal officials through their regulatory authority, retained considerable control over the design and operation of the housing. Today, however, there has been a significant shift . . . toward market driven . . . programs in which cash subsidies and bureaucratic supervision are minimized.112

Two such market driven programs are the Local Initiative Program and the New England Fund, both discussed below in Section IV.

IV.  Market Driven Subsidy Programs

Much has been written about 40B, but nearly all scholarly criticism of it has focused on the statute’s zoning override procedures and potential for delay.113 Very little has been written about how 40B and the HAC should take account of the radical changes in financing af[*PG665]fordable housing, exemplified by the change from government command–and–control to a market–incentive approach to affordable housing.114 It is especially important for 40B and the HAC to keep pace with the changes in financing affordable housing, since traditional public housing is being blown up, state and federal funds have all but dried up, and privatization is the political and economic theme of the day.115

While the HAC has generally kept pace with the changes in affordable housing financing, 40B has not.116 Chapter 40B, passed when command–and–control programs were popular, still requires developers to obtain government subsidies to apply for a comprehensive permit.117 As financing methods have changed, the HAC has merely interpreted what counts as a government subsidy more broadly.118

Recently, two programs have emerged which do not require traditional, large cash subsidies: the Local Initiative Program and the New England Fund, which will be discussed further in this section.119 These two programs mark a transition between the command–and–control programs of the past and the possibility of subsidy–less affordable housing development.120

[*PG666]A.  The Subsidy Requirement Under 40B

1.  Definition

To be eligible for a comprehensive permit, a project must be “fundable by a subsidizing agency under a low or moderate income housing subsidy program.”121 Low or moderate income housing is “housing subsidized by [a] federal and/or state government and/or local housing authority . . . .”122

2.  The Shift From Command–and–control Programs to Market–Based Incentives

When 40B was passed, during the implementation of the “Great Society” programs, government still played a large role in building and managing low and moderate income housing.123 Housing and other programs were implemented through the command–and–control model.124 Under that model, federal and state government deci[*PG667]sion–makers use their centralized control to regulate and impose improvements on local communities.125 Shortly after 40B was passed, however, a gradual ideological shift occurred, from command–and–control programs to government programs employing market–enlisting strategies.126 Rather than have government manage programs, market–enlisting programs give incentives to private industry to achieve the same goals.127

The Comprehensive Permit Law, according to Werner Lohe, Chairman of the HAC, anticipated the move from command–and–control programs to market–based regulation.128 Accordingly, in its decisions, the HAC has reinforced the importance of local control.129

3.  The Purpose of the Subsidy Requirement

When 40B was passed in 1969, housing subsidies in Massachusetts were provided by two main subsidizing agencies: the Massachusetts Housing Finance Agency (MHFA) and the Federal Housing Administration (FHA).130 In the early years of 40B, most affordable developments were financed by MHFA.131 As a result, MHFA became familiar with the comprehensive permit process, and reviewed projects with the comprehensive permit requirements in mind.132 When developers received subsidies from MHFA, they also received “site approval letters.”133

[*PG668] Site approval letters served several purposes.134 Besides checking the physical site, architect’s plans, and financial feasibility of the project, the site approval letter provided assurance that the project met the comprehensive permit requirements.135 An MHFA site approval letter also meant that MHFA would continue to be involved in the project.136 Most importantly, MHFA monitored the long term affordability and use restrictions on the project.137 Thus, requiring a traditional government subsidy and its accompanying site approval letter gave municipalities some assurance that, while their zoning bylaws were being overridden by developers, the subsidizing agency would at least screen out unrealistic proposals which would otherwise unnecessarily “tie up” a site.138

As affordable housing financing changed, the HAC adapted its procedures to other programs which provided similar assurances: the Farmers Home Administration, Tax Exempt Local Loans to Encourage Rental Housing (TELLER), and the Homeownership Opportunities Program (HOP).139 In addition, in the last decade two new non–traditional subsidy programs have developed: the Local Initiative Program (LIP) and the New England Fund (NEF).140 Neither program uses command–and–control–style, large cash subsidies to promote construction of affordable units.141 These two programs, as approved by the HAC, nevertheless protect municipalities’ interests by requiring either private or government oversight.142

B.  The Local Initiative Program

In response to the HAC’s power and the 1989 Report of the Special [Legislative] Commission Relative to the Implementation of Low and Moderate Housing Provisions (hereinafter Special Commission [*PG669]Report), the Department of Community Affairs promulgated regulations establishing the LIP.143 Recognizing the political shift from command–and–control to market–based incentives, the Special Commission recommended that local “programs providing for subsidies in kind or through technical or other supportive services . . . be considered subsidies within the intent of M.G.L. c. 40B.”144

The purpose of the LIP is to get towns involved in the construction of low and moderate income housing that does not require federal or state financial assistance.145 Unlike traditional subsidy programs, which require federal or state approval for every aspect of the project, the LIP leaves these decisions to be made at the local level.146 For towns, local control of projects means protection of local interests.147 LIP projects also require local approval, further protecting local interests.148

Under the LIP, the municipalities may encourage developers to build “Low and Moderate Income Units,” which regulations define as “unit[s] for which the purchase price or rent has been established, in conjunction with a Use Restriction149 or Regulatory Agreement,150 . . . to ensure that [the units] will be purchased or rented by a household with income at or below 80% of the regional median household income.”151 Any firm that executes a Regulatory Agreement is consid[*PG670]ered a limited dividend organization for purposes of section twenty of 40B.152 Projects proposed under the LIP must also address the most critical housing needs in the Commonwealth—”family and special needs housing in general and low income family housing in particular.”153

The LIP provides two ways for municipalities to develop low and moderate income housing: Local Initiative Units and Comprehensive Permit Projects.154

1.  Local Initiative Units

To form a Local Initiative Unit, the Chief Elected Official of a municipality must apply to the Department of Housing and Community Development (DHCD).155 In addition, the units must meet five requirements.156 First, they must be Low and Moderate Income Units.157 Second, the units must not be developed with a comprehensive permit.158 Instead, the units must be developed through the usual multi–permit system.159 Third, the units must be subject to Use Restrictions that result from municipality action.160 Fourth, the initial period of Use Restrictions must be as long as practicable, but not less than five years.161 Finally, the owner(s) of the units must agree to be subject to equal housing opportunity guidelines.162

[*PG671]2.  Comprehensive Permit Projects

To form Comprehensive Permit Projects, the Chief Elected Official must likewise apply to the Department of Housing and Community Development, and the units must also meet five requirements.163 First, at least twenty–five percent of the units must be Low and Moderate Income Units, though section 45.09 allows a waiver down to fifteen percent if a written finding is made stating that it is “necessary to allow the project to serve lower income households, to make such development in that city or town economically feasible, or to otherwise advance a legitimate public purpose.”164 Second, the developer must execute a Regulatory Agreement.165 Third, the units must be subject to Use Restrictions for the longest time allowed by law, though section 45.09 allows a waiver down to fifteen years if a lesser period is “necessary to advance a legitimate public purpose and that adequate measures are in place to prevent the displacement of low or moderate income occupants upon the expiration of such restrictions.”166 Fourth, the developer or owner must implement an affirmative fair marketing plan as required by the Department of Housing and Community Affairs.167 Finally, the project must have the written support of the Local Housing Partnership, a municipal advisory group appointed by the Chief Elected Official and recognized by the Massachusetts Housing Partnership Fund.168

3.  LIP Units Increase Both Subsidized Housing Inventories and Local Control

Building units under the LIP helps towns increase their low and moderate income housing inventory, while also protecting local interests.169 By following LIP guidelines, municipalities can build Local Initiative Units and Comprehensive Permit Projects in order to increase their subsidized housing inventory170 to ten percent of their [*PG672]total housing stock and thus escape the jurisdiction of 40B.171 However, it is more advantageous to towns to build Comprehensive Permit Projects, and not Local Initiative Units, because all units of a Comprehensive Permit Project are included in the town’s subsidized housing inventory if the percentage of low or moderate income units and the population and incomes served by the project are comparable to projects developed through another federal or state subsidy program in which all of the units are counted.172

C.  The New England Fund

1.  How the New England Fund Works

Unlike more bureaucratic programs like FHA and MHFA, the NEF’s financing program has few requirements and gives only a shallow subsidy.173 While giving the developer some more flexibility, the NEF, like the LIP, also protects local interests.174

The NEF is a program of the Federal Home Loan Bank of Boston (FHLBB), under which developers can receive below market rate construction loans to build housing or economic development projects.175 Upon approval of a NEF application, the FHLBB advances funds to a member bank, which in turn makes a construction loan to a developer at a below market interest rate.176 After some modifications in 1998, NEF Guidelines are now compatible with 40B requirements.177 [*PG673]For instance, the NEF and 40B both require that 25% of the occupants of any affordable housing development have incomes that are 80% or less of area median income.178

2.  The NEF Is a Low or Moderate Income Housing Subsidy Program for Purposes of a 40B Comprehensive Permit

In Stuborn Ltd. Partnership v. Barnstable Bd. of Appeals, the HAC considered for the second time whether a developer building affordable units with NEF funding is eligible for a comprehensive permit.179 There, the HAC found that a NEF funded project can be built with a comprehensive permit, provided that the developer limits its dividends and assures the units’ long–term affordability.180 In its decision, the HAC considered two important questions: whether a NEF loan is a subsidy and whether the NEF is a low or moderate income housing program.181

a.  A NEF Loan is a Subsidy

In Stuborn, the HAC held that a NEF loan is a subsidy for purposes of a comprehensive permit.182 There, the Cape Cod Bank and Trust Co., a member bank of the FHLBB, planned to borrows funds from the FHLBB.183 Cape Cod Bank planned then to lend those funds [*PG674]at a low interest rate to Stuborn, the developer, who planned to use the funds to build affordable condominium housing.184 After Stuborn Ltd. Partnership filed a comprehensive permit application with the Barnstable Board of Appeals, the Board denied the permit on jurisdictional grounds.185 The Board did not address the merits of the proposed housing development.186 The Board argued, among other things, that the NEF was not a subsidy program.187

The HAC, however, found that the NEF is a subsidy program for purposes of 40B for two reasons. First, the Massachusetts Supreme Judicial Court has “noted that the word ‘subsidy’ should not be limited to grants of money, but rather should include ‘[h]elp, aid, [or] assistance’ generally.”188 Second, a NEF loan is similar to financing under MHFA, which has been considered a subsidy under 40B since 1982.189 The HAC noted that the intention of the Act instituting MHFA was to make below market mortgage financing available.190 The interest savings generated by MHFA financing would allow for lower rents for low and moderate income tenants.191 The HAC reasoned that, because the purposes of the NEF and MHFA are the same, [*PG675]and because the financing mechanisms of the two programs are quite similar, a NEF loan constitutes a subsidy.192

b.  The NEF is a “Low or Moderate Income Housing Program”

In Stuborn, the HAC held that the NEF is a low or moderate income housing program.193 Three “fundamental criteria,” argued the HAC, must be fulfilled for an affordable housing development to be eligible for a comprehensive permit.194 First, the housing must be built for those whose income does not exceed 80% of median income for the relevant Metropolitan Statistical Area.195 Second, at least 25% of the units must be for persons whose income does not exceed 80% of median income.196 Finally, the housing must be “locked in” as affordable for at least fifteen years.197

The HAC found that the housing proposed in Stuborn met these three requirements.198 The NEF eligibility guidelines require that the incomes of at least 25% of the units’ owners are no higher than 80% of the area median income, thus satisfying the first two criteria.199 Furthermore, while the NEF itself does not require any affordability “lock in,” the developer agreed to deed restrictions which limit the sale of any affordable unit to other persons of low or moderate income.200

c.  Long Term Project Monitoring to Protect Towns’ Interests

If a comprehensive permit permanently changes a town’s zoning, according to the HAC, then it deserves oversight of the project by a subsidizing agency.201 Though 40B does not explicitly address this [*PG676]thorough oversight, towns have gradually come to expect it.202 Under more command–and–control–style housing programs like MHFA, long term monitoring of the project is performed by the subsidizing government agency.203 The FHLBB, on the other hand, plays no significant role in long term monitoring of its NEF projects.204

To make up for the lack of long term monitoring, the developer in Stuborn signed a monitoring services agreement with the Citizens Housing and Planning Association (CHAPA), a statewide not–for–profit housing organization.205 Under the agreement, CHAPA agreed to monitor the developer’s profits and the initial sales prices of affordable units, two primary concerns of the town.206 The HAC, in response to the town’s concern that CHAPA may not enforce these requirements, suggested that the town could protect itself by requiring that the town become a party to the monitoring agreement.207 If the town became a party to the agreement, then it could protect its own interests by enforcing the agreement itself and passing the costs on to the developer.208

The HAC noted that it would have preferred the developer to use a government agency such as MHFA, DHCD, or a local housing authority to perform long term monitoring, even if day–to–day duties were subcontracted to a private entity.209 A government agency, the HAC argued, is subject to public oversight.210 In addition, a government agency has a greater sense of permanence than a private organization, like CHAPA.211

[*PG677]V.  Developers Should Be Allowed to Build Affordable Housing Projects Under 40B Without a Government Subsidy

A.  Government Housing Financing Has Shifted from Command–and–control Programs to Market–Based Incentive Programs

Despite the modest successes of the Comprehensive Permit Law, there is still a growing need for affordable housing in Massachusetts.212 When 40B was passed, federal and state governments still built, managed, and maintained low and moderate income housing.213 As public attitudes toward poor people and housing projects changed in the 1970s and 1980s, federal and state governments began to get out of the affordable housing business.214 Instead of acting as landlords, federal and state governments provided large, “deep” subsidies in the form of cash or tax incentives.215 Now, shallow subsidies and marketdriven development have supplanted the deeper subsidies and command–and–control programs of the 1970s and 1980s.216

In the 1990s and the new millennium, government programs have tried to harness the discipline provided by market forces.217 The HAC noted in Stuborn that MHFA, a quasipublic housing entity, was the first step toward marketbased incentives and away from command–and–control.218 MHFA programs and the LIP minimize cash subsidies and bureaucratic supervision, while allowing private developers to provide affordable housing based on market conditions.219

In the absence of “deep” government subsidies, Massachusetts should continue to encourage towns to use the LIP.220 Use of the LIP, however, has limitations.221 First, the LIP requires the local Chief [*PG678]Elected Official to apply to DHCD for project approval.222 If the chief elected official is against the project, it will not be built under the LIP.223 Thus, the LIP is only useful when the developer is “friendly”; that is, when the town and the developer can negotiate the comprehensive permit reasonably well.224 In addition, absent a local subsidy, the LIP would only encourage private development in areas where the housing market is strong enough to permit developers to make a profit from being able to build more units per acre.225

The Massachusetts Legislature should also embrace the HAC’s decision that the NEF qualifies as a government subsidy program under 40B.226 Recognition of the NEF as a government subsidy for purposes of 40B is crucial to current efforts to build more affordable housing.227 Not only is a market incentive program like the NEF crucially needed, the HAC sees NEF funding as part of a trend toward privatization of the affordable housing industry.228

B.  Developers Should Be Able Internally to Subsidize Their Projects and Still Take Advantage of the Comprehensive Permit Law

Currently, privatization of the affordable housing industry cannot occur under 40B because the law still requires the developer to obtain a government subsidy.229 The developer in Stuborn was allowed to file a comprehensive permit only because the HAC held that the NEF was a government subsidy program.230 While the HAC’s decision that the NEF qualifies as a government subsidy should be considered progress toward privatization, the decision still perpetuates the antiquated notion that a government subsidy is necessary to make all affordable housing projects financially feasible for developers.231 In addition, the LIP, while helpful, only helps build affordable units where local forces are in favor of them.232

[*PG679] Given the weaknesses of the LIP and the NEF, if Massachusetts wants to fill the growing affordable housing need, the Legislature should finally eliminate the government subsidy requirement of 40B.233 Elimination of the subsidy requirement would give developers the freedom to build affordable units with comprehensive permits without obtaining unnecessary government subsidies.234 Roman Petyk and Daniel Sullivan advocated for the elimination of the subsidy requirement as far back as 1986.235 Since 40B was passed in 1969, the comprehensive permit process has changed considerably, constantly accommodating new subsidy programs.236 40B should continue to evolve by embracing the shift in affordable housing financing from command–and–control to marketbased incentive programs.237

In rising real estate markets, usually in suburbs closer to cities, developers can develop more densely under a comprehensive permit since they do not need to follow restrictive local zoning bylaws.238 The ability to build more units on the same land often allows developers to structure developments so that cash subsidies are not required for profitability at all.239 To qualify for a comprehensive permit, a developer need only build 25% of the project as affordable housing.240 If a developer is allowed to build two or three times more units per acre with a comprehensive permit than she can without a comprehensive permit, it would be more profitable to build an affordable housing development than a strictly market rate development.241

In these rising markets, then, no financial subsidy is required to attract developers to build affordable housing.242 Under these conditions, the government subsidy requirement actually prevents affordable housing from being built where it is needed most—in rising real estate markets.243 When the real estate market falls or remains stable and government subsidies are required to make affordable projects [*PG680]feasible, developers should be free to follow the current comprehensive permit procedure.244

C.  Towns’ Concerns Should Be Mitigated by Government Agency Oversight and More Active Local Involvement in Developing Affordable Housing

Towns should be concerned about the elimination of the government subsidy requirement, especially since their zoning is permanently changed whenever an affordable development is built.245 The HAC, therefore, should ensure that projects are monitored in the long term.246 Requiring an affordable housing development to be tied to a specific existing housing program, as is now required under 40B, seeks to preserve towns’ resources by assuring that proposed projects will actually be built if they are approved.247 Additionally, as mentioned earlier, requiring a government subsidy stops unrealistic proposals from proceeding and stops sites from being tied up by a pending comprehensive permit.248

The same protection given to towns under the current requirements of 40B should be provided by government agency oversight.249 Government agency oversight is preferable to private oversight for two reasons.250 First, a government agency would be open to public scrutiny, just as site letters are now under 40B comprehensive permits.251 Furthermore, government agencies are more permanent than private organizations.252

Specifically, the Legislature should amend 40B or require DHCD to pass new regulations allowing DHCD or a local housing authority to oversee the building, operation, and maintenance of affordable units.253 Under this proposal, the overseeing government agency should require the developer to sign a regulatory agreement that makes the agency, the developer, and the town parties with enforce[*PG681]ment rights.254 The new regulations should also require the developer to pay for the initial oversight of the project until the percentage of affordable units, dividend limitations, and affordability lockin are completed.255 Because the need for construction of affordable housing is a statewide need, the Legislature should appropriate funds to pay for continuing oversight.256

Ideally, there should also be stronger local involvement in affordable housing development because it is in towns’ best interests.257 If towns cooperate with developers, local needs are less likely to be ignored.258 One way for towns to get more deeply involved is local housing authority oversight of affordable housing developments.259 Rather than letting a state agency oversee developments, local housing authorities could more carefully protect their own interests while still contributing to the region’s affordable housing need.260


After over one hundred years, the United States is still in an affordable housing crisis. The causes of the crisis are myriad, but the greatest culprit is local land use regulation. Restrictive zoning—large minimum lot sizes and height and use restrictions—makes construction of new units of affordable housing infeasible.

Early approaches to affordable housing followed a command–and–control model of regulation. Government acted as landlord. To remedy the shortage of housing, federal and state governments designed, built, and managed affordable housing units. Frustration with poorly maintained, crime ridden highrise housing projects, along with a general political shift toward privatization, caused government to get out of the landlord business. Gradually, government began to repeal command–and–control housing programs and replace them with marketbased incentives and subsidies.

Massachusetts’s Comprehensive Permit Law harnessed the new wave of marketbased incentives and government subsidies by allowing developers with subsidies to override restrictive local zoning prac[*PG682]tices. Compared to the command–and–control housing programs of the Great Society, 40B has increased local control over affordable housing. It has also made the affordable units more desirable. “Thirty years ago,” the HAC noted in Stuborn, “towns that were actively opposed to affordable housing were forced to accept cookiecutter, rental, low income housing developments developed by bureaucracies in Boston or Washington, D.C. Today’s affordable housing is more varied, typically mixedincome, and as frequently homeownership as rental.”261

While we have made some progress in addressing the affordable housing crisis in Massachusetts, much more needs to be done. Further progress requires political courage. While real estate prices have been quickly rising, construction of affordable units has been puttering along, not able to keep pace with home and rental costs. Even though subsidies are not necessary to make affordable housing construction lucrative in areas of quickly rising real estate prices, 40B still requires developers to obtain subsidies if they want the benefit of a local zoning override. Therefore, the subsidy requirement under 40B should be repealed, and the oversight that subsidizing agencies have been providing should be done by the Department of Housing and Community Development or local housing authorities. This one small step will help give more people a decent place to live.

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