Chapter 40B : Overview of a Failed Policy 2005-03-20
[Editor’s Note: Discussions of land use planning must include the state’s Chapter 40B law. The stated intention of Chapter 40B is to increase the stock of affordable housing in Massachusetts to 10%. But critics say the law has been ineffective in moving toward this goal, and that its provision for overriding local planning hurts people in impacted communities in numerous ways. The author of this article discusses the problems of Chapter 40B and suggests some ways to improve state housing policies.]
Chapter 40B : Overview of a Failed Policy
by John Belskis
A Flawed Concept is Born
In 1969 the Commonwealth of Massachusetts enacted General Law 40B whose stated goal was to ensure that at least ten percent of housing in each municipality qualified as “affordable”. Chapter 40B was popularly referred to as the “Anti Snob Zoning Law”. It’s design was based on the claim that suburban communities were controlling housing growth with restrictive zoning by-laws and forcing all of the affordable housing growth into the metropolitan urban areas. The remedy was to allow local zoning to be overridden in any community that had not reached the 10% quota. While the problem of overly-restrictive zoning may have been true for a some communities, it by and large didn’t fairly represent the principal concerns of many local governments who were working to provide needed housing while meeting other community needs and dealing with fiscal problems. Communities that were attempting to plan for orderly growth and fiscal solvency were being threatened with Chapter 40B developments that went contrary to local planning and, in some cases, required costly infrastructure expansions and mitigation expenditures. Chapter 40B also represented an erosion of local planning rights through empowering real estate developers to ignore local zoning.
When Chapter 40B is measured against its intent to achieve 10% affordable housing, it is clearly a failure. For the first two decades after its enactment there was very little utilization of the law to create any significant affordable housing development. As a rule, it was completely disregard by municipal planners and municipal administrators who felt little pressure to initiate any effort to meet the mandated ten percent. There are many examples of major development projects that were allowed without any provision for including affordable units. (There are even examples where existing affordable units were demolished as part of a development and never replaced.)
In the 35 plus years of its existence Chapter 40B has not even come close to the 10% targets. The state agency overseeing Chapter 40B, DHCD, claims that 40B is responsible for 30,000 units of housing. If so, this would amount to a little more than 1% of the housing stock in Massachusetts. But in fact a large portion of those units was developed with other programs such as LIP (Local Initiative Program), ADDI / HOME (American Dream Downpayment Initiative / The Homeownership Opportunities Program), and CDBG (Community Development Block Grant). And even using these inflated figures, affordable housing production over 35 years has averaged less than 3 units per year in each community.
Anatomy of a Failure
Why has Chapter 40B failed? There are several reasons. First, it provides punishment without providing support for local planning. It provides neither funding nor regulatory tools that communities need to make progress on the creation of affordable housing. It is a punishment that may or may not happen, and local governments generally find it hard to obtain consensus on actions in the face of such uncertain motivations. Furthermore, it has no effect in a community where officials are unconcerned with possible 40B projects. Chapter 40B does not keep scarce buildable land from being gobbled up by luxury housing. It is not part of a rational planning process.
The design of Chapter 40B is inherently flawed in ways that ensure that it will fail, even when it is used for a project. The law requires only 25% of units in a development to be affordable. This adds 75% of the units to the town’s housing unit base and expands the base for the 10% calculation, significantly diminishing the advance to the desired 10%. Secondly, the definition of “affordable” is too high to solve the affordability problem in many communities. Units are considered affordable if they can be purchase by families earning 80% of the median income. This means that over a third of families will find Chapter 40B’s units too expensive. And finally, the expiring use provision allows affordable units developed under a 40B comprehensive permit to revert to market rate as their time factor is reached or a number of other contingencies remove them from the affordable mandate. A recent Harvard study predicts as many as 20,000 of the current affordable stock may return to market rate in the not too distant future. Rather than building toward a permanent solution, Chapter 40B is building toward a future housing crisis.
Inclusionary Zoning – A Missing Piece of the Puzzle
One of the anomalies of this law was the failure to create a statewide inclusionary zoning requirement as an integral part of the law. Simply stated, inclusionary zoning requires that any development over a certain number of units (generally 5-6) must include a stated fraction of affordable units (generally 10% to 15%). Developers are offered the alternative, in lieu of units on their site, of providing a commensurate financial contribution to the local housing authority for a comparable number of units at another site.
Inclusionary zoning is a proven technique. At the same time that Massachusetts passed Chapter 40B, Montgomery County in Maryland enacted an inclusionary zoning law and as a result created units of affordable housing at a rate fifteen percent greater than Massachusetts. In 2004, an inclusionary zoning law was offered as an amendment to a bill restructuring the current the 40B law but it was defeated in the House by a vote of 112 to 42.
The Negative Impacts of Chapter 40B
Application of a 40B permit allows a developer to override all of a town’s zoning bylaws that are not supported by a similar State law. During the last ten years many developers have used 40B to force dense development on sites that in many instances were inappropriate because of environmental conditions such as wetlands, flooding or even contaminated hazardous waste sites. Some of this onerous activity created detrimental situations in neighborhoods that under normal zoning consideration would never have been allowed. Developers have shown a tendency to place luxury housing on land that is clean and well-located, and to use 40B as a way of forcing development onto sites that are unhealthy or problematic.
Attempts at Reform of Chapter 40B
As a result of complaints over the effects of 40B, several moves to reform the law have been made. At one point legislators had introduced over 70 bills to reform the law. Governor Romney cited reform of 40B as a campaign pledge, and after election he supported a “blue ribbon” task force to conduct meetings and hearings to seek reforms. While the task force makeup was intended to reflect all sides of the issues, its formation was delegated to the Director of the Department Of Housing And Community Development (DHCD) whose agency had a built in bias towards preservation of the existing law. This bias was never more evident than in the shoddy treatment that citizen and town officials received when they brought their concerns and comments before the task force. To those of us fighting for meaningful reform, the final task force report was bereft of any significant improvement. It failed to recommend any progress toward inclusionary zoning or ensuring perpetuity of affordable units under 40B.
In the final analysis, 40B is very poorly conceived for addressing the problem of affordable housing. But it is well-designed to be a developer’s dream. Properties that are unsuitable for development can be bought at bargain basement prices and transformed into massive developments by overriding local zoning and control. Communities can be forced to sacrifice land to construction of highly profitable luxury apartments because such units can be counted as “affordable” under the convoluted rules of 40B. Many legislators, whose lists of campaign contributors include numerous real estate development interests, are quick to accept the advice of the real estate development lobbyists when it comes to writing housing legislation. In this environment, genuine solutions to solving the affordable housing problem – such as inclusionary zoning – are set aside in favor of laws that help developers pursue projects that are incompatible with local plans.
Without inclusionary zoning and perpetuity of 40B developed units 40B will remain a predatory developer’s weapon of choice in defeating local ordinances that protect residents, environment, municipal infrastructure, public health and safety etc. These amendments to the law sound so reasonable it raises the question as to why they have never been enacted.
Why have powerful real estate lobbies on Beacon Hill fought so hard – and successfully – to prevent reforms that would make Chapter 40B successful? The simplest answer is that such reforms would take the big money out of the game! With 40B developers can continue to use their prime locations for upscale high priced homes while developing less desirable and problematic sites with the force of 40B and its guaranteed profit margins (Profit margins under 40B are often as high as 20% – 40% compared to the national average for residential development profit of less than 10%). The threat of Chapter 40B has also been used to bully communities into approving denser developments of market rate units – in effect allowing a site to be consumed by unaffordable housing so that a developer does not use 40B to take control away from local planners.
Looking for a Solution
An effective policy for creating affordable housing without allowing developers to abuse local communities is long overdue. We already know the reforms that are needed for effectiveness. Our housing toolkit needs to include inclusionary zoning, permanent affordability, and adequate funding for local housing initiatives. But getting Beacon Hill to set a new course on housing will require a clear public demand that housing policy serve the public interest rather than the profit maximization goals of real estate corporations. Housing advocates and local officials must seek ways to come together around this point and refuse to allow the real estate lobby to pit them against each other. We can have solutions if we stand together and insist upon action.