Affordable Housing Institute : US

[Continued from yesterday's Part 1.]

 

God help us if they get to build it in our town: a 40B property in Sterling, MA

 

Yesterday’s post dug into the high-fiber statistics carefully compiled by MIT DUSP professor (and AHI affiliate) Lynn Fisher and presented in her recently issued Harvard Kennedy School report, Reviewing Chapter 40B: What Gets Proposed, What Gets Approved, What Gets Appealed, and What Gets Built?  As a general principle, I like inclusionary zoning and believe it should be on every global shopping list, and of such schemes our local flavor, Chapter 40B, is the granddaddy of them all, nearly forty years old.

 

Even at forty, 40B, you – look – marvelous!

 

As we saw yesterday, Chapter 40B has remade the state’s housing stock and today is indispensable in producing new affordable housing, yet despite its predilection for rental, communities fight rental:

 

Rental vs. Owner-Occupied Projects

 

There are significant differences between owner-occupied and rental projects.  (See Table 1)  Most notably, on average, rental projects (as finally permitted) are almost three times the size of owner-occupied projects and over twice as dense. 

 

Does rental beget density, or density beget rental?  One can make a case either way.

 

As a result, while 70% of the 386 40B applications receiving ZBA decisions in the study sample were proposed as owner-occupied projects, the over 32,000 proposed units in our sample were split almost equally between owner-occupied and rental units.

 

Here’s the overall breakdown in tabular form:

 

Nothing like numbers to show you reality

 

In terms of our pachinko machine, what happened to the applications Lynn studied?

 

 

Out of the 404 applications, just over half (203) were (a) approved, (b) not appealed, and (c) built.  One might consider these the programs unqualified successes, since the process both worked (parties happy) and it birthed new affordable housing. 

 

The survey results showed that:

 

While about 90% of the proposed projects ultimately were approved, only 62% had obtained building permits by the second quarter of 2008. 

 

Unfortunately, delays aren’t even a byproduct or an unintended side effect of the 40B process, they’re an intrinsic feature – and, for many refusenik localities, a deliberate strategy, hoping if not to win at least to discourage the applicant, and for that matter inoculate the community against further applications while the current one is pending.  That’s a feature of oppositional programs like 40B, where one party (in this case, as usual for oppositional statutes, a body of government) is being compelled by another part of government (whether legislative or judicial doesn’t matter) to do something that may be in the larger public interest but is perceived by the locals to be contrary to their parochial interest. 

 

One might almost think it was a strategy

 

Lynn’s data (which we’ll show) prove conclusively that Chapter 40B burdens everyone, most particularly the development, with a protracted process accompanied by substantial soft costs.  Lynn’s study doesn’t quantify those additional costs, but it sets the stage for that later quantification.

 

 

More than 80% of projects were initially approved at the local level and, for over 80% of these approved projects, developers did not challenge the conditions of the approvals.  As of September 2008 developers had received building permits for about 75% of these projects.

 

Thus the ‘main line’ of a property’s development is application/ negotiation/ approval, and then development.  What about the safety valve, the appeals process?

 

Overall, developers appealed 28% of the local decisions on applications. 

 

Surprisingly, more appeals came out of approvals as out of denials.  Developers obviously felt that the approval was grudging and not fully in conformity with the law, and the evidence backs their judgment:

 

Is it worthwhile to appeal even if you are approved?  The pachinko machine says Yes!

 

I’m betting on my appeal

 

Out of the 40 adjudicated (80% of the appeals), developers ‘won’ 33, winning modification from the original appeal.  That’s pretty impressive evidence that developers, at any rate, have learned the law in depth, and don’t appeal frivolously – not surprising when you reflect that appealing costs money and time (which is money).  As she put it:

 

Chapter 40B has created a process that developers and towns, among other actors, play with increasing sophistication.  Most notably, both local officials and developers seem to understand the conditions that the HAC will – and will not – accept when reviewing developer appeals of local ZBA decisions. 

 

More sophisticated than we look, actually

 

Equally surprising, when appealing a denial, the developers’ batting average is no higher: 24 wins, 13 losses.

 

Is it worthwhile to appeal when you’re denied?  The pachinko machine says Yes!

 

As you might have expected, whether or not appealed, the program is time-consuming:

 

On average, it took local governments 10 months to make a decision on proposed projects and, for built projects, on average it took about an additional year before developers received a building permit that allowed them to start work on an approved project.

 

That’s 22 months’ gestation just to get the building permit, meaning construction can start.  In that 22 months, the developer is spending the following:

 

1. Land purchase price (or option price).

2. Architects’ fees and other full-blown design costs.

3. Professionals (e.g. 40B consultants, lawyers).

4. Developer’s executive overhead (and trust me, that’s a lot of person-hours).

 

Plus interest on the borrowing needed to cover all these costs …

 

The appeals process is a higher-stakes game because while developers are more likely to gain a favorable ruling (particularly when local ZBAs turn down the requests for comprehensive permits), the delays associated with the appeals process – and likely lawsuits challenging some HAC approvals as well – reduce the odds of projects moving (at least for awhile) from planning to construction. 

 

Is there any wonder why per-unit affordable housing costs in Massachusetts are high, with all these procedural taxes imposed by localities resisting affordability altogether?

 

On average, localities held seven public hearings about proposed projects during the application process and took 10 months to make their decisions about those applications. 

 

It takes years to write the history of a hearing

 

Seven hearings?  What could possibly be left unsaid by the first hearing that requires six more?  This sounds like process-for-the-sake-of-delay, not process-for-the-sake-of-transparency.

 

However, the time it took ZBAs to rule on the applications ranged from as little as one month to as long as six years to complete. 

 

Again, delay is the intransigents’ friend, and that delay costs money. 

 

Just a few more procedural requirements …

 

Despite its modest title and slim executive summary, this is a major and critical piece of work.  As baseball-revolutionizing stat guru Bill James once put it, “You have your opinion and I have mine, but mine is supported by this mountain of facts.”

 

The Bill James of Chapter 40B?  MIT Associate Professor Lynn Fisher

 

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