John Belskis has offered the following post. Thanks to him for taking the time.

I offer this OpEd piece and hope you find it informative. Longer than most posts, but many will find it very interesting.

40B Disinformation in the News:
Pro-40B interest groups have worked for years to frame the affordable housing debate according to their terms. The following are common pro-40B arguments, misinformation or disinformation and the real truth behind the spin:

“Without 40B, there would be less affordable housing.”

This is the mother of all pro-40B arguments and we shouldn’t be surprised! Leave it up to lobbyists and lawyers to use technicalities. Of course 40B developments contribute something, but what this argument fails to acknowledge is that 40B produces very little affordable housing at all.

• If 40B worked, then after 38 years Massachusetts wouldn’t be at the bottom of national rankings in housing affordability (49th!).
• If 40B worked, then 53% of the few “affordable” units the state does have wouldn’t be in danger of expiring due to deed restrictions running out.
• If 40B worked, then two-thirds of the additions to the state’s affordable housing stock wouldn’t have been from repair programs, new houses for the Dept. of Mental Health/Retardation and market rate rental units that “count” towards 40B thresholds but which aren’t actually affordable; such gains would have come from 40B.
• If 40B worked then why, of the very few communities that have reached the “10% affordable” threshold set by 40B, were half accomplished by utilizing other methods: usually local plans that alleviated local problems?
• If 40B worked, it would have a record better than, at best, 3 affordable units, per town, per year!

The fact remains that we are the real advocates for affordable housing with many faces and one goal: repeal 40B, a law that costs hundreds of millions of dollars annually to produce skyrocketing land prices and mostly market-rate units. 40B advocates claim the law is working because it is producing more housing. They are right, but it is the wrong kind of housing! 40B has provided negligible amounts of “affordable” units, 30% of which require residents to seek further funding to afford. Thirty-eight years of 40B has failed to pull Massachusetts out of its bottom ranking in national affordability while, at best, only producing three “affordable” units per town per year of its existence. Shortly, 53% of those “affordable units” will expire due to time-limited deed restrictions. 40B is not synonymous with affordable housing. It is a special interest law that forces undesirable growth while diverting resources that should be used to provide the real affordable housing we need.

“40B provides incentives developers so that they are to produce affordable housing in cities and towns that wouldn’t allow it”

Firstly, this assumes incorrectly that cities and towns do not seek more affordable housing. Excellent examples are seen across the state where local plans provide affordable housing that is appropriate and necessary and far more successful than 40B. One group, the Municipal Coalition for Affordable Housing (http://www.mcahinfo.org/Home_Page.html), represents municipal leaders who want to regain the ability to provide affordable housing since the state has been so unsuccessful in providing it.

When originally developed in 1968, 40B meant to produce rental housing so a supply of reasonable and available units would allow residents appropriate housing. By 1988, powerful developer and real estate lobbyists pressured changes to the legislation that added home ownership units to 40B. This began the era of confrontation and bullying by the state and by developers who could seek outside funding and force development on communities while reaping significant profits. As a recent expert on 40B developments said at MIT: “This is a statue that should be used as an exception when towns aren’t doing a good job. It shouldn’t be the thing that developers look to first; we have to close that loophole.”

Consider the following statistics: Prior to 1999, 40B rental units had been built with affordable units comprising 81% of total units. Each year, the percentages dropped as developer profits rose. In 2006, the affordable units comprised 32.1%! Prior to 1999 40B owner-occupied units were built with affordable units comprising 33.6% of total. By 2006 it stood at 26.6% The future is telling: affordable owner-occupied 40B units in the pipeline represent only 19.1% of total. This is occurring at the same time that the number of towns in Greater Boston, according to the Boston Foundation, in which a median-income household can afford a median-priced home plummeted from 148 to only 27 out of 161! Ladies and gentlemen, 40B is working. It just isn’t working for us!

“Developers don’t make huge profits on 40B developments because of restrictions”

Pro-40B advocates argue that unlike conventional development, 40B developers are subject to a limited investment return on rental projects and a limited profit in excess of costs for home ownership. They cite the fact that a developer’s audited financial statements must be provided to the subsidizing agency. Any profit in excess of the limit must be paid to the town.

This is all true, but it doesn’t mean that such restrictions are effective. According to the Boston Globe’s report on the investigations being conducted by the Massachusetts Investigator General’s office:

“A pattern is emerging: Developers use a variety of tactics to conceal their profits, including exaggerating land costs and hiring companies in which they have a financial interest as subcontractors, then paying the subcontractors excessive amounts to inflate the project’s expenses. In addition, he said, some developers are “permit brokering — buying land and securing the coveted 40B permit from the community, then selling the suddenly more valuable land and the permit to another developer at a significant profit, without reporting those profits to the state.”

A recent case of abuse occurred in Duxbury where a developer attempted to claimed land costs at eighteen times the actual appraised value! This could have resulted in a profit margin 62 to 82 percent higher than allowed under state law, according to an appraisal.

Beyond the egregious examples of abuse, it is a fact that the percentage of affordable units in 40B developments drop every year and profits rise. It is what Reform 40B Coalition founder John Belskis describes as “developer-welfare.”

40B has created affordable housing and serves the people who really need it.

40B advocates would love to have you believe that 40B housing serves a broad range of needs and is available to households with incomes up to 80% of median. But in reality, according to a recent report produced by the Pro-40B CHAPA:

• The report concludes that it is exceedingly difficult for 40B to serve the neediest households unless it secures even more funding since 40B targets only those at the upper end of eligibility (70-80% of median income.) As an example, to apply for a 40B home in Chelmsford, a family may not earn more than $53,650 and they must earn at least $48,000. A $5,650 range. Thus, it does nothing to provide housing to those that really need it with incomes of less than $48,000 per year.
• A recent sampling of 40B rental units showed that 10-30% of tenants needed additional rent vouchers just to be able to afford to live in the “affordable” units.
• Of the communities that achieved having 10% of their housing stock ‘affordable’, only half were accomplished because of 40B
• Two thirds of additions to the affordable housing stock in the state since 2001 resulted from repair programs, new qualifying houses that serve the Dept. of Mental Health/Retardation and market rate units in rental developments for which the community gets credit on the inventory but which aren’t affordable

In Massachusetts, a minimum wage worker earns an hourly wage of $6.75. In order to afford the Fair Market Rent for a two-bedroom apartment, a minimum wage earner must work 130 hours per week, 52 weeks per year. In Massachusetts, the estimated mean (average) wage for a renter is $15.33 an hour. In order to afford the Fair Market Rent for a two-bedroom apartment at this wage, a renter must work 57 hours per week, 52 weeks per year. Now consider the amount of people who do not make that much money per hour.

The Housing Appeals Committee (HAC) doesn’t always sides with the developer.

True. Just 81% of the time! Those examples include development projects that had proven public safety problems:

• Walpole was overruled by the HAC even though they demonstrated that their police, fire and EMT vehicles would be unable to even get to the proposed site under common traffic circumstances!)

• There is also consistent precedence for the HAC to continue to rule in favor of developers despite the fact that abutting properties would incur serious structure damage due to land changes or impact on watershed.

Just hope that if a 40B development is proposed near you that your city might fall into the 19% success category in appealing to the HAC.

John Belskis
www.repeal40b.com