Dissecting the False Case for 40B


Summary of 40B Dishonesty

Do you really want developers and their banks making development decisions for you?

Here, you will learn the real truth behind the disinformation spread by developer lobbyists and elite power-brokers. The truth is that 40B is the biggest obstacle to providing affordable housing in Massachusetts. In addition to emphasizing construction of new market rate housing, 40B encourages artificially high real estate and land costs because it encourages price overbidding on plots of land that developers know they can overdevelop (and consequently "over-profit "from). 40B developers also regularly add 9-15% premiums on the prices of market-rate units that cause additional increases in the price of housing. This is further exacerbated by 40B regulations that put developers and their banks in charge of project size and profit limits and by allowing developer-lobbyist groups like CHAPA to do cost-certification reviews. All of this is done under the guise of promoting greater affordability. Developers continue these practices because 40B regulations allow for opaque financial reporting that allows them to claim that they lose money on the production of affordable units. This is disinformation and it is disingenuous.

The Truth, By the Numbers


Click here to fact check the Truth, by the Numbers. Here, you'll see the latest state data on 40B and its failures.

Myth One: "Without 40B, there would be less affordable housing."

This is the mother of all pro-40B claims and we shouldn’t be surprised! In fact, without 40B there would be more affordable housing, not less. 40B has a specious link to increasing affordable housing since it does little more than provide excess market rate units. Multiple reports now indicate Massachusetts has an over-supply of market rate homes.

  • 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 why are alternatives to 40B providing 90% greater contributions of affordable housing?
  • 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 come 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 is it that most of the communities who reached the “10% affordable” threshold set by 40B did so by using alternatives to 40B?
  • If 40B worked, why can not not produce more than 3 affordable units, per town, per year!
  • If 40B worked, then why is it so often being investigated for fraud?

40B costs hundreds of millions of your tax dollars annually to produce skyrocketing land prices and mostly nonaffordable homes. 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 plummeted Massachusetts to its bottom ranking in national affordability. Shortly, 53% of those "affordable units" will expire due to weak 40B deed restrictions expiring. Far from synonymous with affordable housing, 40B is a special interest law forcing damaging growth while diverting resources that should be used to provide for the affordable housing we need.

Myth Two: “40B provides incentives so developers can produce affordable housing in towns that wouldn’t allow it”

Firstly, this assumes incorrectly that towns do not seek more affordable housing. Excellent examples are evident across the state where local plans provide affordable housing that is appropriate, necessary and far more plentiful than housing produced by 40B. In fact, since 2000 communities have chosen to use alternatives to 40B such as inclusionary zoning and have produced 90% greater contributions of affordable housing. In addition the the Massachusetts Municipal Association, the Municipal Coalition for Affordable Housing, represents municipal leaders who want to regain the authority to provide affordable housing in light of the state’s egregious failure at doing so.

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 lobbyists on Beacon Hill help change 40B to emphasize building home ownership units. This began the era of confrontation and bullying by Beacon Hill and by developers who could seek outside funding and force development on communities while reaping significant profits. An expert on 40B developments testified 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: Prior to 1999, 81% of total 40B rental units were considered affordable. Each year, the percentages dropped as developer profits rose. In 2006, the affordable units comprised only 32.1% and many working families cannot even afford to live in them! The same happened with 40B housing units, which started as 33.6% affordable. By 2006 it dropped to 26.6% The future is clear: 40B housing units in the pipeline are only 19.1% affordable! This disgusting practice 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!

40B is working for developers and Beacon Hill, it just isn’t working for you!

Myth Three:“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 restricted 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 supposed to be true, but Beacon Hill and developers continue to uphold these restrictions. In testimony at the State House, the Inspector General called ongoing financial abuses of 40B as "on of the biggest abuses in state history." According to the Inspector General:

“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.”

In the fall of 2007 a developer attempted to claim land costs at eighteen times the actual appraised value! This could have resulted in a profit margin 62 to 82 percent higher than is supposed to be allowed by law.

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, leaving us to wonder whether 40B is anything more than a “developer-welfare” program.

Myth Four: 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 Citizens' Housing and Planning Association (CHAPA):

  • The report concludes that it is exceedingly difficult for 40B to serve the neediest households unless they secure supplementary 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 must earn between $48,000 and $53,650 - a $5,650 range. It is common for 40B affordable units to sit vacant as the majority of working families are left behind by 40B's standards. How is this providing housing to those who really need it?
  • A recent sampling of 40B rental units showed that some 30% of tenants needed additional rent vouchers just to be able to afford to live in the "affordable" units.
  • Of the communities that have achieved the arbitrary 40B goal of having 10% of their housing stock 'affordable', only half were accomplished via 40B construction.
  • Since 2001, two-thirds of additions to the affordable housing stock in the state have resulted from repair programs, new qualifying houses that serve the Dept. of Mental Health/Retardation, and low cost market rate units.

In Massachusetts, minimum wage workers earn $6.75/hour. In order to afford a two-bedroom apartment at fair market rent, they would have to work 130 hours per week, 52 weeks per year. Quite simply, those making minimum wage cannot afford housing under the 40B regime.

On average, a renter in Massachusetts makes about $15.33 an hour. If these renters were looking for a fair market rent two-bedroom apartment at this wage, even they would have to work 57 hours per week, 52 weeks per year! Put another way, under the 40B-dominated regime, most renters are struggling just to afford even the most rudimentary housing.

Myth Five: The state Housing Appeals Committee (HAC) doesn’t always side with the developer.

True, not always - just at least 81% of the time! Those favorable decisions include development projects that had proven public safety problems, in violation of HAC's own guidelines:

  • The Town of Walpole was overruled by the HAC even though it demonstrated that their police, fire and EMT vehicles would be unable to even get to the proposed 40B development because of their traffic circumstances!
  • HAC has a consistent pattern of ruling in favor of developers even as abutting properties have incurred serious structural damage due to land changes or impact on watershed.

When you consider that towns have won 10% of HAC cases on a technicality or developer mistake, it is evident that a mere 9% success rate based on actual HAC rulings demonstrates incredible bias. The HAC and DHCD (Dept. of Housing & Community Development) are now allowing developers to claim land values far in excess of market values, so that towns will have less power to request lower densities for unwise development proposals. They have even supported changes regulations so that challengers to 40B projects will have to incur the project's carrying costs!

*Source: National Low Income Housing Coalition