With Question 2, Affordable Housing Funds On The Line

By Andrea Smardon

Oct. 29, 2010

The Villas at Old Concord in Billerica are a mixed-income development, with a quarter of units considered affordable under the 40B law. (Andrea Smardon/WGBH)

BOSTON -- On Nov. 2, Massachusetts voters will consider Question 2, which would repeal a law designed to increase the supply of affordable housing in Massachusetts. 

The law, known as Chapter 40B, has been in place for more than 40 years. Its supporters say that the law has helped create 58,000 affordable housing units since its inception. But the debate over its past effectiveness and future viability is exposing an uneasy relationship between private developers, suburban towns, and state government.

The Villas at Old Concord in suburban Billerica are not what you might expect from a subsidized housing project.  An online rental ad details the features of this gated community.

“Villas at Old Concord offers an array of amenities that are aimed to enhance our residents’ quality of life.  Enjoy the fully equipped movie theater, sparkling pool with conversation deck, 24-hour business center, and fitness center complete with cardio equipment and free weights.”

The Avalon at Chestnut Hill in Newton, has income limits for 43 of 200 units. It received $43 million in public financing. (Courtesy masshousing.com)

"I don’t think because you have a limited income you should be subjected to living in the projects,” Fluerant said. “We’re not bad people.  We’re just the same as the person who lives next door who you grew up with.”

Fleurant once owned her own home in north Billerica. Then she was diagnosed with Multiple Sclerosis, had a divorce and had to sell her house.  She discovered that she qualified for affordable housing because her income was less than 80 percent of the median.  Fleurant says her medical expenses were so overwhelming, she would have had to move in with her son in Cambridge. But because of 40B, she said, she was able to go to the Villas.

“I’m in a financial situation that I have no control over. I can not work, my sole source of income is controlled by someone else,” Fluerant said. “So I’m just very thankful that 40B exists in Billerica and in the Villas so I can stay here.  I love Billerica; I didn’t want to move.”

But there were neighbors and townspeople who did not want a 40B project in this densely forested spot.  Democratic state Rep. William Greene is one of them – and still feels that way.  As he drives around behind the development, he points to a couple of nearby older single-family homes, which look out onto the gates of the Villas.

“A lot of the people come to Billerica because they want to get out of the city.  They can buy a lot with 20 or 30,000 square feet and all the surrounding lots have  20 or 30,000 square feet – and they’ve got what they want – the American dream,” Greene said.

Greene is worried Billerica’s spaciousness could be lost. “A developer can come in and buy 2 or 3 of their houses, put something like this up.  It completely devalues their property.  If this is carried to the extreme, there will be no suburbs like this,” Greene said.

40B affects suburban towns like Billerica especially because the developer has a right of appeal in communities with less than 10 percent affordable housing.   Greene says developers use this power to get what they want. 

“I don’t think because you have a limited income you should be subjected to living in the projects."

-- Cathy Fleurant

In the case of the Villas, he says a developer named David Veo originally tried to get the land zoned for an office park, but residents objected.  Then the developer said if he could not build an office park, he would bypass local zoning restrictions and build a 40B development. “It’s that clubbing effect that has created a lot of objections from the townspeople,” Greene said. “It’s the developer coming in a taking over the destiny of town.”

Developer David Veo contends that he was not using 40B as a threat, that obtaining a 40B permit was his best option for recouping his investment in the office park. Veo says he sold the property to a developer in Texas and made some money, but he didn’t do anything illegal.  And he’s correct. Veo’s actions are no different from those taken by many developers over the years who’ve simply taken advantage of 40B’s unique provisions.

To some, a more troubling aspect of the 40b law has to do with excess profits. Profits made by 40B developers are supposed to be capped at 20 percent with any excess going to the town.  In 2007,  state Inspector General Gregory W. Sullivan audited ten 40B projects – including one in Billerica called Salisbury Hill Estates.  The audit found that Salisbury Hill Corporation owed the town of Billerica $3 million in excess profits. Just over a year ago, Sullivan voiced his outrage on state Senator Robert Hedlund’s “Monday Night Talk” show on WATD-FM.

“The thing that bothers me… I hate when people rip off other people with the government power behind them.  And in this case, millions of dollars have been made by people who have been able to very adroitly manipulate the system and get away with it,” Sullivan said.

“If someone goes in with careful scrutiny, honestly, looking at it objectively, you will see - no question – that the money has been taken away from the people in these cities and towns.”

According to the inspector general’s audit, Salisbury Hill Corporation inflated the expenses of its 40B project and understated the revenues. The inspector general found that the developer was able to do this in part by getting its cost certification from an auditor of its own choosing.  The case is currently under investigation by the attorney general’s office. 

Sullivan said his office has estimated hundreds of millions of dollars have been misappropriated in 40B projects. He declined to be interviewed for this story; a spokesman for Sullivan's office says the inspector general is a nonpartisan position and does not want to speak on a ballot measure. But McCarthy says Sullivan still maintains there needs to be more oversight of the 40B program.

State Sen. Susan Tucker, a Democrat from Andover, is chair of the Senate housing committee.  She claims that excess developer profits have been addressed in regulations passed in 2008 and 2009. Tucker says the developer no longer gets to choose who does its cost certification.

"If this is carried to the extreme, there will be no suburbs like (Billerica)."

-- State Rep. William Green

“The projects, and believe me there were some abuses, we’ve addressed that,” Tucker said. “We’ve changed the auditing and cost certification process through regulation.  These cases that they talk about are years old.  It’s just not going to happen under our new regulations.”

The Citizens' Housing and Planning Association is a non-profit organization that reviews the finances of affordable housing projects for the state.  Executive Director Aaron Gornstein says he’s satisfied that the new regulations will prevent future abuses.  As to Question 2, which asks voters to repeal 40B, Gornstein says it’s important to keep alive the primary tool the state has for producing affordable homes. 

“The focus on developer profits takes away from what we should really be talking about, which is how are we going to provide affordable housing for working families going forward,” Gornstein said.

“There are 12,000 homes ready to be built, and this law would take away those homes, and wipe it off the books because the developer may not have a building permit,” Gornstein continued.

Gornstein says 40B has created 58,000 homes in Massachusetts since its inception in 1969.  Whether more will be created under this unique public-private partnership will be determined by voters on November 2. 

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