Above - Crown and Eagle, Uxbridge, Ma. Elderly Housing

Excessive profits Found Again and Again by MA Inspector General

More Bad Deals in Affordable Housing: See notes below & PDF

Attached is the latest report from the IG on 40B activity in the Town of
Berkley. This covers all of our concerns about excessive profits, 40B
*flipping*, as is assessment, etc. Even more unsettling is the lack of
good oversight on the part of the CHAPA monitor.

Several messages are worth highlighting.

Before issuing a comprehensive permit, the town should validate the
allowable acquisition value of the site against pertinent land appraisal(s).
The allowable acquisition value should not exceed the as-is fair market
value of the site under existing zoning and without the benefit of the
comprehensive permit. The appraisals should be compared against the most
current real estate tax assessments for the site. Any differences in value
greater than 5% should be investigated and resolved. Related party land
transactions and the selling/transfer of land/comprehensive permits need
special scrutiny.

The town should document and review in detail any future comprehensive
permit transfer requests. Financial transactions associated with these
transfers should be analyzed to ensure that profiteering does not take place
at the expense of the town, its taxpayers and future affordable housing
initiatives. To facilitate such analysis, the town and the "new" developer
should be required to have a documented agreement (amended comprehensive
permit and regulatory agreement) before the authorization to transfer the
permit is granted. The agreement should specify what portions of these
transfer costs will be considered allowable costs for computing the
project's excess profit. Potential allowable transfer costs may include
payments for services (such as architectural plans, surveys, permit fees,
etc.) incurred by the original applicant but which will benefit the "new"
developer as part of the project's continuation. The developer should
provide detail support to the town for these transfer costs.

As part of the comprehensive permit application process, the developers
should identify all related party activities including any financing
arrangements. For these related party arrangements, it is incumbent upon the
town to understand the breakout of expected related party expenditures
(direct versus indirect costs). Since these related party transactions are
entered into without the benefit of a competitive bidding process, and
higher development costs provide an opportunity/incentive for higher profits
to be retained by a developer as opposed to being made available to the town
for additional affordable housing initiatives, it is imperative that the
town understand these related party costs. This includes understanding the
associated overhead, general conditions and profit built into these
relationships. The town should negotiate with the developer reasonable
related party costs which will be included in the projects allowable costs
and these agreements should be memorialized in the comprehensive permit and
the regulatory agreement.

The town should consider inserting itself in the cost monitoring process for
the project and may even want to assume the role of monitoring agent. The
town also should be a party to the selection process for the public
accounting firm which will perform the detailed cost certification audit and
should review the audit procedures to be performed in order to ensure that
all concerns are addressed through the audit. These procedures should
include review and comparison of income and expense categories reported in
the cost certification to the original estimates reflected in the pro forma
financials. Explanations for any material differences should be obtained
from the developer and independently verified by
the auditor. All these arrangements should be incorporated in both the
comprehensive permit and the regulatory agreement.

In order to help guarantee responsible project unit revenue sales estimates,
the town should consider imposing conditions through the comprehensive
permit and the regulatory agreement that would allow the town to retain or
share in the sales revenues above the pro forma estimates.

In addition to gaining an understanding of the related parties (and
associated costs) which will be involved in any future Chapter 40B
development, the town should also be aware of all planned consultant
activities. This understanding should be developed as part of the
comprehensive permit process. The town, possibly through an affordable
housing committee, local housing authority, or other local entity, should
consider assuming some of the consultant duties, such as marketing and
lottery agent for the affordable units. Various state agencies have recently
adopted guidelines which provide opportunity for liberal financial reward to
Chapter 40B consultants. If the town serves in any of these capacities, it
will be able to use this generous income to help create additional
affordable housing opportunities than would otherwise be possible.

In order to help guarantee project completion according to the agreed upon
plans and also to protect the town's interest in potential excess profits,
consideration should be given to requiring the developer to post adequate
bonds or other forms of security. These arrangements should be clearly
articulated in the comprehensive permit and the regulatory agreement.

 

 

Something that local ZBA's and Town Counsel's may want to consider.
 
Recently there has been a noticeable trend whereby a developer initiates and gets approval on a 40B project then sells the approved project to another party at a further inflated price. This practice often referred to as *flipping*, presents a totally unwarranted abuse of the 40B law.
 
This scenario generally involves one of the high powered developers engaging a powerful legal firm whose expertise and tactics totally overwhelms the local ZBA and is often supported by the 40B facilitators supplied by MassHousing. The project initiator may not be at all interested in developing affordable housing but only seeking to maximize profits on an acquired piece of real estate.
 
It has been suggested that a simple wording change in the final ZBA approval could prevent a continuance of this undesirable activity.  There is an opinion that in most of the conditions where reference is made to the "Applicant," the wording should include "his (or its) heirs and assigns."  There is a belief is that by referring only to the Applicant, the opening is there for the present developer to walk away before even beginning the project, whereas the suggested wording ties them to the project through its completion. .
 

 

Land Planning Resources

DRAFT GUIDELINES for Affordable Housing LIP (Local Initiative Project) - Useful for All Communities

Link: HAC Regulation Changes for 40B   Smart Growth Sustainability Scorecard     

 To help fight unsustainable or poorly planned 40B Projects   The Nimby Report

Blackstone Valley's Affordable Housing Committees:

Millbury: James Fitzpatrick, James Schiff, Chair, Harry Swenson, Joan Raymond - Cordis Mills Redevelopment & Two new homes Grafton:- 256 unit 40B approved, 76 hostile 40B approved in Grafton's farmlands, LIP for 84 signed 12/03, 2 other pending 40Bs Uxbridge: Millville:

11/26/03 -  Pawtucket Celebrates Opening of 27 Units of Affordable Housing

Presently, the Valley has mostly waited for 40Bs to come along. The realization of the need, the possible reuse initiatives and the community setting a vision in place are all starting to come together as they have in Millbury with both large and small successful creation and renovation of affordable housing initiatives. 

In Uxbridge, a 40B will shortly be filed for land along Rte 146A past the Quaker Motor Lodge. Details will be forthcoming when filed with the ZBA. 

10% Doesn't Matter Anyway???    Link:Mass Policy Online: Affordable Housing Update

Save Miscoe Fights a Tough Fight to Preserve an ACEC (Area of Critical Environmental Concern)

Sustainable Affordable Housing

Renovated mill housing line many Rhode Island and Massachusetts mill communities. This can substantially enhance the community by maintaining affordability for the core of citizens while keeping the older, but now renovated, mills and the mill homes as part of each community's visual history. Ashton, RI and Northbridge, MA are two prime examples of the re-use of mill housing. New housing projects are also coming forward but these have often eaten up the farmlands in a sprawl effect, so smart planning and a proactive approach is critical to maintain the charm of our communities.  Link: Cumberland's Successful Plan for Affordable Housing 

Hopkinton has recently followed the lead of the Ashland Town Administrator to join a regional housing effort in the communities of  Ashland, Hopkinton, Holliston, Southboro, Sherborn and Medway. Hopkinton has a very diligent effort underway based on a thorough analysis of needs and doable projects. Their analysis, however, showed, that due to their lack of need for rentals, the Town will never reach the 10% minimum required by the State to be able to deny 40Bs. However, their upfront requirements, including a thorough Notice of Intent filed and reviewed prior to any decision, assure a very informed committee will demand a suitable 40B project for the town.

 40B Letter from Witten and Horsely     CHAPA    MassHousing    MHPFund    DHCD      Calendar

Second Soft Loan Program - available in Grafton   Resources     Income Limits    

 3/16/04: "Turning a Dream into An Opportunity for Hardworking Massachusetts Families" is the tag line of the Massachusetts Housing Opportunities Corporation. "We work with communities to establish a plan by building quality homes which reflect well within the neighborhood." UMAss Amherst Dean and longtime Planner and Speaker for the Blackstone Valley, Dr. John Mullin, sits on the Board of this group. MHOC helps communities plan a planned production progra,. For more information, contact www.mhoc.info or call 1-800-782-7040.

 Woonsocket, RI has 16.53% moderate income housing, according to Mayor Susan Menard. Only Newport, RI has edged Woonsocket out of the lead in the percentage of affordable units.

2/16/04: Lou Boersma of the Grafton Housing Authority has submitted a website for those building affordable units. If the design is incorporated from intial stages, the cost per unit to adapt a home for handicap (or universal) access is only about $300. extra. 

2/9/04: Developer Sotir Papalilo will soon be bringing the  lottery informational package for his project's affordable units to the Uxbridge ZBA for their review.  The lottery information package consists of documents that are similar to those found in LIP application under Section VIII: Marketing Plan updated to reflect the current conditions.  The ZBa will then review the materials and respond to the developer who hopes to advertise and start the lottery process by accepting applications from potential affordable homebuyers.  The lottery is tentatively scheduled for April 8, 2004.  A pre-lottery informational meeting will be held with all qualified participants on April 1, 2004. Further information will  be forthcoming as the ZBA approves the marketing plan. The project is nearly fully constructed. It is unclear how many homes will be affordable although 25% of the project will be reserved for affordability. 


News Brief 1/28/04:  BOSTON, JAN. 26, 2004..News of a state-sponsored $100 million housing construction initiative was tempered Monday by three sobering doses of Bay State reality. Researchers at the UMass Donahue Institute released a report saying Massachusetts was the least affordable state to rent an apartment in during 2003.The Massachusetts Association of Realtors (MAR) released figures Monday showing the average home sale price in December was $377,881, up 10 percent from December 2002. 

Established by the Legislature in 1966, MassHousing has sold bonds to investors to provide more than $6 billion in loans used to finance roughly 60,000 apartments and 40,000 homes statewide. The new housing program will focus $75 million on mixed-income housing developments, each with at least 20 percent of the units affordable to low and moderate-income residents. Another $22 million is earmarked for mixed-income housing near public transit sites, and $3 million is to assist communities in affordable housing planning consistent with the states smart growth plan.

NEWS ON PRICES, RENTING & BUDGET FRONTS PUT HOUSING PLAN IN PERSPECTIVE

MassHousing will subsidize up to $75,000 per unit, with priority given to three-bedroom units, a provision of the plan particularly supported by Rep. Kevin Honan (D-Boston), co-chairman of the Legislatures Housing and Urban
Development Committee. Honan and co-chairman Harriette Chandler (D-Worcester) joined the governor at a press conference Monday to applaud the initiative.Despite average sale prices that continue to soar, the realtors association reported Monday that single-family home sales in December rose 19.9 percent over the last year and condominium sales were up 28.4 percent.  Low interest rates continue to attract buyers.  The average price of a condominium rose from $250,242 in December 2002 to $279,085 in December 2003 an 11.5 percent hike.

The market is not suffering, said John Dulczewski, communications director for the Massachusetts Association of Realtors (MAR). Interest rates are working in the buyers favor and making homes more affordable than normal. He predicted 2003 was the best year ever for condominium sales. While touting Mondays news of rising sales, Dulczewski was quick to point out Massachusetts needs to create 25,000 to 30,000 new housing units each year to meet the demands of new residents and growing families. He estimated that an average of 17,500 units were built over the last several years.

A UMass study, sponsored by CHAPA and the Massachusetts Housing Partnership, said that in 2003 more than 260,000 middle-income homeowners and 330,000 renters spent more than 30 percent of their income on housing. It also pointed to 2000 data showing 28 percent of renters spent more than 50 percent of their income on rent. The full study is available at www.chapa.org.

 

 

Go to Mass DHCD website for more information or RI site for housing

Return to Blackstone Daily