Three recent Massachusetts Supreme Judicial Court (“SJC”) decisions have clarified two areas of uncertainty relative to the Massachusetts Comprehensive Permit Statute, Mass. Gen. Laws Chapter 40B. The SJC has provided much-needed guidance as to (1) when municipalities can challenge Subsidized Housing Inventory (SHI) calculations, and (2) when developers are entitled to challenge comprehensive permit conditions. These decisions are of importance to anyone involved in the development, financing, or permitting of affordable housing projects in Massachusetts.
In two related cases decided on May 27, 2008, the SJC ruled that a municipality must exhaust its administrative remedies before bringing a court action contesting the Department of Housing and Community Development (DHCD)’s calculation of the municipality’s SHI. In the third case, decided on June 10, 2008, the SJC ruled that developers cannot successfully challenge conditions attached by local zoning boards to comprehensive permits unless they can demonstrate that those conditions render the proposed project uneconomic.
I. The Hingham and Wrentham Cases: Calculating a Municipality’s SHI
In Town of Hingham v. Department of Housing and Community Development and Town of Wrentham v. West Wrentham Village, the SJC clarified that a municipality can only challenge DHCD’s determination of a town’s SHI in the courts once all available administrative remedies have been exhausted.
In the Hingham case, Hingham’s Zoning Board of Appeals (ZBA) had issued a comprehensive permit for a 1750-unit continuing care retirement community, with the expectation that all 1750 units would qualify for inclusion in Hingham’s SHI. If all 1750 units were included, Hingham’s affordable housing inventory would rise above the 10% minimum threshold required by Chapter 40B, and the Hingham ZBA would be authorized to deny future Chapter 40B comprehensive permit applications. However, DHCD subsequently determined that only 25% of the 1750 units would be counted toward Hingham’s SHI, keeping Hingham below the 10% threshold. Instead of appealing this determination to the DHCD’s Housing Appeals Committee (HAC), Hingham sued DHCD in Superior Court, arguing that no administrative remedy existed for challenging DHCD’s SHI calculations.
After granting direct appellate review, the SJC upheld the Superior Court’s decision to dismiss the suit, on the grounds that Hingham had not exhausted all available administrative remedies. The SJC held that, before bringing a court action to challenge SHI calculations, the town must wait for an applicant who had been denied a comprehensive permit to file an appeal with the HAC, and then present evidence of an improperly calculated SHI at that administrative hearing. The SJC reasoned that the alternative - allowing municipalities to bring frequent and unlimited court challenges to DHCD’s SHI calculations - would itself cause lengthy and expensive delays, thereby impeding Chapter 40B’s aim of streamlining the affordable housing permitting process.
The SJC faced a similar issue in the Wrentham case, in which the Town of Wrentham argued that DHCD erred by failing to include certain “affordable” units in Wrentham’s SHI calculation. The dispute arose after the Wrentham ZBA denied a comprehensive permit application on the grounds that Wrentham had already reached the 10% affordable housing minimum required under Chapter 40B. The developer applicant successfully appealed this permit denial to the HAC, which ruled that the ZBA had overstated Wrentham’s SHI by improperly counting certain units as “affordable.” The HAC then remanded the permit application to the ZBA for a hearing on the merits of the application. Wrentham appealed the remand order to the Superior Court, which dismissed the suit on the grounds that the HAC remand did not constitute an appealable “final judgment.” The Appeals Court concurred with the Superior Court.
After granting further appellate review, the SJC upheld Superior Court’s decision to dismiss the suit for lack of subject matter jurisdiction, holding that the HAC’s decision to provide the ZBA with a broad range of options on remand indicated that no final agency action had occurred. The SJC noted that these options included: a) approving the comprehensive permit application; b) denying the permit for environmental, safety, or health reasons that outweighed the need for affordable housing; or c) denying the permit (in tandem) for cause and on statutory minima grounds. As in Hingham, the SJC also noted that lengthy delays associated with independent court challenges to the accuracy of SHI calculations would frustrate the streamlining purpose of Chapter 40B.
II. The Woburn Case: Constructive Denials and Comprehensive Permit Conditions
In Board of Appeals of Woburn v. Housing Appeals Committee, the SJC was asked to decide whether the HAC has the authority to hear appeals of “constructive denials”: comprehensive permits that have been granted by a ZBA, but with extensive and onerous conditions attached. The case concerned a 2001 decision by the Woburn ZBA to condition approval of a proposed Chapter 40B project on a reduction in the project’s size from 640 to 300 housing units. The developer appealed to the HAC, arguing that these burdensome conditions amounted to a “constructive denial” of the project as proposed. The HAC concluded that the developer failed to demonstrate that the conditions made either the construction or operation of the housing development “uneconomic.” Nonetheless, the HAC concluded that a 540-unit development would be consistent with local needs, and ordered the Woburn ZBA to issue a comprehensive permit for a 540-unit complex.
After granting direct appellate review, the SJC overturned the HAC order and upheld the ZBA’s conditional permit. The SJC held that the HAC “exceeded its statutory authority when it revised the conditions imposed by the [ZBA] . . . after finding that the [ZBA’s] conditions did not make the project uneconomic.” Stressing the plain language of Chapter 40B, the SJC ruled that the HAC “may review an approval with conditions only if those conditions render the project uneconomic” (emphasis added). In a concurring opinion, Chief Justice Margaret Marshall warned that local zoning boards could conceivably attempt to deter affordable housing development by imposing conditions that are just onerous enough to make projects “barely” economic, and thus undesirable to a developer in practice. For this reason, the Chief Justice encouraged DHCD to use its broad regulatory authority under Chapter 40B to provide further clarification of the term “uneconomic” in light of the Woburn opinion.
III. How Hingham, Wrentham, and Woburn May Affect Comprehensive Permit Applicants
Following the Hingham and Wrentham cases, the remedy for a municipality that disagrees with DHCD’s SHI calculation is to challenge that calculation before the HAC. This remedy is clearly a cumbersome one, since the HAC is only authorized to hear appeals of comprehensive permit denials. Thus, the only way for a municipality to challenge DHCD’s SHI calculation is for the municipality to deny a developer’s comprehensive permit application (on the basis that the municipality has exceeded the 10% threshold and thus need not issue any further comprehensive permits) and wait for the developer to appeal. In practice, this scenario is most likely to occur in situations where a municipality believes that it has exceeded the 10% threshold, but DHCD disagrees. Those developing and financing 40B projects should therefore be familiar with any such SHI discrepancy in the municipality where the project is proposed, and be aware of the potential additional time and resources that may be required of them should they choose to proceed under such circumstances.
Following the Woburn case, the success of developer challenges to “conditional approvals” now depends on the ability of the developer to demonstrate that ZBA-imposed conditions render the project “uneconomic.” In drafting initial project proposals, developers and lenders may thus now wish to give additional consideration to how they will demonstrate (if necessary) the combination of potential conditions that would render a given project “uneconomic.” Additionally, in the absence of clear guidance from the SJC as to the definition of the term “uneconomic” in light of the Woburn decision, all parties involved in the comprehensive permitting process - developers, lenders, and local communities - should encourage DHCD to promulgate definitive guidance in this regard.