BOSTON, MA - State Inspector General Gregory W. Sullivan said yesterday that Massachusetts cities and towns may be owed a collective $100 million due to abuses by developers involved in a state program aimed at bringing low cost housing to every community. Appearing before the Senate committee on post audit and oversight, Sullivan detailed an investigation by his office that uncovered abuses developers used to hide excess profits made by taking advantage of the state's Chapter 40B affordable housing law.
The law reduces zoning restrictions for developers who agree to set aside 25 percent of units for residents earning less than 80 percent of the host city or town's median income. Sullivan said the $100 million estimate was based on a review of 10 Chapter 40B developments that found that developers exaggerated expenses and understated profits. Regulations say developers are limited to 20 percent profit, and that the remainder is to be returned to the city for further investment in affordable housing, he said.
Sullivan warned the problem is growing and cited recent policy changes that have raised the minimum level of profits for developers and increased the allowable density of 40B developments. "Municipalities have been virtually kicked out of the process," Sullivan said. "I don't think that the Legislature would stand for that, and I don't think you should."
State Sen. Susan Fargo, D-Lincoln, speculated that Waltham might be in line for additional payments as a result of the findings. However, she said no process of determining what they might recoup is in place. "If the system is flawed, there may be the potential for some money to come back to the community," Fargo said after the meeting. "Now that's going to be a longer-range kind of thing. It's not going to happen overnight." Fargo said there has been a growing concern in many communities that developers are taking advantage of the law.
Dan O'Connell, secretary of the executive office of housing and economic development, said 26,000 affordable homes have been created in Massachusetts since the inception of Chapter 40B in 1969. State Sen. Robert Hedlund, R-Plymouth, echoed the concerns that local governments do not have the same voice with housing agencies as developers of Chapter 40B projects. "It seems to me there is a "circle the wagons" mentality amongst folks at the (Department of Housing and Community Development), and I've sensed a little of that today," he said. "And I hope that changes."
Tina Brooks, undersecretary of the Department of Housing and Community Development, said her administration has enhanced the process of 40B developments. She did not address past financial misrepresentations directly, but said regulations have been put in place to prevent developer abuse. "We adopted detailed and clear cost-examination procedures for homeownership transactions that require the CPA firm to adhere to our land value and cost guidelines," she said. "We require that the cost examination be available to a community for review and comment prior to its acceptance."
State Sen. Marc Pacheco, D-Taunton, said the next step is for the housing and development agencies to figure out how serious the problems actually have been, and to address ways of fixing them. "The intent of having this hearing is not to repeal 40B. That question has been debated in this very room," Pacheco said. "This is about public interest, and whether or not the public interest is being served, based upon some of the information that has come into light."
Source: DailyNewsTribune.com