June 1, 2009

Senate Oversight Committee Calls for Greater Transparency and Accountability in
State’s Affordable Housing Law

The state’s Chapter 40B affordable housing law, plagued by allegations of fraud and abuse, is long overdue for an overhaul to bring it up to standards of accountability and transparency that would allow towns and cities, as well as developers, to regain confidence in the system, according to a report released today.

Senator Michael O. Moore (D-Millbury) a member of the Senate Post Audit and Oversight Committee, which conducted the investigation, said “This report documents the abuses that have taken place in a program that was designed to mandate affordable 40B Housing in cities and towns.  During such difficult economic times, it is imperative that we increase transparency and accountability in managing Chapter 40B so that communities and citizens are protected.”

The report, “Chapter 40B: Building Accountability into the Massachusetts Affordable Housing Program” calls for a more thorough process for certifying costs under the program, which allows developers to override local zoning in order to build more units than the underlying zoning would allow. It also calls for key rules to be established by an open, public process that would ensure that all stakeholders be consulted.

Chapter 40B projects allow developers to override local zoning in order to build more units than the underlying zoning would allow.  In return, developers agree to set aside a percentage of affordable units, limit their potential profits, and return excess earnings to the municipality. Under the program, there has been no consistent auditing of developers. Cost certifications have been spotty and not well documented, resulting in fraud and abuse.

“The history of the 40B cost certification program is outrageous,” said Pacheco, D-Taunton, chairman of the committee. “At the very least, municipalities should be assured that there is accountability in the cost certification process, and the opportunity for legitimate input, since 40B takes control from local government.”

In addition, substantive aspects of the program – including cost certification, density limits, profit limits and the determination of what makes a project “uneconomic,” have been governed by guidelines instead of regulations.

These particular issues are often the source of conflict between developers and municipalities. Such key aspects of the program should be governed by regulation, which has the force of law, the committee says. Regulations are more appropriate for governing a program that allows developers to override local zoning laws.

“If there is a piece of good news here, it is that this administration is in the process of addressing problems that have been long ignored by previous administrations. The housing agency has already begun to act on our recommendations. We are now headed down the path of broader input, and greater transparency and accountability,” Pacheco said.

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