Housing project off table

A controversial affordable housing project in Duxbury and Kingston appears to be dead -- at least for now -- and local officials are relieved.

Tarkiln Commons Development LLC withdrew an application for state approval for an affordable housing designation last week at the request of Massachusetts Housing Finance Agency, which threatened to formally reject the application if the developer did not pull it. The agency made the request last month after determining that the 75-unit housing development's profit margin would have greatly exceeded what was allowed under state law because of a discrepancy in land values.

Tarkiln had claimed on its state application that it bought the proposed site of the development -- 9.4 acres of cranberry bogs and wetlands that straddles Duxbury and Kingston -- for $9 million, but the state appraised the land last month for only $500,000. Under the state's affordable housing law, known as Chapter 40B, developers can factor land acquisition payments into development costs. That figure is then used to calculate their profit -- up to 20 percent of the total.

"On behalf of the applicant, I hereby request the above referenced application to be withdrawn without prejudice," wrote the developer's attorney, William D. Rounds of Taunton, in a letter received by MassHousing last Monday.

While MassHousing did not accuse Tarkiln of any wrong doing in asking to withdraw the application, the agency's request came at a time of greater state scrutiny of profit margins for affordable housing developments.

Earlier this year, an investigation by the state inspector general's office revealed that 40B project developers sometimes jack up profits by exaggerating land values, and in April MassHousing yanked support for a 40B project in Sharon after a town appraisal valued the land at $2.5 million , a quarter of what the developer told the state it was worth.

In the case of the Duxbury-Kingston development, the discrepancy in land values could have resulted in a profit margin 62 to 82 percent higher than allowed under state law, according to an appraisal done last month by MassHousing.

Thomas Farmer, a MassHousing spokesman, said he did not know if the developer intended to re submit the application with updated numbers. However, the developer will be able to recoup a $7,250 application fee.

"It gives them a chance to assess what they may or may not want to do," he said.

Neither Rounds nor the developer could be reached for comment.

The project, known as Commons at Tarkiln, would have produced about 11 full-price units and four affordably priced ones in Duxbury. The portion of the project in Kingston would have contained about 45 full-price units and 15 affordably priced ones.

Officials in Duxbury and Kingston expressed relief that the developer withdrew the application. Officials in both towns questioned aspects of the project in letters to MassHousing sent in May. Concerns ran the gamut of effects on wildlife and traffic to a lack of clarity over whether the housing would use sewer or septic systems or have age restrictions for residents.

But Duxbury officials went one step further than Kingston in its letter, raising doubts about the $9 million purchase price of the land. The town noted that the parcel sold four years ago for $300,000 and asked MassHousing to conduct an appraisal, although the agency says it has done appraisals since November 2005.

Jonathan Witten , a Duxbury selectman, said he thought it was appropriate for Tarkiln to withdraw the application.

"I'm glad they heeded MassHousing's warning," he said. "It will be interesting to see if they re apply."

Kingston Town Administrator Kevin R. Donovan said his town was happy about the project's apparent demise.

"That's part of the whole process -- MassHousing has to look at the financial piece," Donovan said. "That's what MassHousing is charged to do and they did their job."

James Vaznis can be reached at jvaznis@globe.com.