Change urged to rein in developer abuses
Senate panel says localities lose out
A state Senate panel today will recommend tougher measures to crack down on developers who abuse the Massachusetts affordable-housing program by keeping excess profits for themselves instead of returning the money, as required, to cities and towns.
The controversial program, known as Chapter 40B, has been marred by builders who inflate expenses, underreport profits, and deprive municipalities of millions of dollars, said Senator Marc R. Pacheco of Taunton, a Democrat who is chairman of the Post Audit and Oversight Committee, which is scheduled to issue the findings of a months-long study this afternoon.
The report, among other recommendations, urges tougher accountability standards for developers and says some guidelines for the 40-year-old program should become enforceable regulations instead.
"Based upon spot-checks and looking at the evidence that we presently have, the type of oversight that can ensure absolute integrity was not in place," Pacheco said. "Every penny that ought to be recouped for the taxpayer should be, and it should be done as soon as possible."
At a September hearing before the committee, state Inspector General Gregory Sullivan said some developers had not accurately stated their affordable-housing profits, at a loss of $100 million for cities and towns. Sullivan testified that no mechanism existed to track which projects had been certified for financial accuracy.
Pacheco said the committee's work confirmed much of Sullivan's probe.
"Follow-up has been spotty at best over the years," Pacheco said. "When nobody was watching, these developers would go along and do whatever they needed to do."
Under the law, builders are allowed to bypass local zoning restrictions in communities where less than 10 percent of the housing stock is classified as affordable. To do so, they must set aside 25 percent of new units for residents who make less than 80 percent of the community's median income. Profits for such projects are capped at 20 percent, with any excess channeled back to the cities and towns.
In 2005, Sullivan began an investigation of Chapter 40B developers. Last July, in one example, he alleged that builders had inflated profits and underreported expenses for a 12-unit project in Acton.
As a result of his inquiry, Sullivan found "developer profits were routinely and substantially understated. The results, in many cases, were windfall profits to the developers which deprived the respective municipalities of the excess profits."
The law, although spurring the development of 26,000 units of affordable housing since 1969, has been an irritant for many communities that have lost control over development.
John Belskis of Arlington, chairman of the statewide Coalition to Repeal 40B, said he is interested to read the details in the Senate report.
However, Belskis said, he will continue to push to scuttle the program unless substantive reforms are implemented.
"Unless we see some significant moves to tighten this thing up, to improve the law, to stop the abuses, we'll try to repeal it," Belskis said.
At last count, he said, the coalition has members from 200 communities across the state. The goals behind Chapter 40B have merit, Belskis said, but he believes the program needs a drastic overhaul.
"If some of the defects are corrected and it's administered properly, then, yes, there's potential," he said.
Pacheco said improvements are underway. He said the state Department of Housing and Community Development agrees with the substance of the panel's report and, among other measures, has created a database to track 40B projects.
"When this administration understood what was taking place," Pacheco said, "they aggressively moved forward working with Post Audit on this issue."
Pacheco said Chapter 40B will remain controversial because the law allows builders to bypass jealously guarded zoning restrictions. However, he said, the program "at least should be something that is done the way it was intended to be done, in terms of accountability and profits going back to the communities if it exceeds a minimum number."
Despite its flaws, the Post Audit committee concluded, "Chapter 40B has proven to be an innovative and effective method to encourage developers to build housing and at the same time meet the demand for affordable housing in Massachusetts."
Brian MacQuarrie can be reached at b_macquarrie@globe.com. 