2013 Housing Score: Builders 2, Towns 0

Today I welcome guest contributor Peter Feuerbach of Rubin and Rudman, LLP.  Peter penned an article recently on the state of multi-family construction in Massachusetts.  Thanks Peter! The stars continue to align for builders in 2013. As if low interest rates, pent-up demand, and the Governor's plan for 10,000 new housing units per year were not enough of a tailwind, along comes the Supreme Judicial Court and issues not one but two decisions approving affordable housing developments.

The recent SJC decisions continue to recognize the importance of constructing affordable housing (rental or ownership) under the "comprehensive permit" law, Chapter 40B. The decisions also remind local boards to not deny a project based on unreasonable concerns, because improper reasons will be overturned.

1.  On January 8, the SJC ruled that the Town of Lunenburg had improperly denied a 146-unit condominium project. The SJC rejected the Town's argument that the project would be inconsistent with the Town's master plan, because the Town had not actually created any affordable units under that plan.

The SJC also held that the Town's affordable housing stock for purposes of Chapter 40B consists of subsidized units with long-term affordability ensured by a deed restriction. Thus, low-cost market rate housing does not qualify as "affordable housing" under Chapter 40B.

2.  On January 14, the SJC held that the Town of Sunderland had improperly denied a 150-unit rental project. It was wrong for the Town to deny the project on the basis that the fire chief had alleged fire safety concerns (i.e., the Town did not have a ladder truck or a garage to store it in). The SJC determined that those concerns were not valid where the 3-story buildings would have an extensive, state-of-the-art sprinkler system, the Town had mutual aid from a neighboring town that owned a ladder truck, and the Town's zoning bylaw allowed taller buildings than those proposed by the applicant.

Importantly, the SJC also ruled that the alleged "fiscal impact" of the project was not a lawful basis for denial. The Town had argued that the project would increase the school age population and necessitate an increase in the school budget; require hiring additional police officers and firefighters; and, create additional maintenance expenses for roads, sidewalks and drainage, all in excess of the tax revenue generated by the project.

The SJC rejected the Town's argument, holding that a fiscal impact analysis is not permitted under Chapter 40B. The one limited exception is if the alleged inadequate municipal services were due solely to unusual topographical, environmental or other physical circumstances of the project, which did not exist in this case.

As a final exclamation point, the SJC ruled that the Town had improperly charged the applicant a $10,000 "filing fee", ostensibly to pay for the Town's attorney for general legal representation. Such burdensome "application fees" were prohibited under the affordable housing regulations.

3.  The affordable housing regulations of the Department of Housing and Community Development (DHCD) and the Housing Appeals Committee (HAC) support proactive municipal efforts to create housing (e.g., adoption of "smart growth" zoning overlay districts to create new housing "by right" under Chapter 40R, commitment of Community Preservation Act (CPA) funds to construct affordable housing, etc.). However, as the SJC recently indicated, the local efforts and plans will not be credited if they do not result in actual construction of affordable units.

In December 2012, I circulated a memo on the Governor's housing plan and "5 Tips for Real Estate Development". Please contact me if you would like a copy.

Please contact me if you or a colleague has any questions regarding comprehensive permits, Chapter 40B, real estate development, or construction issues.

I also post this "Alert" on my BLOG masslegalalerts.blogspot.com, which you can use if you want to comment on this Alert or other subjects on which I have written.

Peter Feuerbach, Esquire 617-330-7136

National Housing Market Update

I sit on the Board for the Builders Association of Greater Boston (BAGB), and have been a member of the Association for a number of years.  It’s interesting to learn from my fellow associates about the local home building industry, and also to hob knob with the local builders.  But as a member of BAGB, I am also automatically a member of the National Association of Home Builders, and I receive the monthly glossy magazine that they publish, appropriately titled “Builder”.   Aside from technical articles about HERS ratings and advances in plumbing, the magazine gives me a broader view of the health of the industry nationwide. Here are some facts, figures and updates from the June edition of “Builder”.

  • In 2005, there were more than 73,000 active building companies in the U.S.  In 2011 there were fewer than 34,000, a decline of over 50%.  The average number of closings per year declined from 18 per builder in 2005 to 9 per builder in 2011.
  • Not surprisingly, the large production home builders such as Lennar, Hovanian, Toll Brothers and D.R. Horton take up the lion’s share of the largest markets.  These builders are not quite as active in New England as in southern and western markets.  For instance, the top 5 builders in the Houston market had 33% of the closings in 2011, and the top 5 builders in the Washington DC area market had 41.8% of the closings, while the top 5 builders in the Boston area market had only 25% of the closings.  Our market is dominated by smaller, local builders.
  • Despite the health of our local economy, eastern MA and southern NH (considered as one housing market), ranks 49 of 50 in a recent ranking of most active home building markets compiled by Hanley Wood Market Intelligence (#50 is Colorado Springs if you were wondering).  Our market had 1,436 closings in 2011.  The number 1 through 5 markets were:
  1. Houston/Sugar Land/Baytown, TX (17,158 closings)
  2. Dallas/Fort Worth/Arlington, TX (12,840 closings)
  3. New York/Northern New Jersey/Long Island (10,391 closings)
  4. Washington D.C./Arlington/Alexandria/MD/W.Va (9,270 closings)
  5. Phoenix/Mesa/Scottsdale, AZ (7,710 closings)
  • The very factor that keeps the large companies out of New England; the scarcity of large tracts of developable land and the onerous nature of our permitting environment, is the thing that has led to retention of housing values in our neighborhoods (my comment).
  • According to NAHB Chief Economist David Crowe, home remodeling has shown a bigger bounce back than new home construction.  Owners are motivated to improve their properties for their own use (as opposed to preparing for a sale), with kitchens and baths as the most popular upgrades.  Whole house renovations and large additions however, are still elusive.  This may be good news for residential landscape architects, for as soon as homeowners get through their backlog of interior renovations, outdoor living environments will surely get upgraded as well.  Anecdotally, I am seeing more inquiries for small scale landscape renovations.


The NAHB website has a link to a blog that is a great source of information for those who want to get into the weeds of the national housing market.

James Taylor and the Lumber Truck

Last week we treated ourselves to a James Taylor concert at Tanglewood.  Although we have been to Tanglewood many times for classical performances, and despite my huge fandom of Sweet Baby James, I had never been to this now famous yearly event.  The place was filled like I had never seen it.  Folks camped out end to end, lawn to lawn.  It was a real festival atmosphere, and it took us a full hour just to exit the parking lot. During the worst of the recession, business was pretty tough for us, and I would not have dreamed of spending $75 for three of us on such a luxury as going to see a concert.  I take it as a sign of economic recovery that 30,000 or so (my guess) would drive to Lenox for the evening (times three nights!) and shell out the dough to be crammed onto that lawn for several hours.  By the way, the concert was great except that too many people talked through the whole thing.

The concert event is anecdotal evidence of course, of an economic recovery.  We constantly search the news for additional signs of recovery, picking apart the data.  We are optimists in my family, choosing to ignore the naysayers and tell ourselves how much things are improving.

Here is another anecdotal story.  I remember in the depths, sometime in 2009 I think, I attended a networking dinner at the Builders Association of Greater Boston.  At the time, this was a group of folks mostly crying in their beers every time we go together, but it was therapeutic, you know?  Someone then excitedly informed our small group that on their way over, they had witnessed a truck driving down the Massachusetts Turnpike.  And can you imagine, it was filled with lumber!  It was like seeing a ghost.

Such was the state of the economy three and four years ago.  Since I am in a design and planning profession and at the leading edge of the economic cycle, my business started to tank in 2007 with the collapse of the condo market.  It really turned around for good in 2011, with many new design contracts coming in toward the end of the year.  Now I drive down the major roads and view one construction site after another; builders and developers racing to get their projects in the ground to beat the competition to market.  Retail, rental housing, subdivisions, or office space, there is plenty of activity.

Yet reports of a dead economy are still coming from my colleagues in the central part of the state where little is happening, so the news is mixed.  And I certainly am aware of pockets of despair throughout the rest of the country.  As I was driving toward Boston on the Pike the morning after the JT concert, I saw a truck filled with lumber, and my optimism was rekindled.