PERMIT 381349

April 2, 2009


Grossman, J.



This matter came to be heard on August 26, 2008, on the Motion of the Hanover Board of Appeals (Plaintiff/Board) for a Judgment on the Pleadings, and on the Cross Motion of the Defendant, 511 Washington Street LLC (Applicant/Developer), for a Judgment on the Pleadings. At the heart of the instant controversy is a condition of a Comprehensive Permit issued to the defendant 511 Washington Street, LLC on January 21, 2003, which authorized the construction of a seventy-four (74) unit development in Hanover, Massachusetts. The disputed condition restricts occupancy of the individual rental units to households having at least one member who is fifty-five (55) years of age or older. (Condition No. 6) [Note 1]

After the Board subsequently refused to rescind this condition, the Housing Appeals Committee (HAC) eliminated it on appeal. [Note 2] The Board, in turn, appealed that disposition to the Land Court. With the present order, this court affirms HAC’s decision to lift the age restriction from the Developer’s Comprehensive Permit.

Background and Procedural History

The Applicant’s completed development, designated North Pointe (development/project), consists of two apartment buildings containing a total of seventy-four (74) age restricted units. [Note 3] Of that total, nineteen are currently affordable units. The project is located on a 3.88 acre parcel off Route 53 in Hanover. [Note 4]

On January 21, 2003, the Plaintiff granted a Comprehensive Permit to the Applicant authorizing the construction of North Pointe. At the outset, the development was to be financed under a Massachusetts Housing Finance Agency ( MHFA/ MassHousing ) tax credit program with thirty units (approximately 40%) to be rented to households at or below 80% of median income. Subsequently, in the spring of 2004 when the project was approximately one third complete, the Developer sought a change of financing and a reduction in the number of affordable units to nineteen, approximately 25% of the total. The request to reduce the number of affordable units was approved by the Board on August 10, 2004. [Note 5]

In a review of the proposed project, MHFA observed that “[t]he subject development will also be limited to occupancy by adults, 55 and older. This restriction will greatly limit the market potential of the subject and possibly affect achievable rent levels.” [Note 6] Noting that the Applicant had “considerable experience with complex single-family and commercial real estate development,” but lacked “prior…multifamily rental development experience” MHFA recommended that the Applicant strengthen its development team with the addition of a consultant or LLC manager with multi-family rental experience. [Note 7]

In the spring of 2004, the Applicant retained Peabody Properties, Inc. (Peabody) to provide marketing, rental and management services for the project. [Note 8] The Applicant provided Peabody an office at the project that was generally open seven days a week during the lease-up period.

In general, measures adopted by Peabody to attract potential renters included placement of advertisements in newspapers and other publications; production of flyers, brochures and signage; use of open houses and model unit furnishings; acquisition of lists of those meeting certain criteria who might be interested in age restricted housing; cross marketing with other developments represented by Peabody; interaction with local real estate brokers; and development of a web site. During the spring of 2005, Peabody offered a promotion affording a free cruise to anyone leasing a market rate unit. [Note 9] In October of that year, Peabody organized a flu shot clinic at the project in an effort to encourage older persons to visit the premises. It offered short term rentals of furnished units in an effort to appeal to the corporate rental market. It initiated a promotion offering one month’s free rent, as well as a reduction in the security deposit. [Note 10] Notwithstanding these efforts, by August 2005, no more than thirty of the 74 units had been rented. Of the thirty, nineteen were the affordable units, while the remaining eleven were market rate. By the following August, the figures had remained virtually unchanged. [Note 11] The Developer asserts that it has never experienced a positive cash flow, while the negative cash flow has reached as high as $50,000 per month. [Note 12] In this regard, the Developer’s expert took note of “[i]ncreases in energy costs [, which] have [had] a particularly significant impact on the economics of the project because rents include heat and hot water, [both of] which are provided by a central heating unit and boilers.” [Note 13]

On September 22, 2006, in light of this poor economic performance, the Applicant formally requested that Plaintiff lift the age restriction on all its rental units. On December 15, 2006, however, the Plaintiff filed a decision with the Hanover Town Clerk denying the Applicant's request. Relying primarily upon its argument that the project was “uneconomic” as so conditioned, [Note 14] the Applicant appealed the Board's denial to the Housing Appeals Committee (HAC). Thereafter, on January 22, 2008, HAC rendered a detailed, sixteen page decision overturning the Board's determination and directing it to remove the said condition.

In its decision, HAC observed that “[t]hough it originally budgeted $55,000 for marketing, the developer spent over $90,000 on marketing, including $30,000 on advertising.” [Note 15] Moreover, it characterized the foregoing marketing efforts as “extensive.” [Note 16] HAC also found that the Applicant had “proven (and the Board has not refuted) that the unchanged, age-restricted development approved by the Board is uneconomic.” [Note 17] HAC finally concluded that “where there is no allegation of fraud or other misconduct, . . . a developer [should not] be prevented from making a change in a development that has become uneconomic unless the Board has established that there are countervailing local concerns . . . [T]he Board has not done so in this case.” [Note 18] Plaintiff’s appeal from the decision of HAC was filed in the Plymouth Superior Court on February 20, 2008. Thereafter, on May 29, 2008, that appeal pursuant to G. L. c. 30A, § 14, was transferred to the Permit Session of this Court. Plaintiff’s Memorandum Of Law In Support Of Its Motion For Judgment On The Pleadings (Plaintiff’s Memorandum) was filed on June 30, 2008. Thereafter, on August 15, 2008, Defendant 511 Washington Street LLC filed its Memorandum Of Law In Support Of Its Cross Motion For Judgment On The Pleadings (Developer’s Memorandum). Four days later, Defendant Housing Appeals Committee filed its Opposition to Plaintiff’s Motion For Judgment On The Pleadings (HAC’s Opposition). As note above, this court heard these motions on August 26, 2008, and took the matter under advisement.


A. HAC’s Statutory Authority

This action is an appeal from an administrative decision of the Housing Appeals Committee, which resides within the Massachusetts Department of Housing and Community Development. HAC is charged with the resolution of disputes arising pursuant to G. L. c. 40B, §§ 20-23, the so-called Comprehensive Permit Law.

In delineating the purpose underlying that statute, the Court in Standerwick v. Zoning Board of Appeals of Andover observed as follows:

We have long recognized that the Legislature’s intent in enacting G. L. c. 40B, §§ 20-23, is to provide relief from exclusionary zoning practices which prevented the construction of badly needed low and moderate income housing . . . The statute reflects the Legislature’s considered judgment that a crisis in housing for low and moderate income people demands a legislative scheme that requires the local interests of a town to yield to the regional need for the construction of low and moderate income housing . . . To effectuate this purpose, the act establishes a streamlined comprehensive permitting procedure . . . permitting a developer to file a single application to the local zoning board of appeals for construction of low or moderate income housing. [Note 19]

447 Mass. 20 , 28-29 (2006) (citations omitted). Thus, the general policy objective animating c. 40B is the promotion of affordable housing for low and moderate income citizens of this Commonwealth. [Note 20]

Especially relevant to the matter at hand, § 22 authorizes an applicant to lodge an appeal with HAC for review of an application granted by a local board of appeals “with such conditions and requirements as to make the . . . operation of such housing uneconomic….” Section 20, in turn, defines “Uneconomic” as follows:

[A]ny condition brought about by any single factor or combination of factors to the extent it makes it impossible for…a limited dividend organization to proceed and still realize a reasonable return in building or operating such housing….

Section 23 speaks to the review and disposition by HAC of the Board of Appeals decision, in relevant part as follows:

[HAC] shall be limited to the issue of whether, . . . in the case of an approval of an application with conditions . . . imposed, . . . such conditions . . . make the construction or operation of such housing uneconomic and . . . consistent with local needs. . . . If [HAC] finds, in [such a] case . . ., that the decision of the board makes the building or operation of such housing uneconomic and is not consistent with local needs, it shall order such board to modify or remove any such condition . . . so as to make the proposal no longer uneconomic . . . Decisions or conditions . . . imposed by a board of appeals that are consistent with local needs shall not be vacated, modified or removed . . . notwithstanding that such decisions or conditions . . . have the effect of making the applicant’s proposal uneconomic.

Complimenting this mandate, 760 CMR 31.06(7) shifts the burden to the relevant board to demonstrate that the condition being reviewed serves a local purpose, once an applicant has offered sufficient evidence to show that the project as conditioned, is uneconomic. [Note 21]

In addressing whether the condition embodied local needs so as to permit the condition to survive review, HAC observed that “there is virtually no testimony or other evidence of local or regional housing needs that support the age restriction. We find therefore that the Board has not sustained its burden of proving a legitimate local concern that outweighs the regional need for housing.” [Note 22]

B. Standard of Review

General Laws Chapter 40B, Section 22 states that such HAC decisions “may be reviewed… in accordance with the provisions of chapter thirty A.” G. L. c. 30A, § 14, captioned Judicial Review, permits “any person…aggrieved by a final decision of any agency in any adjudicatory proceeding …to a judicial review thereof . . .”

Subsection (5) of § 14, provides that, as a general matter, such review is to be conducted without a jury “and shall be confined to the record.” In turn, subsection (7) sets out the options available to the reviewing court. It may affirm the decision of the agency, remand the matter for further proceedings before the agency, or it may set aside or modify the decision if it determines, inter alia, that the decision is based upon an error of law, that it is unsupported by substantial evidence, or “is arbitrary or capricious, an abuse of discretion or otherwise not in accordance with law.” In addition, subsection (7) further explicates the limited scope of this form of judicial review:

The court shall make the foregoing determinations upon consideration of the entire record, or such portions of the record as may be cited by the parties. The court shall give due weight to the experience, technical competence, and specialized knowledge of the agency, as well as to the discretionary authority conferred upon it.

Thus, the statute itself calls for a reviewing court to accord the administrative decision below, substantial deference.

The recent case of Middleborough v. Housing Appeals Committee is especially helpful in delineating the role of this court in reviewing the HAC decision at bar. 449 Mass. 514 (2007). Specifically, the Supreme Judicial Court observed that “[a] reviewing court must apply all rational presumptions in favor of the validity of the administrative action and not declare it void unless its provisions cannot by any reasonable construction be interpreted in harmony with the legislative mandate.” Id. at 524, quoting Zoning Bd. of Appeals of Wellesley v. Housing Appeals Comm., 385 Mass. 651 , 654 (1982) (ultimately quoting Consolidated Cigar Corp. v. Department of Pub. Health, 372 Mass. 844 , 855 [1977]) (internal quotations omitted). Moreover, “[a]gency action will not be overturned unless it is proven arbitrary, unreasonable, or inconsistent with the agency’s own rules.” Id. In this vein, the Court later opined:

[T]he scope of review of an administrative decision pursuant to G. L. c. 30A, s. 14, leaves little room for appellate discretion. As we noted, the agency’s decision must be upheld if supported by ‘such evidence as a reasonable mind might accept as adequate to support a conclusion’ . . . Our deferential standard of review ‘does not permit a court to treat the proceeding [under G. L. c. 30A] as a trial de novo on the record which was before the administrative board. A court may not displace an administrative board’s choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo.’ [Note 23]

That said, the reviewing court must not confuse “judicial deference and restraint [with] abdication.” Fafard v. Conservation Comm. of Reading, 41 Mass. App. Ct. 565 , 572 (1996), quoting National amusements, Inc. v. Boston, 29 Mass. App. Ct. 305 , 310 (1990).

It is worthy of note, that the Board does not address this highly deferential standard as articulated by the Court. Rather, the Board chooses to rely in large measure upon its argument that “the determination of the HAC that the Board’s denial of the Applicant’s…NPC [Notice of Project Change] rendered the project uneconomic is subject to de novo review because it involves a question of law.” [Note 24]

This court rejects the notion that a de novo standard is appropriate under the circumstances that pertain in the instant matter. It is enough to observe that in the face of substantial law to the contrary, see Middleborough, supra; Conservation Comm. of Falmouth v. Pacheco, 49 Mass. App. Ct. 737 , 740 n.3 (2000) (“[it is] well-established [that courts will accord] deference [to] an agency’s findings of fact and interpretation of a statute (or regulations) within its charge [and, therefore, i]f the question is fairly debatable, [the reviewing court] may not displace [the agency’s] choice”), quoting Arthur D. Little, Inc. v. Commissioner of Health & Hospitals of Cambridge, 395 Mass. 535 , 553 (1985) (internal quotations omitted); Arnone v. Dept. of Social Services, 43 Mass. App. Ct. 33 , 34 (1997) (“a court gives due weight to the experience and specialized competence of the agency”), citing Flint v. Commissioner of Pub. Welfare, 412 Mass. 416 , 420 (1992), Plaintiff’s argument is essentially conclusory, lacking convincing legal analysis, citation or other support.

C. Nature of the Age Restriction

Plaintiff first argues that the age restriction was not a condition of the Board’s approval, inasmuch as it had initially been proposed by the Developer itself as part of its original submission to the Board. [Note 25] Specifically, the Plaintiff makes the following assertions:

The condition in the Comprehensive Permit limiting the residents of the rental units to persons aged fifty-five (55) and older was not a condition the Board imposed upon the Project. Instead, this was a fundamental element of the Project as originally conceived and proposed by the Developer…Here, the HAC failed to Recognize that the Town did not “impose” the age restriction as a condition upon the Project . . . . The Board submits that where it approved the comprehensive permit project exactly as proposed by the Developer, and the Developer was able to construct the Project as permitted, the Applicant should not be able to alter a fundamental part of the project absent extraordinary circumstances, which are not present here….The senior renters were promised an age restricted Promise in perpetuity by the Developer. [Note 26] . .

For its part, HAC rejected this argument concluding that it was without merit. [Note 27]

In so doing, HAC relied upon 760 CMR 31.03 (3), [Note 28] captioned Changes After Issuance of a Permit. In so doing, it made the following observation: A considerable amount of time usually passes between issuance of a permit and . . . the end of construction and lease up . . . and changed circumstances during that time are common. As a result, our regulations clearly permit the developer to petition without regard to whether the permit conditions or design parameters were imposed by the Board, negotiated, or proposed by the developer.

R. 1140 (emphasis added). In fact, a simple reading of the Board’s decision leads to the inescapable conclusion that Condition No. 6, setting forth the age restriction, is what it plainly purports to be, a condition or enforceable requirement of the Board’s own approval.

Suffice it to say that the Plaintiff provides neither legal analysis nor authority in support of its contrary position. In any event, this line of argument overlooks the fact that the Board explicitly included the age restriction among the numerous conditions to its approval of the comprehensive permit. It is beyond debate that the Board adopted this requirement as its own, regardless of its genesis. I conclude, therefore, that Condition No. 6’s age restriction was imposed by the Board upon the Developer and upon this Project, as a condition of its approval.

D. Application of MHP Guidelines

In analyzing whether the development as conditioned was uneconomic, HAC utilized [Note 29] the Massachusetts Housing Partnership (MHP) [Note 30] Guidelines. According to HAC, “in addressing what constitutes a reasonable return on investment, [the MHP Guidelines] indicate that a Return on Total Cost (ROTC) of at least 2½ % above the current yield on 10 year U.S. Treasury Bill is generally required to fairly compensate the investor” for the risks associated with permitting, construction, and operations. Taking issue with the application of these Guidelines, the Board’s expert opined that a ROTC of 1½ % [Note 31] above the 10 year Treasury Bill rate would constitute a reasonable return. [Note 32]

Beyond its assertion that the definition of “uneconomic” poses a purely legal question, requiring de novo review by this court, [Note 33] the Board argues that the project is fully constructed and operating, and is set to achieve a reasonable rate of return over the long term. [Note 34] It is for this reason that the Board’s expert argued before HAC that a return of 1½ % above the Treasury Bill rate was appropriate inasmuch as the additional “1 % of the margin above treasury is attributable to permitting and construction risk,” i.e risk no longer present because the development had already been completed. [Note 35]

HAC rejected this argument, noting simply that the MHP Guidelines do not allocate pre- and post-construction risk in this fashion. HAC opined that in any event, the Developer should not be penalized for risk that had materialized after the completion of construction. [Note 36]

This court concludes that HAC’s use of the MHP Guidelines to determine whether the development as conditioned is uneconomic, was appropriate. As the HAC decision well indicates [Note 37] HAC did not impose this standard, borrowed from MHP, “for reasons extraneous to the prescriptions of the regulatory scheme”…or for reasons “related…to an ad hoc agenda.” Fafard, 41 Mass. App. Ct. at 567-568. See id. at 569 (opining “[i]n the administration of controls limiting the use of land – as with any exercise of the police power – uniformity of standards and enforcement are of the essence [because i]f the laws are not applied equally they do not protect equally.”)

Moreover, HAC is invested with the express authority under G. L. c. 40B, § 23 to determine whether a given project is uneconomic. Consequently, the failure of § 23 and the accompanying regulatory scheme to set forth precise standards in this regard, lends weight to the argument that HAC may reasonably devise its own standards. See Fogelman v. Chatham, 15 Mass. App. Ct. 585 , 589, 590 (1983) (observing “interstices are filled in routinely, lines drawn, and simple ambiguities resolved; [therefore,] it is enough if a general policy is stated with reasonable clarity, [allowing] the detailed application of that policy to particular fact situations [to] be left to administrative bodies and the courts”). In the case at bar, HAC reasonably filled in the “interstices” [Note 38] as it had previously done in cases before it. As such, the HAC decision was neither arbitrary nor capricious.

E. Substantial Evidence

In addition to the positions considered above, Plaintiff advances two additional substantive arguments, [Note 39] both of which apparently seek to undermine the HAC decision by claiming a lack of substantial evidence. First, Plaintiff asserts that the development is not uneconomic, and, second, that the development is economic. However, even a cursory examination of the administrative record will serve to refute these contentions. This court will address each in turn, below.

i. The Development Is Not Uneconomic

In its Memorandum, the Board argues that the Applicant “failed to prove that the age restriction caused the project to be uneconomic,” when it bore the relevant burden of persuasion. [Note 40] Developer’s expert, however, determined while conducting “his analysis at three different rent levels,” that the ROTC for this development would be 5.4%, 5.9% and 6.7%, respectively. [Note 41] While rejecting Plaintiff’s position concerning a reasonable rate of return for the development, see supra, § D, HAC utilized [Note 42] the somewhat lower Treasury Bill rate of 4.87%, as advanced by Plaintiff’s own expert, rather than the 5% suggested by the Developer’s expert, and still arrived at ROTC below what the Guidelines classify as a reasonable return. [Note 43]

The Board responds that all affordable units have long since been rented to senior citizens, and, second, it asserts that HAC found “that the Project can achieve a reasonable return rate of 6.6%.”

However, the rental of 19 affordable units out of a 74 unit total does not serve to render the project in its entirety “a success.” Once again, Plaintiff puts forth this argument in summary fashion, offering neither analysis nor support. Moreover, Plaintiff’s assertion that “a fair amount” of the market units had been leased is vague and, at very least, unhelpful. See supra, note 40.

Even so, Plaintiff’s statement relative to a 6.6% rate of return, supra, mischaracterizes HAC’s conclusion. [Note 44] HAC nowhere determined that 6.6% constituted a reasonable rate of return. [Note 45] On the contrary, it observed that even the primary analysis submitted by the Board’s own expert, which showed a 6.6% ROTC, merely served to corroborate the testimony of the Developer’s expert that the ROTC was in a range that would render the Project uneconomic under the MHP Guidelines. See supra, note 43.

As such, there is more than sufficient evidence on the record to support HAC’s conclusion that the Applicant’s development as conditioned will not garner a reasonable rate of return as established by MHP Guidelines, and is, therefore, uneconomic. See Rogers v. Conservation Comm. of Barnstable, 67 Mass. App. Ct. 200 , 205-206 (2006) (explaining that “[a] finding is based on substantial evidence if experience permits the reasoning mind to make the finding; [i.e.,] whether the finding could have been made by reference to the logic of experience”), quoting New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456 , 466 (1981), quoting Boston Edison Co. v. Selectmen of Concord, 355 Mass. 79 , 92 (1968) (internal quotations omitted) (emphasis in original).

ii. The Development Is Economic

After arguing that the project is not uneconomic, Plaintiff then advances the proposition that “[t]he Project is [e]conomic.” [Note 46] By way of support, Plaintiff cites primarily the Pre-Filed Testimony before HAC of the Board’s own expert, Russell Tanner (Tanner). [Note 47] Tanner indicated that “the Project is likely to achieve a reasonable objective of approximately 6.6. % [ROTC] and a capitalized value sufficient to support the invested capital and a modest fee.” [Note 48] In this regard, he observed that “HAC has rigidly applied the MPH guidelines,” but that “such a rigid application is not supported by G. L. c. 40B, § 23. He opined that the MHP guidelines . . . “were not meant to be inflexible and rigid mandates from which no deviation could be made.” [Note 49]

Tanner further cited the MHP Guidelines for the proposition that a ROTC of at least 2½ % to 3½ % above the current yield on 10-year Treasury Notes is generally required to fairly compensate investors for the risks associated with permitting, construction, and operations. However, he argued that, as the permitting and construction phases, which typically represent significant risk, had already been completed, “it is appropriate that the required [ROTC] should be reduced.” [Note 50] He proposed, therefore, that an appropriate reduction would be in the order of 1 % so as to arrive at a corrected ROTC of 1½ % above the 10 year Treasury rate, which Plaintiff places at 4.07 % [Note 51] in September 2005, resulting “in a bottom range of 6.37% [sic].” [Note 52]

In response, HAC noted that instead of the 5% Treasury rate used by the Developer’s expert, the Board’s expert used a treasury rate of 4.87%. Utilizing the standard set out in the MHP Guidelines, a reasonable return based upon the lower 4.87% figure, would be 2½ % higher or 7.37 %, i.e. a figure well above the 6.6% derived by the Board’s own expert. For this reason and as noted above, HAC observed that “[t]his evidence corroborates the developer’s proof, and we find the developer has proven (and the Board has not refuted) that the unchanged, age-restricted development approved by the Board is uneconomic.” [Note 53]

Furthermore, on the basis of the facts before it, HAC could properly conclude that a return on total cost of 6.6% [Note 54] would render the Project uneconomic, and that the 6.6% return as posited by the Board’s own expert was attributable to the age restriction placed upon the project by Condition No. 6 of its decision. As previously noted, it is uncontroverted that the Developer has experienced substantial difficulty renting the project as conditioned by the Board. It has experienced a negative cash flow of up to $50,000 per month since the apartments were first introduced to the market. [Note 55]

Thus, in arguing that the project is economic, the Board presents nothing conceptually distinct from its argument that the project was not uneconomic. For substantially the same reasons set forth supra, at § E.i., this court concludes that HAC’s determination that the development as conditioned is not economic, is fully supported by “substantial evidence.” The administrative record surely “permit[s] the reasoning mind to make the finding” that the development as conditioned is uneconomic. Moreover, it cannot be said that the record “points to no felt or appreciable probability of the conclusion or points to an overwhelming probability to the contrary.” Rodgers, 67 Mass. App. Ct. at 205. Indeed, as stated by the Court in Wolbach v. Beckett, “[a]ll [the Boards’] challenges to [the agency’s] decision are, in fact, arguments to the effect that we ‘should make independent findings on our own initiative from the record more in accordance with the Plaintiff[s’] theory of the case in place of making a determination as to whether substantial evidence exists to support [HAC’s] findings.” 20 Mass. App. Ct. 302 , 308 (1985), quoting Number Three Lounge, Inc. v. Alcoholic Beverages Control Commn., 7 Mass. App. Ct. 301 , 309 (1979).


Given the evidence before the Housing Appeals Committee, the Committee’s broad experience and expertise, and the deferential standard that is to be accorded such expertise, I conclude that the Board has failed to meet its burden of demonstrating that HAC’s decision was unsupported by substantial evidence. So too, it has failed to demonstrate that the HAC decision was arbitrary, capricious, or legally untenable. It is apparent from this record and especially from those portions extracted above, that HAC’s decision is not only thoughtful, but well reasoned, fully consistent with the regulatory and statutory scheme, and predicated upon ample evidentiary support.

Accordingly, it is

ORDERED that Plaintiff's Motion for Judgment on the Pleadings be, and hereby is, DENIED. It is further

ORDERED that Defendant 511 Washington Street LLC’s Cross Motion for Judgment on the Pleadings is hereby ALLOWED.

Judgment to issue accordingly.


By the Court. (Grossman, J.)


Deborah J. Patterson


Dated: April 2, 2009.


[Note 1] The Board’s Decision is dated January 8, 2003 and was filed with the Town Clerk on January 21, 2003. A concluding section captioned Conditions sets out twenty-four distinct conditions of the Board’s approval. Condition No. 6 provides, inter alia, that:

“[t]he Project shall be subject to an age-restriction as follows: All of the occupied units at the Project shall be occupied by at least one person who is age fifty-five (55) or older….”

[Note 2] See 760 CMR 30.00 et seq., captioned Procedural Regulations of the Housing Appeals Committee. See also R. 1136 (FN 3). Section 30.01 sets out three eligibility requirements for the submission of an application for a comprehensive permit. For purposes of the hearing before HAC, the parties stipulated that the Developer had satisfied the three requirements regarding:

(a) The applicant’s status as a limited dividend organization.

(b) The fundability of the Project by a subsidizing agency under a low and moderate income housing subsidy program.

(c) Site control by the Developer.

[Note 3] Rental of individual units commenced in February, 2005.

[Note 4] Defendant 511 Washington Street LLC’s Memorandum of Law in Support of its Cross Motion for Judgment on the Pleadings (Developer’s Memorandum), p. 2.

See also, Administrative Record (R ), p. 3.

[Note 5] R. 1138.

[Note 6] R. 7.

[Note 7] R. 1136-1137.

[Note 8] R. 4, 36-37. Peabody claims to be one of the largest property management and marketing agents in New England with a portfolio of approximately 10,000 units.

[Note 9] R. 44. This promotion resulted in the rental of one market rate unit.

[Note 10] The latter was offered in the summer of 2005. See R. 9 & 10.

[Note 11] The number had increased to 31 units rented.

[Note 12] R. 26 & 27. These assertions have not been controverted by the Plaintiff.

[Note 13] See R. 6 & 27. Pre-Filed Testimony of Albert A. Rodiger, a development consultant retained by the Developer, and of R. Richard Lincoln, a member of the defendant LLC.

[Note 14] The Applicant believes that the project is more likely to be an economic success if it is allowed to seek renters from a larger population pool, unrestricted by age requirements. While the nineteen affordable units have been rented from the outset, the applicant has been unable to rent a high percentage of the remaining market rate units.

[Note 15] R. 1138.

[Note 16] Id.

[Note 17] R. 1147.

[Note 18] R. 1143.

[Note 19] See G. L. c. 40B, § 21: “Any public agency or limited dividend or nonprofit organization proposing to build low or moderate income housing may submit to the board of appeals…a single application to build such housing in lieu of separate applications to the applicable local boards.”

[Note 20] See also Zoning Bd. of Appeals of Wellesley v. Ardemore Apartments, 436 Mass. 811 , 814 (2002). The Court observed that the Legislature’s intent when it enacted the comprehensive permit statute was “to create a long-term solution to the shortage of affordable housing throughout the Commonwealth . . . ” Id. (internal citations omitted).

[Note 21] The regulation states,

In the case of an approval with conditions in which the applicant has presented evidence that the conditions make the project uneconomic, the Board shall have the burden of proving first that there is a valid health, safety, environmental, design open space, or other local concern which supports such conditions, and then, that such concern outweighs the regional housing need. 760 CMR 31.06(7). See also 760 CMR 31.05 (3): In the case of approval of a comprehensive permit with conditions or requirements imposed, the issues shall be:

(a) first, whether the conditions considered in the aggregate make the building or operation of such housing uneconomic; and

(b) second, whether the conditions are consistent with local needs.

[Note 22] R. 1148. See G. L. c. 40B, § 20 (providing expansive definition of the phrase “Consistent with local needs”). Indeed, the Plaintiff does not argue that the condition in question should be retained as it is consistent with local needs. Rather, it restricts its focus almost exclusively upon HAC’s determination that the project as conditioned is “uneconomic.” In so doing, the Board argues that the age-restricted development was “not uneconomic,” but was in fact, “economic.” R. 1145. In view of the foregoing, this court sees no basis upon which to disturb HAC’s conclusion that the Board has failed to meet its burden with regard to the “local needs” issue.

[Note 23] Middleborough, 449 Mass. at 528-529, quoting Board of Appeals of Hanover v. Housing Appeals Comm., 363 Mass. 339 , 376 (1973); Zoning Bd. of Appeals of Wellesley v. Housing Appeals Comm., 385 Mass. at 657 (ultimately quoting Labor Relations Commn. v. University Hosp., Inc., 359 Mass. 516 , 521 [1971]) (citations omitted) (emphasis added).

[Note 24] According to Plaintiff, “HAC noted in its decision that neither [Chapter 40B] nor the [CMR] specify how to determine whether or not a project is uneconomic.” Plaintiff’s argument is as follows: if neither so provide a test for whether a project is uneconomic, then this matter requires a purely legal determination, which, for some reason never convincingly explained by Plaintiff, calls for de novo review by this court. In its decision, however, HAC takes a nuanced approach in making this legal determination for itself, which this court discusses below, §§ D-E, in the body of this decision.

[Note 25] Plaintiff’s Memorandum, pp. 10-11.

[Note 26] Id, pp. 10, 11.

[Note 27] See R. 1140.

[Note 28] 760 CMR 31.00 is captioned Housing Appeals Committee: Criteria for Decisions Under M.G.L. c. 40B, §§ 20 through 23. Subsection (3) thereof, is, in turn, captioned Changes After Issuance of a Permit. It provides in relevant part as follows:

(a) If after a comprehensive permit is granted by the Board…, an applicant desires to change the details of its proposal as approved by the Board…, it shall promptly notify the Board in writing, describing such change….

(c) If the change is determined to be substantial, the Board shall hold a public hearing within 30 days of its Determination and issue a decision within 40 days of termination of the hearing, all as provided in M.G. L. c. 40B, § 21. Only the changes in the proposal…shall be at issue in such hearing. A decision by the Board denying the change or granting it with conditions which make the housing uneconomic may be appealed to the Committee pursuant to M. G. L. c. 40B, § 22….

[Note 29] As it had done in past instances.

[Note 30] A non-profit organization promoting affordable housing in the Commonwealth.

[Note 31] Rather than the 2½ % minimum as specified in the MHP Guidelines.

[Note 32] By so arguing, the Board’s own expert has seemingly accepted the basic ROTC methodology utilized by HAC, i.e. a return equal to a given percentage over the 10 year Treasury rate. See in this regard, R. 1146A where HAC observed as follows:

The Board’s own financial expert analyzed every aspect of the development in great detail, and made minor modifications to the assumptions used by the developer’s expert…. [T]he heart of his argument that the development is not economic (sic) is that a return that is only 1 ½ % above current treasury rates is a reasonable return rather than one 2 ½ % above treasury rates as specified in the MHP Guidelines.

[Note 33] A position this court has previously rejected. See supra, § B.

[Note 34] Plaintiff also asserts that when the legislative intent to provide affordable housing is not at issue, the statutory term uneconomic should be strictly construed. Plaintiff’s Memorandum, p. 18. According to the Plaintiff, it follows then that the Developer should be required to prove that it is “impossible to realize a reasonable return.” G. L. c. 40B, § 20. Plaintiff argues further that the Developer did not meet the burden of showing that it is impossible to realize a reasonable return in building or operating the Project. “Developer bears the responsibility for any alleged losses it is currently sustaining because of its inexperience, poor marketing efforts, and above-market-rate prices for the units. The temporary losses are not the issue because the HAC ruled that the project will earn a positive return of 6.6% over the long term. The mere fact that this may be slightly below MHP Guidelines does not render the project uneconomic . . . ” Id, p. 20.

This line of argument must perforce fail. Suffice it to say that HAC has concluded that a 6.6% ROTC does not constitute a reasonable return; consequently, a return at that level would render the Project uneconomic. In making this argument, Plaintiff provides neither analysis nor authority for its premise that the term must be accorded a narrow construction; nor does Plaintiff detail how, even if the term should be narrowly construed, HAC’s definition fails to narrowly interpret the term uneconomic.

[Note 35] R. 1147.

[Note 36] According to HAC [see footnote 13 of its Decision at R. 1146A] the Developer argued that the project was clearly uneconomic inasmuch as, at the time of the hearing before the Committee, it was losing $50,000 per month. The Board’s expert responded that the Developer ‘has not lost any money, he just has not made any yet.” He argued that over time the development may well perform satisfactorily. “While it is hard not to view the distress of monthly losses as supporting the developer’s position, we [HAC] agree with the Board since our practice is to view the economics of development according to the technical ROTC analysis, rather [than] simply considering cash flow at a particular point in time.”

[Note 37] See e.g. FN 32.

[Note 38] Through utilization of the MHP Guidelines.

[Note 39] The Plaintiff also argues, inappositely, that HAC erroneously acted as the guarantor of a return for the developer. Plaintiff’s Memorandum, p. 15. As it has earlier done, the Plaintiff relies in large measure upon the assertions that the financial difficulties now confronting the developer are of its own making. For example, it faults the Developer for a claimed lack of experience with senior housing; for initially charging higher rents than were appropriate for this market; for deficiencies in its marketing effort; and for underestimating the lease-up period. It criticizes the Developer too, for seeking, early on, to convert the Project to condominiums, thereby effectively chilling the rental market.

It also rests this argument upon the familiar assertion that the age restriction “was not a condition imposed upon him by the Board.” Plaintiff’s Memorandum, p. 15. In advancing this argument, Plaintiff offers the following:

Any rumors of the demise of the Project are greatly exaggerated. In fact, there is no indication . . . that the Project is in any jeopardy whatsoever. The two principals of the Developer, with substantial assets, have guaranteed the construction loan, and will not allow the loan to go into default or foreclosure for fear of placing all of their own assets in jeopardy. A more experienced rental development firm could purchase the Property and would ensure the continued success of the Project . . . In this case, all signs indicated to the Developer that constructing and leasing an age restricted rental project in Hanover would be difficult, but not impossible . . . Id., pp. 16-17.

In its Decision, HAC addressed this line of argument as follows:

[T]he developer, relying on the advice of its agent, significantly underestimated the time required for lease-up . . . [T]he developer relied on the . . . Peabody estimate . . . and thus expected full occupancy by the end of August 2005. As a result, in early July, it began to consider converting the development to a condominium, and these plans became public knowledge by early August. There is no quantitative evidence as to the effect [of the proposed change] on public awareness….

HAC readily acknowledged that public awareness of the possible change to condominium status “would have weakened the development’s position in the market.” R. 1142. HAC observed, however, that miscalculations whether at the construction phase or at the marketing phase are normal risks associated with a project of this sort. And absent allegations of fraud or other misconduct, the Developer, under the circumstances at hand, should not be precluded from making a change in a development that has become uneconomic. R. 1143. See also, Pre-Filed testimony Developer’s expert Richard E. Bonz at R. 129-141. Bonz analysis suggested that there was insufficient demand in the area to support an age-restricted rental project. He estimated the market for such housing at 175 households; he placed the market for such housing without the age restriction at 2,435 households. Nevertheless, this argument is indistinguishable from Plaintiff’s other allegations in this regard, i.e. that HAC used an arbitrary, capricious, or legal untenable standard in reaching its conclusion, and that this conclusion is unsupported by substantial evidence, all of which are rejected in the body of this decision.

[Note 40] Specifically, the Board argues as follows:

It is undisputed that the age restriction did not prevent the construction of the Project . . . The HAC erred in finding that the Developer met this burden because within a couple of months of the completion of the Project’s construction, all of the affordable rental units had been leased, and a fair amount of the market rate units had been leased. The Project was a success gauged by the fact that all of the affordable units were rented to senior citizens. No evidence was presented here that there have been vacancies in any of the affordable units . . . Moreover, the Project is completely built and has been renting out since mid-2005, and is an ongoing successful project. Certainly, in light of the success of the Project, the finding of HAC that the Project can achieve a reasonable rate of return of 6.6% of its total cost, the Developer has failed to prove that any condition of the comprehensive permit makes the Project uneconomic.

Plaintiff’s Memorandum, pp. 11-13.

[Note 41] R. 1146-1146A. Vol. V.

[Note 42] As opposed to the 5% figure adopted by HAC, the derivation of this 4.87% figure is not at all clear from the record.

[Note 43] In this regard, HAC observed:

Accepting [the 4.87% figure] for the sake of argument, a reasonable return is 2½ % higher, or 7.37%. But each of the seven analyses the [Board’s] expert provided shows a ROTC less than that, and his own primary analyses (those based on his own figures . . . ) show a ROTC of 6.6%. This evidence corroborates the developer’s proof, and we find that the developer has proven (and the Board has not refuted ) that the unchanged age-restricted development approved by the board is uneconomic.

R. 1147 (emphasis added).

[Note 44] See, supra, p. 9.

[Note 45] In fact, it concluded just the opposite, i.e. that 6.6% did not constitute a reasonable rate of return.

[Note 46] Plaintiff’s Memorandum, p. 13.

[Note 47] R. 48 et seq.

[Note 48] Plaintiff’s Memorandum, p. 13.

[Note 49] Id. p. 14.

[Note 50] Id.

[Note 51] Id. Note that R. 72 references what is presumably the intended 10-year figure of 4.87%.

[Note 52] Id.

[Note 53] R. 1147.

[Note 54] I.e. less than the minimum called for under the MHP Guidelines.

[Note 55] The statutory purpose underlying G. L. c. 40B would be ill served by ongoing losses that call into question the viability of the Project.