ZONING BOARD OF APPEALS OF WELLESLEY & another [Note 1] vs. ARDEMORE APARTMENTS LIMITED PARTNERSHIP [Note 2] & another. [Note 3]

MARSHALL, C.J. We must decide in this case whether the owner of a thirty-six unit apartment building in an area of the town of Wellesley zoned as a single-family district has a continuing obligation to make some of the apartments available at below market rents, where permission to build the complex was secured under the comprehensive permit statute, G. L. c. 40B, §§ 20-23 (Act). The permit was issued in July, 1982, to Cedar Street Associates (owner) [Note 4] by the Zoning Board of Appeals of the town of Wellesley (the town and the Zoning Board of Appeals are collectively referred to as Wellesley). A comprehensive permit is available only when proposed housing is "subsidized by the federal or state government under any program to assist the construction of low or moderate income housing." G. L. c. 40B, § 20. In this case, construction financing for the project was provided by a loan from the Massachusetts Housing Finance Agency (MHFA) and a second loan from MHFA and the Executive Office of Communities and Development (EOCD) under the State housing assistance for rental production program (SHARP loan). [Note 5]

The subsidized construction financing agreements provided

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that the owner was to rent a specified percentage of the units to low or moderate income persons for at least fifteen years, until July, 2000. In contrast, the comprehensive permit issued by Wellesley does not specify for how long the project was to remain affordable to low or moderate income persons; it is silent on the point. The Act similarly contains no express provision addressing the continuing effect of affordability restrictions.

The owner claims that the Act contemplates that units are to be maintained as affordable for a limited time only, that the "expiring use restriction" provisions of the construction financing agreements determine the date of expiration of the restrictions, [Note 6] in this case July, 2000, and that the low or moderate income units may now all be converted to market rate rentals. Wellesley and the Housing Appeals Committee (HAC) [Note 7] contend that the units must be preserved as affordable for so long as the apartment building is not in compliance with Wellesley's zoning requirements.

We conclude that, where a comprehensive permit itself does not specify for how long housing units must remain below market, the Act requires an owner to maintain the units as affordable for as long as the housing is not in compliance with local zoning requirements, regardless of the terms of any attendant construction subsidy agreements. This is consistent with

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the Legislature's intent when it enacted the comprehensive permit statute in 1969 to create a long-term solution to the shortage of affordable housing throughout the Commonwealth. By receiving permission to build a multi-unit apartment building in violation of local zoning laws the owner received --- and continues to receive --- a great benefit. We see nothing in the Act to suggest that the Legislature intended to override local zoning autonomy only to create a fleeting increase in affordable housing stock, leaving cities and towns vulnerable to successive zoning overrides, and the issuance of a never-ending series of comprehensive permits. [Note 8]

1. The statutory scheme. Although other Massachusetts appellate decisions have described the provisions of the comprehensive zoning law, see, e.g., Board of Appeals of Hanover v. Housing Appeals Comm., 363 Mass. 339 (1973) (upholding constitutionality of statute); Zoning Bd. of Appeals of Greenfield v. Housing Appeals Comm., 15 Mass. App. Ct. 553, 555-557 (1983) (discussing statutory and regulatory scheme), a brief overview of the relevant provisions is helpful.

General Laws c. 40B, §§ 20-23, sometimes referred to as the anti-snob zoning act, id. at 555, was enacted "to provide relief from exclusionary zoning practices which prevented the construction of badly needed low and moderate income housing." Board of Appeals of Hanover v. Housing Appeals Comm., supra at 354. The Act defines low or moderate income housing as "any housing subsidized by the federal or state government under any program to assist the construction of low or moderate income housing as defined in the applicable federal or state statute, whether built or operated by any public agency or any nonprofit or limited dividend organization." G. L. c. 40B, § 20.

Among other things, the Act permits multi-family housing

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structures in zones designated for single-family housing where there is a local shortage of affordable housing as defined in the statute. G. L. c. 40B, §§ 20, 23. See generally Board of Appeals of Hanover v. Housing Appeals Comm., supra. A developer who wishes to build such housing may file with a local zoning board an application for a comprehensive permit rather than seeking separate approval from each local board having jurisdiction over the project. [Note 9] See G. L. c. 40B, § 21. See also Zoning Bd. of Appeals of Wellesley v. Housing Appeals Comm., 385 Mass. 651, 656 (1982). If a local zoning board denies an application for a comprehensive permit, or approves an application but imposes conditions that make the project "uneconomic," G. L. c. 40B, § 20, the applicant may appeal to HAC, G. L. c. 40B, § 22, which conducts a de novo review to determine whether a local zoning board's decision is "reasonable and consistent with local needs." G. L. c. 40B, § 23. See Board of Appeals of Hanover v. Housing Appeals Comm., supra at 371. See also note 7, supra. HAC must decide whether the need for low or moderate income housing in a town outweighs the valid planning objections to the proposal, such as health, site design, and space. Id. at 367. If HAC finds that the decision of the local board is not justified it may direct the local board to issue a comprehensive permit. G. L. c. 40B, § 23. But if a town has already met its share of low and moderate income housing, [Note 10] the local zoning board may deny an application for a comprehensive permit,

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and HAC has no authority to order a local board to issue one. See G. L. c. 40B, §§ 20, 23; Zoning Bd. of Appeals of Greenfield v. Housing Appeals Comm., supra at 556.

2. Prior proceedings. We previously have had occasion to describe earlier challenges to the development of the project at issue in this case. See Zoning Bd. of Appeals of Wellesley v. Housing Appeals Comm., supra at 652. Accordingly, we summarize only briefly the early stages of development.

In 1981, Wellesley was ordered by HAC to issue a comprehensive permit to the owner for construction of the thirty-six unit apartment project at issue here. At the time, Wellesley had not met the statutory minimum requirements for affordable housing. [Note 11] The construction financing provided by MHFA and EOCD was secured by granting MHFA a first mortgage on the project, and the project was granted a certificate of occupancy in 1986.

Ten years later, in June, 1996, Ardemore Apartments Limited Partnership (Ardemore) purchased the project from Cedar Street Associates. See note 4, supra. In connection with the sale, Cedar Street Associates, Ardemore, and MHFA entered into certain agreements whereby Ardemore assumed all of the obligations under the financing and related agreements. In addition, Ardemore and MHFA executed a new regulatory agreement that, together with the obligations Ardemore had assumed from Cedar Street Associates, governed Ardemore's operation and management of the project.

In 1997, MHFA seized the property as mortgagee-in-possession, claiming a default on the owner's obligations to it. In April, 1999, the project was subject to a notice of foreclosure by MHFA. Wellesley promptly requested that MHFA condition any ensuing mortgage foreclosure sale on a requirement that twenty-five per cent of the project continue to be maintained as

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affordable housing "for as long as the building stands." [Note 12] MHFA refused. [Note 13]

In May, 1999, MHFA scheduled a foreclosure auction for June 17, 1999. Wellesley filed a complaint in the Superior Court seeking declaratory and injunctive relief against the owner, MHFA, and HAC. It also sought an order restraining the sale of the project. [Note 14] That same day, the owner filed for protection under c. 11 of the Bankruptcy Code, the effect of which was to stay the Superior Court action, as well as the foreclosure sale. See 11 U.S.C. § 362(a)(1) (2000). On December 2, 1999, at the request of Wellesley, the automatic stay imposed by the Bankruptcy Code was lifted, and the parties filed cross motions for summary judgment.

On March 1, 2000, a plan of reorganization submitted by the owner was confirmed in the Bankruptcy Court. The plan provided for the repayment of the loans by no later than March 31, 2000. The plan also provided that on payment of the indebtedness, all of the agreements between the owner and MHFA "will no longer govern, control or otherwise encumber" the owner's use, occupancy, or sale of the project, and "[s]uch agreements will be null and void in all respects and will no longer be enforceable" against the owner. While the plan of reorganization released the owner from the applicable agreements with MHFA, the owner nevertheless agreed to maintain the nine units as affordable until July 8, 2000, the date provided under the original financing agreements. On March 22, 2000, the Bankruptcy Court entered an order clarifying the amount to

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be paid to MHFA, and one week later the owner discharged the MHFA mortgage.

Wellesley pursued this action in the Superior Court. In September, 2000, a judge in the Superior Court entered summary judgment for Wellesley and denied the owner's cross motion for summary judgment. She concluded that the comprehensive zoning statute's remedial purposes of providing "relief from exclusionary zoning practices" and addressing "the need for low and moderate income housing," would not be furthered by permitting affordable housing restrictions to expire on the satisfaction of construction financing obligations, in this case payment in full of the MHFA and SHARP loans, and the discharge of MHFA's mortgage. [Note 15] The judge denied the owner's motion for reconsideration or to alter or amend the judgment, and this appeal followed. We granted the application of the zoning board of appeal for direct appellate review.

3. The undisputed facts. The parties agree that there are no disputed material facts, and the case is solely one of statutory interpretation. [Note 16] Accordingly, we summarize briefly the terms of the comprehensive permit and the MHFA agreements necessary to our decision in this case.

HAC's 1981 order directing Wellesley to issue a comprehensive permit to the owner, see Zoning Bd. of Appeals of Wellesley v. Housing Appeals Comm., 385 Mass. 651, 652 (1982), placed five conditions on the comprehensive permit, none of which is relevant here. The HAC decision made no mention of

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any expiration of the affordability restrictions; it simply did not address the issue. In July, 1982, Wellesley issued the required comprehensive permit in language virtually identical to the HAC order: it restated the five conditions contained in the HAC decision and, like the HAC decision, did not specify any period during which the project was to remain as affordable housing.

In contrast, the financing agreements between the owner and MHFA are quite specific concerning the expiration of affordability. The MHFA restriction provides in pertinent part that the "term of the Occupancy Restrictions" as described in the agreement "shall end . . . fifteen years from the date [of the agreement]," i.e., July 8, 2000. The MHFA restriction further provides that, during that fifteen-year period, "at least 20% of the units in the Project shall be occupied by individuals or families of low or moderate income." The fifteen-year period is commonly known as the "lock-in" period, and the date on which the "lock-in" period ends, here July 8, 2000, is commonly referred to as the "cliff date."

Similarly, the SHARP agreement required annual disbursements of SHARP loan proceeds to be made "for a period not to exceed fifteen years," and provided further that the annual disbursements would be made in amounts that are "appropriate and are the minimum necessary . . . to ensure that twenty-five percent of the Project units will be occupied, for at least fifteen years, by persons and families who are at the time of initial occupancy of low income." Other provisions of the SHARP agreement required that, for "at least fifteen years after the first disbursement of SHARP loan proceeds, twenty-five percent of the project units shall be occupied by persons and families who are, at the time of initial occupancy, of low income."

As a condition of obtaining construction financing from MHFA, the owner agreed to rent twenty per cent of the units to low or moderate income persons or families under a land use restriction agreement, and twenty-five per cent of the units to persons or families of low income under the SHARP agreement, at least until July 8, 2000. But see note 15, supra. Wellesley was not a party to the construction financing agreements and had no ability to control or influence their terms.

4. Discussion. The issue of the continuing effect of affordability

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restrictions as applied to comprehensive permit projects is one of first impression. The owner argues that nothing in the Act requires that housing built pursuant to a comprehensive permit be maintained as affordable in perpetuity or for so long as the project remains noncompliant with the relevant local zoning requirements. It points out that the Act itself defines low and moderate income housing by referring to State and Federal construction subsidy programs, and that those programs uniformly permit termination of affordable units on satisfaction of project financing after the "cliff" date. Once the subsidized financing loans have been repaid, it continues, any commitment that the owner undertook to maintain a percentage of the development for low and moderate income persons is no longer applicable. [Note 17]

We consider first the Legislature's intent, with a view to effectuating the purpose of the Act's framers. Baccanti v. Morton, 434 Mass. 787, 794 (2001). It is abundantly clear that in enacting G. L. c. 40B, §§ 20-23, the Legislature sought a solution to the "acute shortage of decent, safe, low and moderate cost housing throughout the commonwealth," Board of Appeals of Hanover v. Housing Appeals Comm., 363 Mass. 339, 351 (1973); Report of the Committee on Urban Affairs, quoting 1969 House Doc. No. 5429, at 2. The crisis in affordable housing in the Commonwealth mirrored similar concerns nationwide. [Note 18] See generally Symposium, Affordable Housing in Suburbia: The Importance But Limited Power and Effectiveness of the State Override Tool, 22 W. New Eng. L. Rev. 323, 326-334 (2001). In response, the Federal government and many States enacted a variety of legislative programs designed to address the housing needs of persons of low income. Roisman,

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Opening the Suburbs to Racial Integration: Lessons for the 21st Century, 23 W. New Eng. L. Rev. 65, 66-70 (2001); Symposium, supra at 327 n.12. State and Federal subsidies for construction mortgage loans were one form of legislative intervention. See St. 1966, c. 708, § 2 (low interest mortgage loans made by MHFA to owners of projects renting twenty-five per cent of units to low income persons at affordable levels). See also Christians, Breaking The Subsidy Cycle: A Proposal For Affordable Housing, 32 Colum. J.L. & Soc. Probs. 131, 132-134 (1999) (citing Federal examples). [Note 19] Massachusetts, however, was the first in the nation and one of a small number of States to enact legislation permitting overrides of local zoning decisions to promote affordable housing in particular areas. [Note 20] Courts

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in those jurisdictions, as here, have not considered whether the expiring use restrictions as applied to comprehensive permit projects are short term. Similarly, there is no Federal counterpart legislation, and the Federal law on which the owner relies sheds no light on our inquiry. See, e.g., Cienega Gardens v. United States, 194 F.3d 1231, 1235 (Fed. Cir. 1998), cert. denied sub nom. Sherman Parks Apartments v. United States, 528 U.S. 820 (1999) (describing congressional efforts to halt anticipated loss of affordable units to prepayment, and noting that use restrictions terminated on satisfaction of financing obligation insured by United States Department of Housing and Urban Development).

The availability of a comprehensive permit to override local opposition to housing for low income persons was a particularized solution crafted by the Massachusetts Legislature to address its concern "with the cities' and towns' possible use of their zoning powers to exclude low and moderate income groups" (emphasis added). Board of Appeals of Hanover v. Housing Appeals Comm., supra at 347. [Note 21] Thus the Legislature was concerned not only with facilitating the construction of affordable housing, Zoning Bd. of Appeals of Greenfield v. Housing Appeals Comm., 15 Mass. App. Ct. 553, 555 (1983), but with ensuring that every city and town in the Commonwealth has available a certain minimum amount of affordable housing stock. The Act reflects the Legislature's careful balance between leaving to local authorities their well-recognized autonomy generally to establish local zoning requirements, [Note 22] see Board of Appeals of Hanover v. Housing Appeals Comm., supra at 367,

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while foreclosing municipalities from obstructing the building of a minimum level of housing affordable to persons of low income. As the House Committee on Urban Affairs reported before the Act's enactment:

"The accompanying bill, while not permitting cities or towns to unreasonably obstruct the construction of a limited amount of adequate low cost housing, encourages such communities to establish conditions on such housing which will be consistent with local needs. This measure provides the least interference with the power of a community to plan for its own future in accommodating the housing crisis which we face." [Note 23]

1969 House Doc. No. 5429, at 2.

Thus, central to the legislative scheme is the requirement that an override of a local zoning authority's decision to deny an application to build affordable housing is available only to the extent that a city or town has not met its share of affordable housing units as delineated in the Act. See G. L. c. 40B, § 20 (defining minimum requirements). See also Board of Appeals of Hanover v. Housing Appeals Comm., 363 Mass. 339, 366 (1973). Once a town has met its minimum obligations, local zoning requirements and regulations are deemed "consistent

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with local needs," id. at 367, and the HAC is without authority to order a local zoning board to issue a comprehensive permit. See Zoning Bd. of Appeals of Wellesley v. Housing Appeals Comm., 385 Mass. 651, 657 (1982). To the extent that a city or town does not have an adequate supply of affordable housing (measured in the Act as a percentage of existing housing or of land in each town) its local autonomy in zoning matters is curtailed. Once its obligation is met, the override power delegated to HAC is extinguished.

Viewed in this light it is anomalous to suggest, as the owner does, that the legislation provides a temporal, short-term fix of insufficient affordable housing at the expense of local autonomy. Rather, the Act reflects a legislative intent to provide an incentive to developers to build affordable housing in cities and towns that are deficient in affordable housing, and a developer's commitment to help a city or town achieve its statutory goal is the raison d'etre for the override of inhibiting zoning practices. [Note 24] But if housing developed under a comprehensive permit is "affordable" only temporarily (fifteen years in this case, according to the owner), a city or town may never achieve the long-term statutory goals: each time an affordable housing project reverts to market rentals, the percentage of low income housing units in a municipality decreases, the percentage of market rate units increases, and access to a new round of comprehensive permits is triggered. We see nothing to suggest that the Legislature had in mind such an endless revolving cycle, or contemplated that over time an ever-increasing number of multi-family buildings could be constructed on vacant land in areas zoned for single-family homes, as multi-family housing buildings were first added to and then subtracted from a town's statutory goal. [Note 25], [Note 26]

The Act also embodies a legislative judgment that a particular

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site shall be accorded special zoning treatment (at variance with local requirements) in order to serve the general welfare by providing affordable housing in those cities and towns with an insufficient affordable housing stock. See Board of Appeals of Hanover v. Housing Appeals Comm., supra at 363. The special treatment is warranted "only when it serves the public interest," or "general welfare." Id. That public interest is no longer served when affordable units are converted to market rents. We agree with Wellesley that the override of local zoning requirements (the entitlement to "special treatment") is valid only to the extent that the public interest is served. Thus, unless otherwise expressly agreed to by a town, so long as the project is not in compliance with local zoning ordinances, it must continue to serve the public interest for which it was authorized.

The owner argues that the interpretation of the Act we now adopt is inconsistent with existing State and Federal housing construction subsidy programs. It points out that the Act defines low and moderate income housing by reference to State and Federal construction subsidy programs that permit termination of affordable units after passage of a "cliff" date, G. L. c. 40B, § 20. The reference to Federal or State construction subsidy programs is more properly viewed as a statutory mechanism to determine the threshold eligibility for the developer of a housing project to seek a comprehensive permit. [Note 27] The Legislature was free to invoke Federal and State standards to define "low

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or moderate income housing" without incorporating the affordability expiration terms of such programs. See, e.g., Parker Affiliated Cos. v. Department of Revenue, 382 Mass. 256, 262 (1981) (rejecting taxpayer's request to "interject the entire Federal symbiosis" into State law, and noting that State is free to import some but not all Federal standards). Moreover, the terms of construction subsidy programs (Federal and State) are not all the same, [Note 28] and fluctuate over time. As cities and towns are not parties to the construction subsidy agreements, we think it unwise to read into the legislation a requirement that they be bound by those agreements. Had the Legislature intended financing agreements between State or Federal funding agencies and third-party owners to govern the terms of a comprehensive permit, it could have made that explicit. See, e.g., G. L. c. 23B, §§ 25-27 (SHARP Act) (defining time periods for maintaining affordability). [Note 29] The Act is not a construction subsidy program; it provides no funding to developers. Compare note 19 with

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note 20, supra. The goal is to increase the supply of affordable housing and to locate that housing in communities where there is a particular shortage of housing for persons of low income. If a developer constructs affordable housing without the significant benefits of a comprehensive permit, it may enjoy economic benefits not available under the restrictions imposed by the Act. But a developer who obtains the benefits of a comprehensive permit remains subject to the restrictions imposed by the Act, so long as the project is not in compliance with local zoning requirements.

Nor is there merit to the owner's claim that the comprehensive permit itself provides that the MHFA subsidy agreements set the date for expiration of the affordability requirements of the project. The owner points out that the permit was issued "in accordance with [the owner's] application," and that the application stated in relevant part:

"Cedar Street Associates will by the terms of the financing as required by the Massachusetts Housing Finance Agency . . . agree contractually to limit its return on investment during the term of the mortgage to be obtained from the Massachusetts Housing Finance Agency. . . . The occupants of the proposed building will be subject to the income limitations of the State and Federal programs under which their dwelling units are subsidized and to the additional regulations of the financing agency."

That provision, like the Act's definition of low and moderate income housing, defines the threshold eligibility level for tenants seeking access to the affordable units. It does not determine whether or when the affordable restriction will expire.

Last, the owner contends that the Legislature's intent was to ameliorate the zoning barriers to the construction of low and

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moderate income housing in each municipality. To achieve this legislative purpose, it continues, the Legislature intended to provide an economic incentive to owners by permitting them to convert affordable units (which may have lower rates of return for owners) to market rate units on satisfaction of applicable subsidized construction financing. [Note 30] Similarly, the owner argues, the Legislature sought to increase the stock of affordable housing when it lowered the minimum construction financing term from twenty to fifteen years. See St. 1983, c. 574, §§ 19, 20. This, it contends, created incentive for owners because of the shorter period necessary to obtain market rents.

Whatever the merit of these arguments concerning construction financing subsidies from State and Federal authorities, they do not vitiate the restrictions that attach to comprehensive permits. Not every developer of housing for persons of low income will seek a comprehensive permit. It may be that a comprehensive permit is essential for the construction of some affordable housing projects because of local zoning restrictions, and it may be that, in those situations, the absence of an affordability restriction expiration operates as an economic disincentive to developers to build affordable housing. The solution to that problem, however, lies with the Legislature.

Judgment affirmed.