Tag Archives: #commercialleasing

Legal Liability When an Algorithm Screens Tenants

District Court Allows Discrimination Suit to Proceed
By Christopher R. Vaccaro
Special to Banker & Tradesman

Landlords of apartment buildings in Malden and Canton hired a Texas company to screen tenant applications automatically, prompting a pair of rejected tenants to file a court challenge.

Last month the U.S. District Court of Massachusetts fired a warning shot to­ward tenant-screening firms, in Louis v. Saf­eRent Solutions LLC.

Mary Louis and Mon­ica Douglas are self-de­scribed Black women. They both hold Sec­tion 8 housing vouchers guaranteeing most of their rent payments. Louis applied to Metropolitan Management Group LLC for an apartment at Granada Highlands in Mal­den. Douglas applied to a different prop­erty manager for an apartment at Millside at Heritage Park in Canton. Their applica­tions were forwarded to SafeRent Solu­tions LLC, a Texas-based firm offering ten­ant-screening services to landlords and real estate professionals nationwide.

SafeRent applies a proprietary algorithm to rental applications, using credit histo­ries, bankruptcy records, past due ac­counts, payment performance and eviction histories. The algorithm generates a “Saf­eRent Score” that is intended to assess the likelihood of an applicant’s lease default. The SafeRent Score disregards the benefits of tenant housing vouchers.

Metropolitan rejected Louis’s applica­tion based on her SafeRent Score. Louis challenged the rejection, offering employ­ment and landlord references, but without success. Douglas’s application was initially rejected because her SafeRent Score re­flected credit history and landlord-tenant problems, but it was later accepted after she appealed with assistance from a hous­ing advocacy group.

Louis and Douglas filed a putative class action lawsuit in federal court against Saf­eRent and Metropolitan for violations of federal and state antidiscrimination laws. They alleged that SafeRent’s algorithm gen­erated lower scores for Blacks, Hispanics and voucher-holders, who often have less income and poorer credit histories, result­ing in denials of rental housing applica­tions based on race and use of vouchers. They also sued SafeRent for unfair and de­ceptive practices in violation of Massachu­setts General Laws Chapter 93A. Commu­nity Action Agency of Somerville Inc. (CAA), which provides housing services to underprivileged individuals, joined the suit as a plaintiff.

SafeRent and Metropolitan moved to dis­miss the lawsuit, arguing that Louis and CAA lacked standing, and that the plain­tiffs failed to state actionable claims against them. Defendants often file  mo­tions to dismiss early in litigation, but the tactic rarely succeeds, because judges hearing those motions must assume, for purposes of the motion, that the plaintiffs’ factual allegations – but not legal conclu­sions – are true.

Court Finds Disparate Impacts

Federal and state laws prohibit discrimi­nation in the sale and rental of housing be­cause of race, color, religion, sex, familial status, and national origin. Massachusetts law also prohibits discrimination against voucher holders. The court easily found that Louis had standing to file suit, because she alleged that the defendants’ actions caused her application to be wrongfully de­nied, requiring her to accept costlier but less desirable housing in a neighborhood with a higher crime rate. The case for CAA’s standing was trickier because CAA itself was not denied housing by the defen­dants. Nonetheless, the court ruled that CAA had standing because SafeRent’s prac­tices, if found to illegally discriminate, im­paired CAA’s efforts to fulfill its mission of locating housing for its clients.

SafeRent also argued that antidiscrimi­nation laws do not apply to it in this case, because SafeRent is not a landlord and it does not ultimately decide whether to ac­cept or deny rental housing applications. The court disagreed, noting that SafeRent’s screening service influences housing deci­sions and, according to the plaintiffs’ com­plaint, causes prohibited discrimination.

The court next discussed disparate im­pact claims under anti-discrimination laws. Such claims are actionable under federal and Massachusetts law, when directed at practices that have disproportionately ad­verse effects on protected classes, without legitimate rationales. The court summa­rized the plaintiffs’ allegations that SafeR­ent’s reliance on credit history is misplaced, has a disparate negative impact on Blacks, Hispanics and voucher-holders, and limits their housing opportunities. The court ruled that these allegations were sufficient for the plaintiffs to proceed with their hous­ing discrimination claims against the defen­dants. However, the court dismissed the plaintiffs’ Chapter 93A claims, ruling that their allegations did not suggest that SafeR­ent’s conduct was egregious enough to sup­port a claim under that statute.

The court denied the defendants’ mo­tions to dismiss the housing discrimination claims, but there is no certainty that judg­ment will someday be entered against Saf­eRent and Metropolitan. There remains much work to do. The plaintiffs must prove that SafeRent’s algorithm employs data with little relevance to whether applicants are worthy tenants, causing impermissible discriminatory impacts. SafeRent and Met­ropolitan will strive to prove that SafeR­ent’s algorithm reliably and fairly predicts whether applicants are likely to default, without significant adverse impacts on pro­tected minorities.

While the parties gather data for their experts, SafeRent might want to revisit its methodology.

Download the article as seen in  Banker & Tradesman on June 26, 2023. Learn more about Christopher R. Vaccaro.

Court Rules COVID Shutdown Doesn’t Cancel Rent

Shrewsbury Tenant Argued “Frustration of Purpose” Doctrine
By Christopher R. Vaccaro
Special to Banker & Tradesman

As the effects of the COVID pandemic wane, courts continue to review lawsuits prompted by business shutdowns and whether they excuse tenants from lease obligations.

Many disrup­tions from the COVID pan­demic are now behind us, but litigation related to those disruptions continues to work its way through Massachu­setts courts.

Last month, the Appeals Court decided Inland Commercial Real Estate Services, LLC v. ASA EWC, LLC, involving a commer­cial tenant’s failure to pay rent. The tenant signed a 10-year lease in 2016, to operate a “European Wax Center” in Shrewsbury. Three years later, in March 2020, Gov. Char­lie Baker issued COVID-19 Order No. 13, re­quiring non-essential businesses, including the wax center, to close. The tenant com­plied with the order and did not reopen until July 2020, after the governor issued a new order ending the shutdown.

After the tenant failed to pay rent and water charges for March through Septem­ber 2020, the landlord sent it a notice to quit, claiming over $55,000 in delinquent rent, some of which accrued during the three-month shutdown period. The tenant made a partial payment, but did not bring the rent current. The landlord terminated the lease and filed suit in superior court to evict the tenant.

In contesting the eviction, the tenant ar­gued that it should not have to pay rent for the three-month period when the COVID shutdown order prohibited it from doing business. The tenant supported this argu­ment with the often-invoked, but rarely suc­cessful, frustration of purpose doctrine.

The Supreme Judicial Court summarized the frustration of purpose doctrine in a 1991 decision, as follows: “Where, after a con­tract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occur­rence of which was a basic assumption on which the contract was made, his remaining duties to render performance are dis­charged, unless the language or the circum­stances indicate the contrary.” When con­sidering this defense, courts look at whether unforeseen circumstances effec­tively negated the value of the contract to the party who invoked the defense.

Unforeseen Circumstances Can Negate Contracts

In the case of the Shrewsbury wax cen­ter, the Superior Court judge rejected the tenant’s frustration of purpose defense, and entered judgment awarding the landlord possession of the leased premises and $86,841 in damages. The tenant appealed, and the Appeals Court offered a useful anal­ysis of the doctrine, before affirming the Su­perior Court’s judgment.

The Appeals Court noted that the frustra­tion of purpose doctrine excuses a party from performing its contractual obligations “where unanticipated supervening events require it.” For the doctrine to apply, the purpose that is frustrated must be so intrin­sic to the reason for the contract, that the contract makes little sense without it. Courts are generally reluctant to apply the doctrine, preferring instead to preserve the certainty of contracts.

The Appeals Court also noted that most courts decline to apply the doctrine to tem­porary business closures caused by govern­ment shutdown orders. When evaluating frustration of purpose defenses in govern­ment shutdown cases, courts consider the duration of the forced closures, the length of the lease term, how far into the lease term the closure occurred, whether tenants could reopen after restrictions were lifted, whether tenants remained in possession of the prem­ises during the shutdown and whether ten­ants could use their premises for purposes not barred by the shutdown order.

Temporary Shutdown Not a Dealbreaker

Taking these factors into account, the Ap­peals Court found the tenant’s frustration of purpose argument unpersuasive. It noted that the tenant did not show that its tempo­rary closure substantially frustrated the pur­pose of the lease. The tenant was already three years into its lease when the shutdown occurred, the three-month shutdown was relatively short compared to the 10-year lease term, the tenant remained in posses­sion of the premises during the shutdown and could sell goods from the premises, and the tenant was able to resume its business after the shutdown was lifted.

The Appeals Court also rejected the ten­ant’s argument that a temporary frustration of purpose should excuse the tenant from paying rent during the shutdown period. The court found that the doctrine provides relief to parties who see the anticipated benefits of their bargains destroyed by un­foreseen events, not merely interrupted on a temporary basis.

The Appeals Court went on to state that even if the doctrine were available on a temporary basis, the tenant’s obligation to pay rent during the shutdown period would only be suspended, not discharged alto­gether. The court affirmed the Superior Court’s judgment.

This decision shows that the tenants who invoke the frustration of purpose doctrine to avoid rent payments will most likely be frustrated by unfavorable court rulings.

Download the article as seen in  Banker & Tradesman on June 26, 2023. Learn more about Christopher R. Vaccaro.

Supreme Court Deals Setback to Tax Takings

Decision Will Affect Mass. Property Liens
By Christopher R. Vaccaro
Special to Banker & Tradesman

A U.S. Supreme Court ruling is likely to force changes to Massachusetts law governing tax lien foreclosure procedures.

Last month, the U.S. Supreme Court ruled in Tyler v. Hennepin County, Minnesota that a Minnesota county acted improperly when it seized a one-bed­room condominium for delinquent property taxes, sold the condo­minium for more than the amount owed, and then refused to remit the surplus to the elderly owner. The ruling is likely to af­fect the enforcement of property tax liens in Massachusetts.

Geraldine Tyler lived alone in her Min­neapolis condominium. In 2010, her family persuaded her to move into a senior com­munity where she would be safer, but they neglected to keep her safe from the Hen­nepin County tax collector. Real estate taxes on her condominium went unpaid.

Under Minnesota law, after property taxes become one year delinquent, they accrue costly interest and penalties, and the county obtains a judgment transferring limited title to the state. If the taxpayer fails to redeem the property by paying the delinquent taxes, interest, and penalties within three years, the state secures abso­lute title to the property. The state may keep the property for public use or sell it to a private party. Surplus proceeds from private sales belong to the county, to be shared with the town and school district. Taxpayers have no right to surpluses.

By 2015, unpaid taxes on Tyler’s condo­minium exceeded $2,000 and had accrued $13,000 in interest and penalties. The county seized the condominium, sold it for $40,000, and kept the $25,000 surplus rep­resenting the value of Tyler’s equity.

Tyler challenged the county’s retention of the surplus in federal court, claiming that the county violated the Fifth Amend­ment of the U.S. Constitution, which pro­hibits governmental takings of private property without just compensation, and the Eighth Amendment of the Constitu­tion, which prohibits governments from imposing excessive fines. The district court dismissed her suit, and the appeals court upheld the dismissal. The Supreme Court agreed to hear Tyler’s case.

Citing the Magna Carta and the Fifth Amendment of the Constitution, the Su­preme Court’s nine justices unanimously agreed that the county’s retention of the $25,000 surplus violated Tyler’s Fifth Amendment rights. Two justices went fur­ther in a concurring opinion, labeling the county’s action as an imposition of an ex­cessive fine in violation of the Eighth Amendment. The other justices declined to rule on the Eighth Amendment issue, believing that the Fifth Amendment gave Tyler sufficient grounds to prevail.

Parallels to Bay State Foreclosure Rules

Massachusetts’s tax foreclosure proce­dure is similar to Minnesota’s. The Massa­chusetts statute provides that if delinquent real estate taxes are not paid within 14 days after the municipality’s demand, the tax collector may proceed to take the land for the municipality. Delinquent taxes ini­tially accrue interest at 14 percent per year. If the taxes are not paid within 14 days after the collector notifies the tax­payer of its intention to do so, the collec­tor may take the property and record a no­tice at the local registry of deeds.

After the taking, the interest rate on the delinquent taxes jumps to 16 percent per year. The collector does not need a court order to effect the taking. After the taking, taxpayers have a right to redeem the prop­erty by paying the taxes and interest, and taxpayers usually continue to possess the property, until their right of redemption is foreclosed.

To foreclose the taxpayer’s right of re­demption, the municipality must file a foreclosure action in Land Court. The tax­payer’s right of redemption continues until the Land Court enters a final foreclosure judgment. If the taxpayer fails to redeem before the judgment, the municipality gains full value of the real estate, and the taxpayer retains nothing and forfeits the value of its equity. The statute lets taxpay­ers petition the Land Court to vacate the foreclosure judgment for up to one year after its entry, but judges have discretion to grant or deny such petitions.

The situation in Massachusetts is exac­erbated when municipalities deal with pri­vate investors such as Tallage LLC, which uses subsidiaries to acquire tax titles and then foreclose on taxpayers’ rights of re­demption. Registry of Deeds and Land Court records reveal that Tallage routinely purchases tax titles, secures foreclosure judgments from the Land Court, and sells the foreclosed properties in private sales for more than the amount of the delin­quent taxes. The Tyler decision may end this questionable practice, which some have called “equity theft.”

In light of the Supreme Court’s Tyler de­cision, Massachusetts’s tax lien foreclo­sure procedures are difficult to defend. If the Massachusetts legislature does not change them, state or federal courts prob­ably will.

Download the article as seen in  Banker & Tradesman on June 26, 2023. Learn more about Christopher R. Vaccaro.

New Mandates Loom for Massachusetts’ Vacationland

Property Owners Subject to Septic Upgrades
By Christopher R. Vaccaro
Special to Banker & Tradesman

A Massachusetts Department of Environmental Protection map shows watersheds that will be automatically designated as nitrogen sensitive areas (pictured in dark green) as it updates the Title 5 septic regulations.

Changes are com­ing to regulations affecting waste­water management on Cape Cod and south­eastern Massachusetts, but the scope of these changes and their po­tential impact on prop­erty owners are still taking shape.

The Massachusetts Department of Envi­ronmental Protection is responsible for reg­ulating private on-site sewage disposal sys­tems, commonly known as septic systems. For decades, DEP has regulated septic sys­tems through Title 5 of the State Environ­mental Code. Conventional septic systems collect wastewater in watertight septic tanks where solids, grease, and fats are sep­arated from liquids, and partial treatment of solid waste occurs. Liquids are then distrib­uted over subsurface leaching fields, where microbial action removes some pollutants before the liquids seep into the soil and groundwater.

Nitrogen, usually in the form of ammo­nia, is a major pollutant found in wastewa­ter. Septic systems are designed to use bac­teria to convert nitrogen compounds into harmless nitrogen gas, a relatively inert molecule that is the primary component of the earth’s atmosphere. However, conven­tional septic systems only reduce nitrogen pollution by an unimpressive 5 to 10 per­cent. The untreated pollutants seep into the groundwater, and often into nearby wet­lands. The results of incomplete pollutant reduction are notable on Cape Cod, where water quality in many harbors, estuaries and marshes is already significantly de­graded, and getting worse.

To address this problem, DEP seeks to enhance pollution prevention standards on septic systems serving Cape Cod and south­eastern Massachusetts, by amending Title 5 and adding new watershed permit regula­tions. DEP’s initiative would identify water­sheds vulnerable to nitrogen pollution, and designate them as “nitrogen sensitive areas”

(NSAs). DEP has not completed its designa­tion of NSAs, but towns on Cape Cod from Bourne to Orleans would certainly have NSAs, and much of Martha’s Vineyard, Nan­tucket and the western shore of Buzzards Bay would likely be included. DEP’s pro­posed amendment to Title 5 would require all septic systems located in NSAs, includ­ing existing systems, to be upgraded to em­ploy “best-available nitrogen-reducing tech­nology” within five years.

However, if a community obtains, or files a notice of intent for, a “watershed permit” from DEP, the community’s property own­ers would be exempt from the upgrade re­quirement.

Expensive New Technology Required

DEP’s website offers helpful information on different kinds of septic systems that use the best available nitrogen-reducing technol­ogy, or BAT, for short. BAT systems can re­duce nitrogen pollutants by over 70 percent, a significant improvement over the lacklus­ter performance of conventional systems.

But BAT systems are expensive, and may cost over $35,000 each. If thousands of property owners are required to install BAT systems, the overall financial burden would be exorbitant. Whether there are enough qualified professionals available to com­plete thousands of upgrades within five years is questionable. The upgrade mandate would also likely have an adverse effect on construction and housing costs on Cape Cod. State government would probably have to create new funding sources and loan programs for property owners to pay for upgrades.

DEP is sensitive to these concerns. The proposed regulations would offer communi­ties a way to shift the upgrade requirement from individual property owners to the community in general, using watershed per­mit regulations. Under DEPs proposed reg­ulations, communities could seek a 20-year permit to implement long-term wastewater planning for entire watersheds. This would give communities time to develop innova­tive approaches to better wastewater man­agement, including possible expansions of public sewer systems. Individual property owners would not be required to upgrade their septic systems during the 20-year pe­riod that the watershed permit is in effect.

Communities seeking watershed permits would be expected to commit to wastewa­ter management plans demonstrating that at least 75 percent of the necessary pollutant reduction levels would be achieved within 20 years. Those communities would have to provide annual progress reports to DEP, and implement adaptive management pro­grams to produce the necessary reductions. If a community fails to satisfy the require­ments of its watershed permit, DEP could terminate or revoke the permit and reim­pose the Title 5 upgrade requirement on in­dividual property owners. DEP’s initiative is clearly intended to encourage communities to take a holistic and proactive approach to wastewater treatment in NSAs, so individ­ual property owners are not saddled with upgrade costs.

DEP held public meetings last year and in January seeking comments on its proposed regulations. While many participants at those meetings expressed concerns about upgrade costs, many others supported DEP’s efforts to improve water quality on Cape Cod. The time for comments is now over, and Cape communities will soon learn what will be expected of them to achieve that goal.

Download the article as seen in  Banker & Tradesman on March 27, 2023. Learn more about Christopher R. Vaccaro.

Courts Force Abutters to Take Appeal Bond Seriously

Plaintiffs Dealt Seatback in Salisbury 40B Case
By Christopher R. Vaccaro
Special to Banker & Tradesman

A recent Supreme Judicial Court ruling imposes new requirements on abutters challenging the approval of housing developments.

The 2021 amend­ment to the Mas­sachusetts Zoning Act was intended to encourage multifamily housing production by  making it easier for mu­nicipalities to change local laws to allow higher density housing projects and for de­velopers to obtain special permits for such projects, and by requiring communities with MBTA service to establish zoning districts permitting multifamily housing as of right.

The amendment also changed Section 17 of the Zoning Act, which allows “persons aggrieved” to appeal local zoning decisions in court. Such appeals often impose finan­cial hardships on developers and prevent housing projects from going forward.

But now judges hearing appeals of spe­cial permits, variances and site plan ap­provals may require plaintiffs to post surety or cash bonds of up to $50,000 to secure payment of developer’s costs, when poten­tial harm to developers or the public inter­est resulting from delays outweighs the fi­nancial burden of the bond on the plaintiffs. Recent decisions by the Supreme Judicial Court and the Superior Court in Marengi vs. 6 Forest Road LLC offer in­sight into how courts will apply this bond­ing requirement.

Abutters Challenged 40B Development

The developer in Marengi obtained a comprehensive permit under Chapter 40B from the Salisbury Board of Appeals for a 56-unit project with 14 affordable units in 2021. Abutters appealed to the Superior Court, arguing that the comprehensive per­mit should not have been issued because the developer lacked a valid purchase and sale agreement, there was no economic jus­tification for the project, the town already exceeded the statutory minimum of 10 per­cent subsidized housing units under Chap­ter 40B and the Zoning Board failed to fully consider the project’s impacts.

The developer moved for a court order requiring the abutters to post a $50,000 bond to cover some of the developer’s esti­mated $250,000 in costs caused by the ap­peal, including increased construction costs, consultant fees, higher interest rates and attorney’s fees. The Superior Court judge ordered the abutters to post a $35,000 bond, without conducting a hearing. The abutters appealed, claiming that the bond requirement does not apply to appeals of comprehensive permits; that the bond order was improper because their appeal was not brought in bad faith or with malice; that the bond impermissibly included costs outside of the scope of the statute; and that the Su­perior Court judge abused his discretion. The SJC took up the appeal, and issued its decision last December.

Superior Court Gets the Last Word

The SJC noted that the bond requirement specifically applies to appeals of site plan approvals, which are a necessary compo­nent of applications for comprehensive per­mits. Therefore, the bond requirement can be imposed when abutters appeal compre­hensive permits. However, the SJC noted that the Zoning Act only allows costs to be awarded against plaintiffs who “acted in bad faith and with malice in making the ap­peal.” The Superior Court cannot order a bond without a specific finding that the abutters’ appeal “appears so devoid of merit that it may be reasonably inferred to have been brought in bad faith.”

As to what costs are properly covered by the bond, the SJC found a middle ground between the developer’s argument that the bond should cover all of its costs caused by the appeal, including expert fees, attorney’s fees, carrying costs and delay damages, and the abutters’ argument that the bond should only cover “taxable costs” such as filing fees, travel costs and nominal witness fees.

The SJC ruled that the bond could cover expert fees, but not attorney’s fees, carrying costs, and other delay damages. Because the Superior Court’s order lacked specific findings of bad faith or malice by abutters and discussion of what costs can be cov­ered by the bond, the SJC was unable to de­termine if the Superior Court judge properly exercised his discretion. The SJC vacated the bond order and remanded the case to the Superior Court.

Last month the Superior Court got the final word on this, issuing a harsh decision against the abutters. The court ruled that the abutters’ arguments against the compre­hensive permit were so devoid of merit that they could be reasonably inferred to have been brought in bad faith. The court issued a new order, reinstating the $35,000 bond requirement. The abutters accepted a dis­missal of their appeal.

Marengi vs. 6 Forest Road LLC shows that Massachusetts courts are mindful of the purposes behind the recent amendment to the Zoning Act, and they are prepared to require hostile abutters to put up serious money if, without good reason, they chal­lenge zoning relief granted to housing devel­opers.

Download the article as seen in  Banker & Tradesman on March 27, 2023. Learn more about Christopher R. Vaccaro.

How a Smart Growth District Changed Downtown Reading

Housing Production Follows Zoning Updates
By Christopher R. Vaccaro
Special to Banker & Tradesman

Reading’s smart growth district zoning attracted projects such as Oaktree Development’s 30 Haven, which includes 53 apartments and 22,000 square feet of retail space steps from an MBTA commuter rail station.

The Smart Growth Zoning and Housing Production Act, codified at Chapter 40R of the Massachusetts General Laws, is intended to promote multifamily housing developments.  The results have been mixed, as many communities balk at these developments. But the town of Reading, located along Interstates 93 and 95 and served by the MBTA’s commuter rail and buses, has embraced Chapter 40R, with positive outcomes.

Chapter 40R encourages cities and towns to establish smart growth zoning overlay districts, where higher density residential developments are allowed as of right, near public transit facilities and town centers. The Massachusetts Department of Housing and Community Development oversees this program.

To obtain DHCD approval, proposed smart growth districts must allow at least eight units per acre for single-family dwellings, 12 units per acre for two- and three-family dwellings, and 20 units per acre for multi-family dwellings. At least 20 percent of units must be affordable – that is, available for families earning less than 80 percent of area-wide median income. Chapter 40R enables municipalities to direct high-density developments to better suited locations, unlike Chapter 40B of the Massachusetts General Laws, which lets developers circumvent local zoning restrictions in communities lacking sufficient affordable housing.

Payments Offer Incentives for Density

Participating municipalities qualify for one-time zoning incentive payments under Chapter 40R, based on the number of additional housing units permitted as of right in their smart growth districts. Zoning incentive payments can be as high as $600,000 for smart growth districts allowing over 500 additional housing units. Chapter 40R also provides for one-time density bonus payments of $3,000 per housing unit upon issuance of building permits.

Reading has established two smart growth districts. Its Gateway Smart Growth District is on the former campus of Addison-Wesley Publishing near I-95. Housing developments there added 424 dwelling units, of which 200 are within the smart growth district and 43 units are affordable.

Reading’s Downtown Smart Growth District, in the commercial center, has five completed projects that added 192 units, including 43 affordable units. An additional 42 units are approved for construction in that district.

The two smart growth districts earned Reading $700,000 in zoning incentive payments, and over $1 million in density bonus payments. Projects on the drawing board are expected to generate another $123,000 in density bonus payments. Reading also recently approved three significant Chapter 40B products. The Metropolitan and Schoolhouse Commons projects, both located near the commuter rail station, added 88 rental units. The Eaton Lakeview project added 12 ownership units and 74 rental units.

A Faster Path to Compliance

Some of Reading’s Chapter 40R and Chapter 40B projects set aside 25 percent of their rental units as affordable, instead of the usual 20 percent. This increased percentage provides a noteworthy advantage.  As mentioned above, Chapter 40B enables developers to avoid local zoning laws in communities with insufficient affordable housing. But municipalities whose subsidized housing inventory (SHI) exceeds 10 percent of its total inventory, qualify for a “safe harbor.”

Under this safe harbor, if the local zoning board of appeals denies a comprehensive permit application for a proposed Chapter 40B project, the developer cannot successfully appeal to DHCD. Affordable units are included in municipalities’ SHI when determining whether they qualify for the safe harbor.

If a municipality increases the required percentage of affordable rental units from 20 percent to 25 percent, it can include all rental units at those projects in its SHI, not only the affordable units. This benefit helped Reading increase its SHI by 334 units since 2013, resulting in a 10.49 percent SHI and safe harbor protection under Chapter 40B. Reading now has better control over locations and densities of future housing developments.

However, SHI percentages can fall below 10 percent if market-rate units are added to the inventory by new construction or conversion of affordable units to market-rate units. Reading’s planning department continually monitors its SHI.

Andrew MacNichol, the town’s community development director, is also focused on the 2021 Massachusetts Zoning Act amendment, requiring that MBTA communities like Reading to have at least one zoning district where multifamily housing is permitted as of right. The Massachusetts attorney general warned this month that MBTA communities that fail to comply risk liability under federal and state fair housing laws.

MacNichol is confident that Reading will comply, noting that the town “has prioritized working with stakeholders and engaging in a robust public process for all housing developments. Support from the public at large and governing bodies has been an immense benefit. We will continue with these efforts for all future opportunities and needs.”

One town alone cannot solve the housing shortage in Massachusetts, but Reading is doing its part.

Download the article as seen in  Banker & Tradesman on March 27, 2023. Learn more about Christopher R. Vaccaro.