40B Zoning: A Layman's Guide
40B is the set of state laws that handle much of the states affordable housing guidelines. Please note, I'm not an attorney, and you should consider this a "layman's" guide to 40B for the novice. Refer to the state website location for more detailed information.
Now that we have that disclosure out of the way, let's establish WHAT 40B is, WHY it exists, HOW it is supposed to work, and HOW it actually works today.
What is 40B Zoning?
First up: What is this crazy thing called 40B?
All towns in Massachusetts have zoning requirements. Zoning specifies, at some level of detail, where you can put certain types of buildings in that town. Industrial zoning, Commercial zoning, residential zoning are generally all separate areas, but lately many towns (especially high density ones) have been adopting mixed-used zoning, which sounds complicated until you remember it basically undoes what zoning does in the first place.
In general, people don't like big changes to the towns they live in, and over time, many communities used the zoning laws capabilities to limit what - and how much - of certain things developers might want to build in town. One of the more common problems was restrictions on high-density zoning. Developers, in general, like high-density zoning, as they can take small amounts of land and create many potential units, or purchasers, and higher profits. Neighbors, in general, dislike high-density zoning, especially if there are anticipated visual issues (blocking views, or unattractive buildings), traffic issues (more people means more cars), noise issues, and other issues. This wouldn't be a problem accept that real estate in Massachusetts is expensive relative to many places and the solution is - wait for it - high-density zoning. Makes sense right? Create enough supply and prices will stabilize, or go down.
Why do we have 40B Zoning?
The goal of 40B was to create more affordable property in Massachusetts. Simply creating more supply just through the creation of high-density housing wasn't a guarantee it would be AFFORDABLE. To make sure that the developers actually created "affordable" housing, 40-B has a requirement to do just that - which we'll get to in a moment.
Thus, the push for 40B was born. In an attempt to create affordable housing, the state decided that if a town didn't have "enough" affordable housing, than a developer could apply to the state to overturn the towns' zoning map, and basically rezone the land that they owned to create more affordable housing. This was a huge win for developers; the one catch for 40-B for builders was that a certain percentage of the units needed to be designated as "affordable", a very complicated metric that is tied to the average household income in the town. There were a few town protections as well - if the town met or exceeded their affordable housing requirements on a percentage basis, than they could choose to reject any 40B proposal.
Ok, that's a mouthful. Let's make sure we got our definitions right.
Zoning: A set of regulations that define what types of building can go in a certain area, and under what restrictions.
40B: A state zoning override designed to create affordable housing.
Affordable housing: Housing that can be bought by people on the lower end of the median income of a town. Typically it is smaller in size. True affordable housing regulated at the price it can be bought and sold, and it is limited to those who have certain income guidelines as to whether or not they can purchase it. If this sounds like a complete abandonment of the free market, it's because it largely is just that.
High-density zoning: zoning that allows for more, generally smaller units for a given parcel of land. Creates higher density of people in an area.
There's much more to 40B, it's a large and complicated law. It was done to help developers get around local zoning boards, and create "affordable" housing for folks in each and every town in the state. But only up to a certain point.
How is 40B Zoning Supposed to Work?
The typical steps in a 40B project were supposed to go like this:
1) Developer sees town does not meet it's affordable housing requirement
2) Developer purchases land
3) Developer announces a 40-B project to the town and the state
4) State approves project
5) Developer builds and sells project.
Note, since it's a 40B project, other than keeping the town in the loop, the developer really doesn't need a lot of approvals from the town. The state runs the show.
That sounds simple and good, but, like all things political, actually pushing a 40B project through a town that doesn't want it can be expensive for the developer. Expensive enough that most developers would rather do a project with the town's approval and blessing, as that is much faster. So how it actually works in most cases today is quite different.
How does 40B Zoning Work in Practice?
In practice, the developer generally uses 40B as "leverage" to get the town to accede to a compromise between what 40B would offer and what the town zoning currently offers. So instead of building 60 units with 15 affordables, the builder will do 44 units with 11 affordables. By shaving units off, the developer gets faster approvals, and the town gets less density than what would happen if it went all the way through the 40B process. More importantly, town concerns about traffic and noise and all the rest can be addressed with the developer directly. Most towns now realize that fighting 40B is a losing battle, and if they want to remain in control, it is best to work with the developers instead of shutting them out.
So does 40B work?
Technically, 40B does do what it is designed to do - create affordable housing. But the devil is in the details. Here are some of the problems with affordable housing as regulated by the state.
1) Buying an affordable is often threading a needle for a buyer. Buyers must have a certain amount of income in order to afford a mortgage, but not TOO much income, or they don't qualify as requiring an affordable. In my experience, these units are hard to sell, because the scope of buyers that don't make too much and don't make too little is very, very small. The extra paperwork require doesn't help, as most affordable owners are first time buyers, and the process is more complicated.
2) Once you get in, you don't have to leave. Let's say I buy an affordable home. Two years later, I get a big promotion, bump in pay, the works. I would no longer qualify for the affordable if I had to apply today, but the application process is done. I'm already in, and they don't make you sell it just because you are no longer meeting the income guidelines. Basically that means the owners are getting very cheap housing, and they often stay longer than they need to - creating more of shortage - at the taxpayers expense.
3) Limited upside of home ownership. Before you start thinking that an affordable is the way to go, guess what? Your home is very cheap when you buy it, but you'll be giving it away when you sell it. You see, the price of the property doesn't depend on it's market value - it depends on a set of calculations that determine what the price should be for a home of that type to be affordable. So if the town you live in sees prices rise by 10%, it could be totally possible that your affordable unit went up 1%. Or nothing. Or 3%. Obviously, one of the great wealth builders in this county is the leverage that a house can provide as an asset, but if you live in an affordable, you may not participate in that equity build up. Can values of affordable fall? Yes, they can, it all depends on the median household income levels in a town, and if they fall so will the values of the units.
Despite it's flaws, 40B (and it's cousin, 40-R) should be recognized as getting developers and town to work together - not always happily - and makes the change if not easier, a little more accepted.
