Beveridge & Diamond

Massachusetts SJC Decision Overturns HAC Use of De Facto Denial

Beveridge & Diamond, P.C. - Client Alert, June 30, 2008

When a local board of appeals grants a comprehensive permit with a condition reducing the size of the project, the Housing Appeals Committee (“HAC”) does not have the authority to determine that the approval is a constructive or “de facto” denial of the comprehensive permit, according to the Supreme Judicial Court’s decision in Board of Appeals of Woburn v. Housing Appeals Committee, SJC-10014 (Cordy, J., June 10, 2008).  The HAC has been applying this de facto denial standard since its decision in Settlers Landing Realty Trust v. Barnstable Bd. of Appeals, HAC Docket No. 01-04 (2003), under which developers faced an easier burden of proof to reverse the board’s density reduction. Where developers formerly enjoyed the “denial” burden of proof (local board must prove a valid local concern supports the denial and that such concern outweighs the regional housing need), under Woburn, project proponents must now prove that the condition or reduction of units renders the project “uneconomic” (impossible to realize a reasonable return in building or operating the project within the limitations set by the subsidizing agency).   

In this case, a developer sought a comprehensive permit to construct a housing development on a 74.46-acre parcel in Woburn with 640 units. The Woburn Board of Appeals (the “Board”) issued a comprehensive permit with conditions including one that reduced the number of units to 300. The developer appealed to the HAC, which found that there was no reasonable factual or legal justification for the limitation on the number of units. As a result, the HAC approved 420 units. The parties appealed to the Superior Court, which ruled that the reduction in units from 640 to 300 constituted a “functional equivalent of a denial,” and remanded the case to the HAC to determine the appropriate number of units “given the need for affordable housing and local needs concerns.” On remand, the HAC determined the project should include 540 units, which was upheld by the Superior Court.

On direct appellate review, however, the Supreme Judicial Court (“SJC”) rejected the de facto denial and upheld the comprehensive permit as issued by the Board, finding that the HAC did not have the authority under Chapter 40B to treat an approval subject to conditions as a constructive denial of an application. The SJC found that the developer must demonstrate that a challenged condition renders a project uneconomic as “a necessary element of the developer’s prima facie case for relief” and that absent such a finding, the HAC has no power to modify or remove conditions. Only if the developer demonstrates a condition is uneconomic does the burden then shift to the board to show “consisten[cy] with local needs.” In sum, the Court reasoned that Settlers Landing afforded the HAC “almost unbridled discretion” to consider any condition the functional equivalent of a denial,” discretion which was inconsistent with Chapter 40B.

In a footnote, the SJC suggested that, without revising Chapter 40B, the Department of Housing and Community Development (“DHCD”) could remedy this situation by promulgating regulations that would “more fully address the meaning of the term ‘uneconomic.’” Also, in a concurring opinion, Chief Justice Marshall, after opining that regulations further defining “uneconomic” would fall within the broad authority of DHCD, suggested that such regulations could define “reasonable return” or “perhaps provid[e] that a reduction over a certain percentage should be presumed uneconomic.” Seemingly urging the DHCD to act, the Chief Justice concluded that, “[i]n the absence of appropriate regulations, a local board remains free to impede the pace at which affordable housing units – so urgently needed – are constructed in the Commonwealth, even if a larger project would be entirely consistent with local needs.”