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How Big is Corey Kupersmith's 40B Stick?

Opinion - By Sam Low
The Martha's Vineyards Gazette

Early last month, in a letter to the editors of both island papers, Corey Kupersmith expressed his belief that the Martha's Vineyard Commission was unfair, unprofessional and personally biased, and that the MVC will "continue to refuse to approve any golf plan for our land" in the Southern Woodlands of Oak Bluffs. He then filed a plan for a dense, 366 unit residential development with the Oak Bluffs Zoning Board of Appeals (ZBA) under a Massachusetts law known as Chapter 40B.

Chapter 40B, also known as the "anti-snob zoning law," was intended to encourage towns to build affordable housing. The law enables local ZBAs to basically override their own zoning restrictions to approve housing developments where at least 25% of the units can qualify as "affordable." The law applies to all towns that do not meet the state's requirement that 10% of the local housing stock be affordable. On Martha's Vineyard, only one town meets that standard - Aquinnah.

Kupersmith's open threat to the Town of Oak Bluffs is not unusual. In Brewster. For example, a developer is proposing seven homes on 19.5 acres near Long Pond. If the town disapproves his proposal, the developer is threatening to build 70 units under 40B. And in Bourne, developer Len Cubellis wants to build a massive 100 million-dollar mixed-use development called CanalSide - a half a million square feet of retail and business space, a 300-room hotel, two restaurants, 40 townhouses, and 124 apartments. If the town denies him a permit to build this mammoth project, he also threatens a 40B appeal to build an undisclosed number of affordable houses. Similar situations exist in such towns as Taunton, Georgetown and Woburn.

When a developer uses 40B as a threat, housing savants call it an "unfriendly application." But the most prevalent use of the statue is a "friendly application." A town that wants to build affordable housing, for example, may find its own zoning restrictions - large and hence expensive lots, perhaps - make it impossible. The town can use 40B as a tool to make exceptions to their own zoning without setting an unwanted precedent.

"A town that wants to put in affordable housing can use 40B to do so without changing their own zoning laws," says Oak Bluffs summer resident Bob Kuehn, a developer of affordable housing in many communities across the state. "This avoids the technical messiness of variances and the uncontrollable precedent of spot zoning (a change from 3 acre zoning to multi-family, for example) which opens the door to others demanding exceptions."

On Martha's Vineyard there are a number of examples of friendly 40B applications. Sepiessa, four rental homes in West Tisbury built by the Regional Housing Authority, the several senior citizen housing developments built by Island Elderly Housing and Island Cohousing. Island Cohousing was a collaboration between South Mountain Company and the town fathers of West Tisbury which resulted in 16 homes, of which four are affordable (priced for families earning 80% of the town's median income), three are priced to be affordable by median income families and the remaining nine were sold at market rates. By clustering the houses, the plan allowed for the preservation of 85% of the development's 36 acres in perpetuity. Island Cohousing has been so successful that West Tisbury's Planning Board has revised the town's zoning ordinances so that similar cluster developments can take place without recourse to a 40B process.

This is an example of how 40B should be used - a friendly collaboration between developer and town. Corey Kupersmith, on the other hand, seems to be saying "build my golf course or else!"

How does someone wishing to build 40B affordable housing go about it?

A developer submits a 40B application to the local Zoning Board of Appeals (as Mr. Kupersmith has already done.) The zoning board huddles with other local boards and, within thirty days of receiving the application, begins a public hearing, which typically continues for several months. After ending the public hearing, the zoning board must issue a decision within forty days They may approve the application as submitted, approve with conditions or changes, or deny the application altogether. If the board denies the application or imposes unreasonable conditions, the developer may appeal the decision to the State Housing Appeals Committee (HAC).

Contrary to rumors circling about the island, however, applying to HAC does not in any way mean automatic approval. Of the appeals that went to the committee between 1990 and 1999 - only 25% of the ZBA decisions were overruled outright and 13% of the ZBA decisions were upheld, 38% were approved with stipulations, 11% were withdrawn by the developer and 9% dismissed. Or, in other words, while 63% of the time the developer prevails, more often than not the approval comes with stipulations made by HAC. And, in 33% of the cases the developer fails outright.

Perhaps more importantly, according to Aaron Gornstein, the executive director of CHAPA (the Citizens' Housing and Planning Association), the appeals process is a lengthy one, often requiring 2 or 3 years for a developer to get approval once he applies to the local ZBA. "There are a lot of myths surrounding 40B," says Mr. Gornstein, "the most frequent is that if a developer appeals under 40B that the decision is automatic in favor of the developer. It is an extensive process. There are hearings, reviews of case law, and the decisions are thoughtful. The committee (HAC) tries to take local concerns into account."

"The whole process can also be expensive," says Bob Kuehn, "towns can kill you with consulting studies - for the impact on drinking water, sewage, traffic - they can tie you up in knots. In my practice, if a town does not want affordable housing I will go elsewhere. I only like to work in communities that welcome affordable housing and desire to pursue a collaborative approach," Kuehn says.

Although no one from HAC will acknowledge it - and for good reasons, political and otherwise - it's common knowledge among developers I have spoken to that the committee will take a long second look at blatantly "unfriendly" 40B proposals.

"If a developer wants affordable housing he or she should come in with that in the first instance and not use it as a threat," says Mr. Gornstein of CHAPA. "We do not think that is an appropriate use of the statue. But we don't think that such abuse is widespread. For every instance of abuse by a developer we hear the same - if not more abuse - from the town in terms of blocking affordable housing without justification."

Another trend in the 40B data seems to indicate that the size of the development matters. Of all 40B applications, 83% were for developments of 100 units or less, while only 13% of applications were for 101 to 200 units, and only 4% were for developments over 200 units. What will the Committee do when they receive Mr. Kupersmith's application for 366 units?

The State legislature is currently looking into changes in the 40B law due, in part, to abuses by developers who use the law not as a friendly "carrot" to build affordable housing but as a decidedly unfriendly "stick" to threaten towns that do not agree to their proposals. Among the changes being considered are:
Changing the method of calculating the affordable housing in a community by allowing trailer parks and Section 8 private vouchers (rent subsidies) to count as "affordable." (If 10% of a communities' housing can be deemed "affordable," the 40B process no longer applies. So by increasing the count of affordable housing, the legislature will reduce the number of towns affected by 40B.)
Establishing a "cooling off period" - a period of time that a developer must wait after being turned down by the local ZBA for one kind of development before filing a Chapter 40B proposal for a different kind of development
Allowing local ZBAs to reject proposals that are for more than 300 units.
While we don't know at the time of writing this article what measures will be adopted, there is certainly a lot of momentum among legislators to help towns like Oak Bluffs defend themselves from developers like Mr. Kupersmith. And, even if these changes are not passed, there are already some significant stumbling blocks in his way.

According to Mr. Charles Clifford, head of the Martha's Vineyard Commission, if Mr. Kupersmith fails to gain approval for his golf course, he will have to come before the Martha's Vineyard Commission again with an application to build housing.

"Our enabling legislation requires a review of any development that consists of more than 10 units of housing or 10 separate lots," Mr. Clifford said. "We have reviewed every other 40B application on the island and so there is also considerable precedent for our review of Mr. Kupersmith's development."

"Kupersmith doesn't believe that the MVC has jurisdiction over 40B projects," says John Abrams, the developer of Island Cohousing (under a friendly 40B application.) "But when we had our attorneys, Goulston and Storrs, look into it for us they were quite certain the Commission does have the authority to review 40B applications. Kupersmith would have a major battle on his hands to avoid the MVC unless the town actually pulls out (of membership in the Commission), in which case they would lose the Commission's regulatory protection."

Some confusion has been caused by the fact that the Cape Cod Commission does not review 40B applications, but, as Mr. Clifford explained, "the Cape Cod Commission was established much later than the Martha's Vineyard Commission and under different enabling legislation that does, in fact, exempt them specifically from review of 40B applications. That is not so on the Vineyard."

So, if Mr. Kupersmith does go forward with his housing development, he will most likely come before the MVC yet again. Under the most favorable circumstances, such a proposal will require 2 to 5 months for review. Should there be any difficulties with his proposal, and I think you can count on it, it will take longer.

Finally, it remains to be seen whether or not Mr. Kupersmith can actually make a profit by developing housing on the island. According to Bob Kuehn, "affordable housing is very difficult to develop - we wouldn't have the current housing crisis on the Vineyard or elsewhere in Massachusetts if the task was easy". Assuming Mr. Kupersmith eventually prevails with the 40B process and is permitted for, say, 300 homes - this is only the first half of his battle. The second half is to make the development profitable, a task that will probably require the cooperation of a number of state and federal housing programs.

Mr. Kuehn sketched out the numbers, starting with the development costs:
Land Cost (including carrying and permitting) $ 20,000,000
Construction Costs $ 60,000,000 (400,000 SF @ $150 per SF)
Professional Fees (architecture, engineering, legal, etc.) $ 4,000,000
Soft Costs (including interest, marketing, etc.) $ 7,500,000
Contingency Allowance $ 4,500,000 (5% of above)
Profit and Overhead $ 9,000,000 (10% of above)
Total Development Cost $ 105,000,000
Cost Per Home $ 350,000

The average cost per home does not look too bad, but remember that 25% must be reserved for affordable occupancy so at least 75 of the homes must be sold for $125,000 or less (the price that can be afforded by a family of four on the Vineyard at 80% of the median income or about $48,000). The remaining 225 homes will then have to sell for about $425,000 on average to balance the books. This may be a stretch.

The homes could be rented, but - if you do the affordable housing math - the maximum allowable rent will be about $1200 per month. Full market rent is at least double that so there is a $1200 per month shortfall that has to be made up through rental assistance programs. This gap grows larger if lower income groups are served as required by certain of the assistance programs.

A number of programs could be used to cover the shortfall - tax-exempt bonds, low-income housing tax credits, rental subsidies, capital grants, etc. But here's the rub for Mr. Kupersmith: affordable housing resources are in short supply and are awarded by a competitive process. Agencies therefore consider the background of an application and are less likely to award funds if the site is the subject of an adversarial proceeding. Indeed, some agencies require an affirmative endorsement of local officials before considering an application.

So, Mr. Kupersmith could possibly (although by no means probably) win the first battle by permitting his site under an unfriendly 40B application - but then lose the war of attrition as he waits to secure funding to build the housing.

Kupersmith's use of 40B as a tactic has had a predictable - and truly unfortunate - result. He has managed to turn neighbor against neighbor and threaten the effectiveness of the entity that he views as his archenemy - the Martha's Vineyard Commission. Theo Nix of Oak Bluffs is leading a petition drive to encourage the town to withdraw from the Martha's Vineyard Commission because he feels the Commission will deny Mr. Kupersmith's golf course plan, leaving the town facing the prospects of bankruptcy if such a massive number of new houses are built within its boundaries. Perhaps he is right. Others, however, feel that it's unlikely Mr. Kupersmith will even try to build housing. Why would someone with the ample means to go elsewhere to do what he loves - build golf courses - put himself through so many hurdles to build housing - something he has shown no desire to do in the past? I tend to think that if the Commission turns him down he will sell to the highest bidder - perhaps even a consortium of conservation groups.

" Kupersmith has gotten bad advice and botched the process," says John Abrams, the developer of Island Cohousing. "He doesn't seem to understand collaborative methods and his assault tactics always backfire. Hopefully he'll come to see that a conservation-based alternative will be the best result and a mixed use plan will result that combines conservation, campground, perhaps some small scale affordable housing, and other uses beneficial to and desired by the town. When people finally put their heads together positive results can emerge - what happened recently at Herring Creek Farm is an elegant example."

What remains true regardless is that Kupersmith's strategy has divided the town and thereby weakened its ability to resist him. Ironically, if Oak Bluffs does withdraw from the Martha's Vineyard Commission, it would make it easier for Mr. Kupersmith to build a massive housing development - by removing the Commission's oversight of his project.

Corey Kupersmith's threat to the Oak Bluffs community is a blatant misuse of Chapter 40B. What was meant to be a tool for collaborative decisions between a developer and a town to achieve a meaningful goal - has been subverted by an individual for his own selfish needs. This tells us much about Mr. Kupersmith and others who have recently come to the island pursuing single minded investment opportunities.

But this sorry episode may yet teach us a valuable lesson. We are caught in a problem of our own making. We may want to blame it on others - as in Mr. Nix's accusation of bias against the Martha's Vineyard Commission - but, in the famous words of cartoonist Charles Shultz - "the enemy is us." If we do not begin working to house our neighbors, we will destroy our island community. None of us want to see island demographics swing toward a two tier society - those who have and those who serve them. On the contrary - we want to insure that our children, our friends and our neighbors can continue to live and thrive on our island. We want to sustain a balanced community of all income levels, races and ethnic groups. And we want to avoid the intrusion of off island developers who divide us so as to conquer us. One way to achieve all these goals is to move forward quickly to meet the state's mandate of ensuring that 10% of our housing, in each of our towns, is affordable. By so doing, we will support our thriving island community - and eliminate the threat of developers brandishing 40B sticks.

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