A fight in Boston’s Fenway neighborhood to preserve the affordability of a local apartment block may only be the opening round in a statewide war between landlords and tenants over thousands of affordable housing units set to have their subsidies expire in the next few years.

The Burbank Apartments on Haviland Street in the Fenway make up 173 of the more than 29,000 Massachusetts units affected by the so-called “40-year problem.” Beginning in the 1960s, the federal government offered developers cheaper mortgages if they agreed to ensure apartments built using the funds were offered at below-market rates for the duration of the mortgage – usually 40 years.

Most of the Massachusetts properties developed using the subsidies were built between 1972 and 1976, and will pay off their mortgages within the next few years, leaving it up to owners to decide whether to continue to maintain affordable units or convert apartments to prevailing market rates. A new report by the Community Economic Development Assistance Corp. (CEDAC), a quasi-state agency monitoring affordable housing in Massachusetts, suggests many landlords are willing to take that leap – potentially eliminating as many as 10,000 affordable units in the course of just a few years.

“We’re always concerned about this issue, because it’s so hard to replace affordable units, especially in high-cost neighborhoods,” said Shelia Dillon, housing advisor to Boston Mayor Thomas M. Menino. “Those opportunities just don’t come along again.”

Project Vs. Tenant-Based

The roughly 29,000 properties affected by the 40-year problem represent about one-third of the state’s existing affordable units. The problem threatens to lower the ratio of affordable to market-rate properties in cities and towns across the state, an important benchmark in determining whether developers may bypass local zoning ordinances when constructing housing under Chapter 40B, a state statute meant to encourage new affordable housing development.

Starting in the 1990s – when many of the affected property owners became eligible to pre-pay mortgages and leave the program – Congress authorized HUD to create a number of new subsidies allowing landlords to receive market-rate rents while also maintaining affordability.

These programs were initially successful in convincing landlords to keep the units affordable. But that may be changing.

“After the HUD changes, we went through a period of about 10 years where we were losing very, very few [affordable units]. People had a false sense of complacency, I think, that that period of almost negligible lost units would continue,” said Bill Brauner, housing preservation program manager for CEDAC. “But we’re in a different world now, and the indications from the Year 40 report is that we are looking at a greater number of lost units if significant changes aren’t made.”

Central to the problem has been a federal shift in emphasis from “project-based” subsidies –which require a particular apartment to be subsidized for a period of time – to “tenant-based” subsidies, which allocate subsidies, often in the form of vouchers, to individuals based on income and other factors. While some project-based subsidies are still available, tenants of landlords who elect to opt out of a HUD program usually receive vouchers. Such vouchers have been secured for the Burbank apartments.

“In the process of converting this property from a subsidized to a market-rate development, the company has secured HUD enhanced vouchers for every unit,” David Ball, a spokesman for Burbank Apartments’ ownership, said in a statement. “This is an expansion of affordable housing in Boston, not a retrenchment.”

But the vouchers carry their own problems, affordable housing advocates contend.

“There’s two critical problems with changing from an apartment based subsidy to a purely voucher based. It’s going to be trickier and harder for the [current] tenants to qualify, and it’s only going to be available to current tenants who qualify, not future tenants,” said Dharmena Downey, executive director of Fenway Community Development Corp. “So the affordability gets moved, and thus it’s lost in this neighborhood.”

Tough Row To Hoe

Those reasons compelled her group to file suit to prevent the Burbank Apartments from going market-rate. The group, along with the Burbank Apartment Tenants Association and the Massachusetts Coaliton for the Homeless, is also arguing that converting the units will disproportionately impact minority groups and the elderly, and is therefore a form of discrimination.

Several affordable housing advocates said they were unaware of any similar suit by a community development group. There has been at least one case, involving the Ardemore Apartments in Wellesley, in which a group of tenants sued to prevent a landlord from converting to market rate, but that case involved a property built according to restricted zoning regulations that required the property to remain affordable.

“It’s a pretty difficult row for them to hoe, because this was based on a contractual obligation between [the owners] and HUD,” and basic contract law principles entitle parties to rely on the provisions of a legal contract, including the expiration date, to be enforced, according to Jeffrey Turk, a partner at Braintree-based real estate law firm Marcus Errico Emmer & Brooks. “A lot of people were buying these properties and investing in these properties based on knowing that the affordability provisions [in a few years] would be lifted.”

A win for the CDC and its allies in the Burbank case would drastically alter the affordable housing landscape in the commonwealth. And even if victory for the Fenway group is a longshot, the existence of the dispute may foretell more contentious battles to come as more properties near their expiration date.

A task force already exists to monitor the intentions of landlords as projects near their affordability expiration dates, and a statutory provision passed in 2009 allows the state to acquire such properties to preserve affordability. But allocated funds have yet to be tapped, and in an era of fiscal constraint, any further spending is a tough sell.

“The state has provided a lot of leadership,” said Roger Herzog, executive director of CEDAC. “But we really need some federal help to make this work.”