In a decision that will have widespread repercussions, the state’s Housing Appeals Committee has backed a developer’s request to lift the age restriction at this Hanover apartment complex.

A state housing board has backed a developer’s request to lift the age restriction at an apartment complex in Hanover.

The Massachusetts Housing Appeals Committee ruled that the town’s decision to deny the developer’s request should be overturned.

The recent decision will have repercussions statewide, as developers in several Bay State communities have tried to open up age-restricted communities to a bigger pool of buyers and tenants because of the housing market slump, according to some observers.

The developers of the Hanover project, a 74-unit complex known as North Pointe, sought the town’s permission to change the age restriction after having trouble renting the units. The request was denied by the town’s Zoning Board of Appeals in December 2006.

The developers, R. Richard Lincoln and Richard D. Matthews, appealed to the HAC, arguing that the town’s refusal to remove the age restrictions made the project “uneconomic.” The project, which was completed in early 2005, was built under Chapter 40B – a state law designed to create mixed-income housing in communities that lack a sufficient amount of affordable housing.

“I think it’s a very substantial win for developers, in that it gives everyone a clear message that there is flexibility in the development process under Chapter 40B even after construction of the project has concluded,” said Marc J. Goldstein, the developers’ attorney.

The town’s attorneys argued that Hanover officials hadn’t imposed any conditions to make the project uneconomic. Instead, the attorneys said the age restriction was “a fundamental element” of the project as proposed by the developer.

They also argued that the developer didn’t pay enough attention to a market analysis indicating a longer lease-up time for the units. The analysis projected it would take until the end of 2005 to rent all the units. Instead, the developer hired another marketing agent, which predicted that the market units would be rented as early as August 2005.

But the HAC said it was up to the Zoning Board to prove there is a valid “local concern that supports the denial of the change and that this concern outweighs the regional need for affordable housing.”

“The purpose of the comprehensive permit law is not to guarantee an economic return to the developer. But, where there is no allegation of fraud or other misconduct, neither should the developer be prevented from making a change in a development that has become uneconomic unless the board has established that there are countervailing local concerns,” the decision reads.

Dennis McKenna, a partner with Riemer & Braunstein who’s representing the town, said Hanover officials haven’t decided whether to appeal.

“The town is weighing its options and has made no decision as to what further steps it might take,” he said.

He added, “The town welcomed this project with open arms and approved this as proposed because the town was receptive to the idea of affordable housing at this location with an age restriction. And certainly when the developer tried to convert the rental project to condos and then later attempted to remove the age restriction, the town felt at that time as if the 40B process should not enable a developer to change the core components of the project as it had been represented to the town.”

‘An Important Decision’

The decision comes after an explosion in the development of so-called active-adult communities throughout the state. There were 150 active-adult communities in 93 communities throughout eastern and central Massachusetts that were either in existence or under construction, according to a 2005 analysis. Those projects alone include more than 10,000 units and another 14,000 were planned, proposed or in the permitting process.

One reason active-adult projects became popular is because they generate fewer schoolchildren. Many communities that struggled with a rise in educational costs over the years were more willing to accept those kinds of projects instead of housing geared to families.

When the housing market took a dive, however, some developers struggled to fill units and asked towns to waive the age requirement.

At North Pointe, only 33 of the 74 units are rented. Nineteen of the rented apartments are below-market-rate units. Goldstein, the developer’s attorney, said the developer tried a variety of incentives, including lowering the rent, to attract tenants. Monthly rents range from $1,375 for a one-bedroom to $1,675 for a two-bedroom apartment, according to the development’s Web site.

The developer also spent over $90,000 on marketing, including $30,000 on advertising, according to the HAC decision.

Jay Talerman, an attorney who represents communities in development matters, said this latest case “signals a disturbing trend.”

“When the market began to fall, over-55 developments were among the first victims. Concerns were widespread among the subsidizing agencies, development community and municipalities. Nevertheless, as is often the case with Chapter 40B, it is the cities and towns that are bearing the brunt,” Talerman said in an e-mail sent to Banker & Tradesman.

“It is certainly disturbing that the towns cannot rely on the bargains that they negotiate with developers, especially in that [the Department of Housing and Community Development’s] own published guidelines on Chapter 40B encourage negotiated accords,” added Talerman, of Blatman, Bobrowski & Mead in Millis. “In the Hanover case, the Housing Appeals Committee blithely rejects the notion that a municipality should be able to rely upon the promises made by a developer Â… The HAC’s decision sets forth a template by which a town may defend a decision to reject a conversion to non-age restricted housing. However, in doing so, the HAC sets a very high bar. As a municipal advocate, I fear that the HAC’s decision will open the floodgates to similar requests for conversion.”

Goldstein, a principal of Beveridge & Diamond in Wellesley, said the Hanover case is the first to address two questions: Can a developer make a change after a project is constructed under Chapter 40B, and what standard should be applied to determine what type of changes are appropriate?

“It clearly is an important decision because it answers those questions about how Chapter 40B works and it sends a message to developers that if the underlying conditions in which you’re building a project have changed in some material way, there’s a process for addressing those changes through the statute,” said Goldstein.

Goldstein said the ruling shows that Chapter 40B is flexible enough to allow developers to make changes when there are unforeseen changes in market conditions.

“Knowing that some of the risk that he may face down the road can be addressed by a change in the project makes the developer more likely to pursue these kinds of projects,” he said.