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Governor Proposes Changes to Starter Home Program

By May 3, 2022 No Comments

Since its enactment in 2016, the amendments to the Smart Growth Zoning and Housing Production Law (G.L. c. 40R) to encourage the production of “starter homes” has failed to live up to its promise. Continuing his commitment to tackle the state’s housing shortage, Gov. Charlie Baker has filed legislation to make changes to the law that he hopes will result in greater interest among homebuilders and municipal officials in a program designed to produce more affordable single-family homes.

Shortly after they took office in 2015, the Home Builders and Remodelers Association of Massachusetts (HBRAMA) approached the new Baker-Polito Administration with the idea of establishing a program to incentivize cities and towns to adopt zoning to allow for the production of smaller homes on smaller lots as a matter of right. The goal was to enable homebuilders to build new single-family homes for families of average means. By reducing land costs and restricting the size of the homes, these “starter homes” could be affordable to first-time and first-generation homebuyers.

The HBRAMA was pleased that the governor included legislation to create a starter home program in his first omnibus economic development bill and its passage was a major accomplishment for the association. But the bill enacted by the Legislature incorporated the concept of “starter homes” into the Smart Growth Zoning and Housing Production Law (Chapter 40R), thereby setting up an inherent conflict that has crippled the program from the start.

Chapter 40R encourages communities to create dense residential or mixed-use smart growth zoning overlay districts, including a high percentage of affordable housing units, to be located near transit stations, in areas of concentrated development such as existing city and town centers, and in other highly suitable locations. Projects must be developable either as-of-right or through a limited plan review process akin to site plan review. Upon state review and approval of a local overlay district, communities become eligible for Chapter 40R zoning incentive and production bonus payments, as well as other financial incentives.

The 2016 amendments enabled a city or town to qualify for Chapter 40R financial incentives if it adopted an overlay zoning district that permits the development of smaller homes (not exceeding 1850 sq. ft. of heated living area) on smaller lots (at a density of no less than 4 units to an acre). The problem is those homes have to be located in a so-called “smart growth” location. The reality is that land located near a near a transit station, area of concentrated development or other “highly suitable location,” is too valuable to develop small, affordable single-family homes. Consequently, none have been built.

Gov. Baker has proposed in his 2022 economic development bill (H. 4720) to strike starter homes from Chapter 40R and create an entirely new statute, Chapter 40Y, Starter Home Zoning Districts. By doing so, it will resolve many of the problems of trying to fit “a square peg into a round hole.” No longer would a starter home zoning overlay district have to be located in a “smart growth location” approved by the Department of Housing and Community Development. Rather, an eligible starter home zoning overlay district would be any location that a community determines is appropriate. Further, the current requirement that 20% of the units in a starter home development be affordable to individuals and families whose incomes do not exceed 80% of Area Median Income as determined by the U.S. Dept. of Housing and Urban Development, would be reduced to 10% of the units at 110% of AMI, thereby making the economics of such a project more workable.

Importantly, the governor’s approach will result in changes to the existing regulations governing starter home zoning that will be make them substantially less burdensome for municipalities and less time-consuming and costly for developers. Those changes, too, should make it more attractive to both municipalities and homebuilders to participate in the program.

The HBRAMA will be strongly urging legislators to include the new Chapter 40Y in any economic development bill enacted by the Legislature.