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Case Study #3: Selby Dayton ApartmentsThis 93-unit Section 236 project is located in agentrifying inner-city St. Paul neighborhood.The residents are predominantly minority families,and 100 percent of the units are Section 8-assisted. The property was in poor conditiondue to the owner’s neglect, and when HUD notifiedthe owner of its intent to terminate theSection 8 contract, the owner found a buyerwho planned to undertake a market-rate conversion.StrategiesAfter residents and advocates failed to blockthe proposed sale and conversion, they filed alawsuit against HUD and the owner. Since HUDheld the mortgage, litigants claimed it had astatutory obligation to maintain existing restrictionsthrough the end of the original mortgageterm. The litigation and related preservationactivity received widespread local support andpublicity.OutcomeOnce again, HUD called for a settlement meetingimmediately after the litigation was filed.The city secured a purchase agreement andtransferred ownership to a nonprofit developer.Resources for the transaction includedHistorical and Low Income Housing Tax Credits,state preservation funds, city CDBG funds,retained IRP subsidy, and Section 8 projectbasedsubsidies.2. ENFORCEMENT OF EXISTING USERESTRICTIONS: MASSACHUSETTSIn Massachusetts, coalitions of residents, advocates,and government officials have developedsuccessful preservation strategies around theenforcement of existing state and local userestrictions. These restrictions are derived fromthe following sources:Tax Relief (Chapter 121A). Under this state program,many developers of federally-assistedhousing pay a formula-based excise tax in lieuof regularly assessed property taxes. Inexchange for tax relief and predictability, thedevelopers agree to provide public benefits,such as low- and moderate-income housing, forthe term of the 121A contract, typically 40 years.While most 121A contracts do not include anexplicit use restriction, promises made by thedevelopers in their original applications havebeen construed as legally binding.Zoning. Many federally subsidized projectsreceived some type of local zoning relief at thetime of original construction based on their lowandmoderate-income status. A common exampleis a parking variance granted on thegrounds that low-income elderly tenants needfewer cars. Unless stated otherwise, the obligationsimposed by zoning relief are permanent.In some cases, the zoning approval explicitlystipulates that parking requirements revert tothe original standard if the use and occupancyof the project changes.Urban Renewal. In projects that were built onurban renewal land, deed covenants oftenrestrict the parcel’s use to low- or moderateincomehousing for the term of urban renewalplan. Even if a parcel has no specific restrictions,if the property is located in an urbanrenewal area it is often subject to the low- andmoderate-income housing goals of the urbanrenewal plan.Case Study #4: Fresh Pond Apartments(Chapter 121A)This 500-unit property was developed 30 yearsago under the Section 221(d)(3) BMIR programin what is now a prime location in the City ofCambridge. Approximately two-thirds (338) ofthe units were assisted under a project-basedSection 8 LMSA contract—but only 250 unitswere actually receiving Section 8 subsidies, dueto what advocates perceived as the owner'sdeliberate underutilization of the contract inanticipation of market-rate conversion. Both theSection 8 and the non-Section 8 BMIR unitswere viewed as critical housing resources, withmarket units in the neighborhood renting fortwice the BMIR rents.In 1998, the owner sent tenants an opt-outnotice and announced his intention to prepaythe BMIR mortgage. The city's CommunityDevelopment Department played a lead role byorganizing residents, retaining its own consultants,and engaging the owner and HUD in negotiations.chapter three: State and Local Preservation Tools and Strategies 27