Issue a RFP & Choose a Developer
If analysis and information obtained during predevelopment leads to the conclusion that the selected site is ideal for housing development, and the proposed development is financially feasible, the municipality can begin the process of disposing of the land. This includes the following steps:
- Drafting a Request for Proposals (RFP)
- Selecting a developer
- Executing the development agreement
- Disposing of land through a fee-simple sale or a long-term lease agreement
Draft a Request for Proposals (RFP)
An RFP provides a formal process for soliciting information from prospective developers/owners and will enable the municipality to fairly compare submissions to ultimately choose a developer and dispose of the site. As stated above, to issue an RFP, your municipality must have a Chief Procurement Officer (CPO) or a person with delegated authority to do so. Check with town officials to see who has this authority. Your community should also have a committee who will be charged with reading and evaluating the submissions and selecting the developer. RFPs and the selection process are governed by M.G.L. Ch. 30B.
The basic components of an RFP include:
- Description of the site
- Type of disposition (sale or lease)
- Target population, type of housing and level of affordability desired
- Submission requirements
- Design guidelines
- Evaluation criteria
- Schedule for site visits, interviews, and selection
- Forms and certifications
Note that while using an existing RFP from another community or development can be useful in creating your own RFP, MHP urges caution and attention to detail to make sure that no errors in copying are made.
A good RFP will:
- Comply with M.G.L. Ch. 30B requirements
- Clearly articulate the community’s goals for the project
- Include comprehensive information about the site
- Include thoughtful and thorough evaluation criteria (see below for more information).
By adhering to these guidelines, you can develop a thoughtful RFP that will attract qualified developers interested in working to achieve your community’s vision for the site, and begin the development process in an organized and effective manner.
Common RFP Mistakes
- Unrealistic time schedule
- Inadequate developer qualifications
- Goals and guidelines not specific enough, or too prescriptive
- Limited site information
- Excessive submission requirements
- Evaluation criteria unclear and subjective
- Mandated design (without designer selection or public construction)
- Required approvals by municipality post-developer selection, such as construction or management oversight
MHP has created two useful resources to refer to when envisioning how to draft an RFP - RFP Preparation Guidelines and RFP Outline. Keep in mind, MHP's community assistance team is available to provide guidance in drafting an RFP. Email email@example.com if you need help.
Choosing disposition: sale or lease
A public entity that owns land has several options for determining how the land will be developed and who will develop it. Disposition of the property can be by sale or long-term lease.
Sale: The public entity can sell the land to a developer with a deed restriction to ensure affordability. In this way, the seller (the municipality) has the advantage of getting affordable units developed without a serious investment of staff time, money, and risk. A good RFP and selection process will help ensure that the development reflects the goals of the community.
Lease: A long-term lease is considered a disposition. A public agency can use such a lease to dispose of land, granting a long enough time to allow for project financing. It can also specify affordability monitoring and/or a lease payment.
Note that when creating affordability requirements as part of a deed restriction or long-term lease, it is important that they align with any underlying zoning requirements --- Ch. 40B permits for example --- and that the restrictions do not inhibit the financial feasibility of the proposed development.
Developer selection is based on the perceived and proven ability of the developer to meet all of the specifications laid out in the RFP. Their reliability, integrity, and financial capacity will be reflected in a developer's financial submissions, portfolio of completed developments and references. It is up to the municipality to decide which type of developer is the best fit for their development. Examples of the types of developers who might respond to an RFP are:
- A nonprofit developer, often a community development corporation (CDC), is a private, mission-driven organization that is engaged in housing and/or economic development activities, usually for a specific neighborhood, community, or region. In addition to developing and owning affordable housing, some nonprofits provide development services or will partner with outside organizations.
- For-profit developers may be driven by the potential for longer term value of a property. Many for-profit developers have management companies that manage their own properties as well as properties owned by third parties. A for-profit developer, if selected, should be committed to the principles of affordable housing and understand the goals for the new development.
- A service sponsor, an organization whose primary business is to provide services to its residents, may also be a property developer and owner. Examples could include senior services like those at assisted living facilities, or housing for those with development disabilities. These organizations are mostly nonprofits and may themselves partner with others for the development of service-enriched housing.
The developer selection process should be transparent and consistent. It should be executed with a committee that understands real estate development and finance, or secures a housing consultant with these skills. This committee could include members of zoning boards, select boards, planning boards, or Municipal Affordable Housing Trusts (MAHTs), or even knowledgeable community members. The authority for the board is granted through a vote by the chief elected officials.
Clear, thorough criteria for evaluating submissions should be articulated in the RFP and then adhered to throughout the selection process. The key is being fair and impartial for all submissions. This means, for example, if your selection committee decides that interviews are an important element of evaluation criteria, all respondents should be interviewed and should be asked the same questions.
An initial screening of all submissions should be done to assess completeness and conformity to submission requirements. Those that don’t meet the minimum threshold criteria can be eliminated.
There are different ways to rank and measure the strength of RFP responses. The most common is to use priority-ranked categories like “Unacceptable, Acceptable, Advantageous, and Highly Advantageous.”
To see how developer submissions can be scored and categorized, see this RFP Comparative Criteria Chart.
Executing the development agreement
Once a developer has been selected, a development agreement is executed that articulates the expectations of both the developer and the municipality during the time between selection of the developer and the execution of the land lease or sale. The development agreement requires the selected developer to assemble the necessary components of a successful development, such as financing and permits, prior to the actual disposition of the land. This agreement also sets forth the terms and conditions under which the municipality will convey the property and the developer will acquire and develop the property. It is a consensual, binding contract and extends benefits to both the developer and the municipality. Please refer to our Elements of a Development Agreement list when preparing an agreement.
Disposing of land through a fee-simple sale or long-term lease agreement
Many municipalities choose to dispose of land through a long term lease, as it provides a measure of control should there be problems with the development at some point in the future. As stated, a long term lease is considered a disposition, and it is recommended that the lease be for no fewer than 50 years in duration. If using a lease, your municipality should engage legal counsel experienced in disposition of public property. MHP has developed a model lease agreement, but as with any legal document, its contents should be reviewed by an attorney and adapted to reflect the specific project requirements. MHP is also available to advise and review proposed lease agreements.