In many weak-market neighborhoods, public investment is often required to catalyze private development. However, in legacy cities, local governments often do not have the resources to take this first step towards revitalization, which presents an opportunity for states to support local municipalities. States can do so by giving communities the authority to incentivize market activity and by providing market gap funding and other resources for those working to regenerate these disadvantaged areas.

The Greater Ohio Policy Center, in partnership with the Lincoln Institute of Land Policy (LILP), has been studying statewide policies that support legacy cities in addressing weak-market neighborhoods. Massachusetts’ Housing Development Incentive Program (HDIP) is a noteworthy example. This statewide policy addresses legacy communities’ market gaps while also stimulating the development and rehabilitation of market-rate housing in designated zones. It is a flexible tool for local governments to encourage the types of development needed most in their cities, and it strategically leverages state policy for projects tailored to local market conditions.

HDIP provides both local and state tax incentives for developers to construct new or rehabilitated multi-unit, market-rate housing in Gateway Cities (the state’s legacy cities) that contain a minimum of 80 percent market-rate units. The local real estate tax exemption is for all or part of the increased property value resulting from improvements, and the state tax credit is for qualified project expenditures of up to $2 million. The State of Massachusetts allocates up to $10 million annually for HDIP. Each project must negotiate the local real estate exemption amount, and developers are required to take both the local and state incentive.

All for-profit and non-profit developers with market-rate housing projects in designated areas of Gateway Cities are eligible for HDIP. A municipality must first propose the designated areas where they want to encourage new development and rehabilitation of properties, to participate in the program. Communities must then develop a plan for how the “HD Zones” will promote market-rate housing development. This plan needs to be approved by the Massachusetts Department of Housing and Community Development, which administers HDIP. (Massachusetts Housing and Community Development, 2020)

HDIP has proven to be a valuable use of public dollars to subsidize market-rate housing; it has resulted in 1,000 new units from 2010 to 2019, and more than an additional 800 are coming online in 2020. (Larry Field, Massachusetts Smart Growth Alliance, 2019)

To learn more about Massachusetts’ successful program, visit the Massachusetts Department of Housing and Community Development’s website: www.mass.gov/service-details/housing-development-incentive-program-hdip

Image Source: City of Lowell, MA