MA Housing Development Incentive Program Tax Credit (HDIP)

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MA HDIP 

Dorfman Capital is a leader in placement of the MA Housing Development Incentive Program (HDIP) Tax Credits.  The MA HDIP is a subsidy for market rate housing in one of 26 Gateway Cities. 

The mission of the program is to increase residential growth, expand diversity of the housing stock, support economic development, and promote neighborhood stabilization.  The program provides tax incentives to developers to undertake substantial rehabilitation of properties for lease or sale as multi-unit market rate housing. 

The Housing Development Incentive Program (HDIP) was established in accordance with 760 CMR 66.00 and M.G.L. Chapter 40V.   The HDIP regulations were initially published in 2012 and then amended in 2017. The HDIP program is administered and ran by the Executive Office of Housing and Livable Communities (EOHLC) formerly known as the MA Department of Housing and Community Development (DHCD). On October 4, 2023, Governor Maura Healey expanded the HDIP program from $10 million per year to $30 million per year and funded a previous backlog of $57 million:

• A MA state investment tax credit (up to 25%) on the Qualified Project Expenditures (QPE’s) of the market rate units is available to developers, with a maximum of $2.5M per Housing Development (HD) project.  
• The HDIP Tax Credit is a one-year certificate, allowed for the taxable year in which the project is completed and certified by EOHLC.  EOHLC will give MA Department of Revenue (DOR) written notification of its Final Certification. 
• HDIP Tax Credits are transferable, in whole or in part. 
• HDIP Tax Credits can be carried forward for up to five years. 
• Developers must apply for a Tax Increment Exemption (TIE) agreement in the gateway city of their development 
• Developers may apply to EOHLC for HDIP Tax Credits of up to $2.5 million for QPEs of the market rate units. 
• The total amount of HD Tax Credits awarded in a calendar year may not exceed $30M, including credits awarded during the calendar year and carry forwards of credits from prior years. 
• Any portion of the $30M annual cap not awarded in a calendar year may not be applied to awards in subsequent years. 
• The housing development project must include a substantial renovation resulting in two or more market-rate housing units for sale or lease.  

Additionally: 

• A minimum of 80% of the units per project must be market-rate units.  
• The construction cost per unit must be $30,000 or more. 
• There is no maximum number of units per project. 

Mixed-use properties are eligible. There are no restrictions on the size of the project.  The project may consist of one or more buildings on one or more contiguous parcels of land provided they are permitted and financed as a single undertaking.  Limited new construction projects such as construction of upper stories, expansion of a building’s footprint and redevelopment of a site after demolition. 

Eligible Rehabilitation Costs 

Substantial Rehabilitation costs relating to the development of market rate housing in a HD Zone are certified by EOHLC as Qualified Project Expenses  for the purpose of calculating the HD Tax Credit award for the Sponsor of a HD Project:  

• Includes both hard and soft costs 
• Includes demolition costs for interior demolition and roof and wall demolition associated with adding stories to, or expanding the footprint of, an existing building 
• Excludes other demolition costs  
• Excludes property acquisition 

Eligible Applicants 

Developers, both for-profit and nonprofit, with proposed market-rate housing projects located in designated areas in Gateway Cities. Developers will need to apply for a TIE agreement in the gateway city for their development. Developers will then apply to EOHLC through a pre-application and projects that are selected will be asked to submit a full application. 

In 2024, two more application windows exist between the following dates: 

• July 11, 2024 through August 9, 2024 
• November 14, 2024 through December 13, 2024 

Eligible Gateway Cities 

Attleboro, Barnstable, Brockton, Chelsea, Chicopee, Everett, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, Malden, Methuen, New Bedford, Peabody, Pittsfield, Quincy, Revere, Salem, Springfield, Taunton, Westfield and Worcester.  All Gateway Cities as defined by Chapter 23A section 3A:  a municipality with a population greater than 35,000 and less than 250,000, a median housing income below the state average and a rate of educational attainment of a bachelor’s degree or above that is below the state average.  

Can EOHLC approvals be suspended or revoked? 

• Suspension or revocation of HD Zone, HD Zone Plan and HD Tax Increment Exemption Agreement if application contained material misrepresentations or if Municipality failed to adhere to material elements of application. 
• Revocation of Final Certification of HD Project if Sponsor’s conduct subsequent to Final Certification was materially at variance with earlier representations and such variance is found to frustrate the public purposes the certification was intended to advance. 
• Sale or lease of market rate units in a HD Project to households with incomes less than 110% of HDIP AMI is not grounds for revocation of a Final Certification.  

EOHLC will review the certified HD projects at least once every 2 years and submit an annual report of findings.