Housing Development Incentive Program
Learn more about HDIP below or contact Elena Eimert, Senior Planner, at eeimert@salem.com, or 978-619-5685.
The Housing Development Incentive Program (HDIP) was established by Massachusetts General Law Chapter 40V in 2012. It provides Gateway municipalities (like Salem) with a development tool to increase residential growth, expand the diversity of housing stock, support economic development, and promote neighborhood stabilization in designated areas. The HDIP provides two tax incentives to encourage substantial rehabilitation of properties for lease or sale as multi-unit market rate housing:
A local-option real estate tax exemption (called a Tax Increment Exemption—TIE) on all or part of the increased property value (only the new value) resulting from improvements.
A state tax credit for Qualified Substantial Rehabilitation Expenditures that is awarded through a rolling application process.
The City will never collect less than the base value of the property, and after the TIE concludes, it will collect the full tax obligation on the improved property.
To participate in the HDIP a City must propose a Housing Development (HD) Zone. In June 2020, the City received approval from the state to expand the HDIP zone to include the entire city - this means properties anywhere in the City could be eligible to apply. Salem’s zoning ordinance will restrict where multifamily development can occur that is using the HDIP tool. The expansion of the HD program area will increase the feasibility of residential development by providing an additional financing tool to overcome development challenges. As was true in 2018, there are pending development projects that have difficult site conditions resulting in development costs that make projects infeasible. City Council approval is required for any HDIP application.
Recent Updates:
June 2024 | At the June 13, 2024, City Council meeting, two Tax Increment Exemption (TIE) proposals were introduced to City Council. As a reminder, a TIE is required to be eligible to apply for the HDIP tax credits. Those projects are 266 Canal Street (rental) and 16, 18, 20R Franklin Street (ownership). Details of each proposal are available here. As of 2024, the City has adopted a new policy of peer reviewing all TIE requests. This review is intended to a) ensure the City’s contribution, via the TIE or resulting credits, are necessary for the project to move forward, and b) to ensure that the City sees the maximum benefit from exemptions that it grants. Both projects were found to meet those criteria by the peer reviewer. The items were referred to the Committee on Administration and Finance - the body met on June 25, 2024, and both items received a positive recommendation back to Council. Presentations are available here - 266 Canal and 16, 18, 20R Franklin. They received positive votes at the regular City Council meeting held on June 27, 2024.
May 2024 | On May 16, 2024, City Council’s Committee of the Whole convened a meeting to received this presentation on HDIP and 40R/Smart Growth Districts from Department of Planning and Community Development staff.
Last updated 7/02/2024.
