Copy of Housing Development Incentive Program

Housing Development Incentive Program

Current Housing Development Zone (March 2017).  Click to expand.

Current Housing Development Zone (March 2017). Click to expand.

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:

  1. 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.

  2. 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. The City of Salem has a HD Zone located within the Central Development zoning district (downtown). The City’s existing HD Plan and program area were approved by the City Council and the state Department of Housing and Community Development in 2017, then expanded through an amendment in 2018.

A housing strategy is proposed to expand the HDIP program area citywide. 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.