Massachusetts Introduces New Tax Credits to Boost Affordable Housing and Community Investment

On August 6, 2024, Massachusetts took a significant step forward in promoting affordable housing and revitalizing communities by enacting the Massachusetts Affordable Homes Act. This landmark legislation introduces two new tax credits designed to incentivize the conversion of commercial properties into residential units and to support the development of affordable homeownership. Additionally, the Act extends and expands existing tax credits that further community investment and historic preservation efforts across the state.

New Tax Credit for Qualified Conversion Projects

A key feature of the Massachusetts Affordable Homes Act is the introduction of a tax credit for qualified conversion projects. Starting from tax years beginning on or after January 1, 2025, this credit aims to encourage the transformation of commercial properties into residential spaces. Developers who complete certified conversion projects can benefit from a credit of up to 10% of the development costs associated with the residential units within the project.

This credit is designed to be flexible and attractive to developers. It is transferable, meaning it can be sold or assigned, and any unused portion of the credit can be carried forward for up to 10 years after the completion of the project. The amount of the credit is influenced by several factors, including the extent of residential development, the diversity of housing options, neighborhood stabilization efforts, and the overall economic impact on the surrounding area.

Introducing the Homeownership Tax Credit

Another significant component of the Act is the creation of the homeownership tax credit, effective for tax years beginning on or after January 1, 2025. This credit is aimed at bolstering the production of affordable homeownership units, a critical need in many Massachusetts communities.

The homeownership tax credit is calculated as 35% of the lesser of either the total qualified project expenditures on a per single-family dwelling basis or 80% of the area median new single-family dwelling sales price. This credit is nonrefundable, but any unused portion can be carried forward for up to 10 years from the date of the initial sale of a single-family home constructed under a qualified homeownership development project.

Extensions and Increases to Existing Credits

In addition to these new credits, the Massachusetts Affordable Homes Act extends the sunset date of the Historic Rehabilitation Credit from 2027 to 2030. This extension provides continued support for the preservation and rehabilitation of historic buildings across the state, contributing to the cultural and architectural heritage of Massachusetts.

The Act also increases the cap for the Massachusetts Community Investment Tax Credit from $12 million to $15 million for tax years beginning on or after January 1, 2025. This increase will enable more projects that promote economic development and neighborhood revitalization to receive critical funding.

Conclusion

The Massachusetts Affordable Homes Act represents a comprehensive approach to addressing the state’s housing challenges and fostering community development. By introducing new tax credits and enhancing existing ones, Massachusetts is creating new opportunities for developers, homeowners, and communities to thrive.

For more information on how these new credits may impact your projects or to explore how you can benefit from them, feel free to contact us. We're here to help you navigate these new opportunities and make the most of the incentives available.

Published on August 27, 2024