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Report includes recommendations on how to reform HDIP to include affordability, equity and accountability.

BOSTON, MA (March 22, 2023) — A recent report on the Housing Development Incentive Program (HDIP) written by the Massachusetts Law Reform Institute (MLRI) provides the first overall review of this multi-million dollar state subsidy for developers of market-rate and high-priced housing in Gateway Cities.

As families in these cities struggle with the state’s affordable housing crisis, soaring rents and fears of displacement, HDIP provides tax credits – thus far totaling almost $90 million — and local tax breaks only for market-rate, above-market and often expensive luxury housing.

“Massachusetts is in the middle of a massive housing crisis, with some of the most unaffordable rental markets in the nation. As currently structured, HDIP supports only higher-priced housing and does not address that need,” said Judith Liben, MLRI Senior Housing Attorney and Access to Justice Fellow.

The MLRI report uncovers troubling aspects of HDIP and makes recommendations to reform the program to include some measures of affordability, equity and accountability.

Key findings include:

• No affordability requirement: HDIP does not support any affordable housing – only 80 of 4085 HDIP final or reserved units are at all affordable.
• Above market-rate housing: HDIP rents are generally above market and often shockingly high with no limits on increases. For example, taxpayers gave $3 million in credits to a developer of a luxury HDIP building in Malden (with no affordable units) where a rental apartment was recently advertised for $5,847/month. Examples of other expensive, luxury HDIP-subsidized apartments can be found in these ads.
• Uneven distribution of funds: HDIP tax credits are not distributed evenly or equitably among Gateway Cities and often go to strong or “hot” markets where no taxpayer subsidy is needed, while neglecting cities that are market challenged. Just 3 or 4 cities account for 48% of HDIP units. Worcester received $14.5 million in final or conditional credits for 1,085 high priced units – none are affordable.
• Lack of family housing: Very few HDIP units are suitable for families with children.
• No local benefits or protections: HDIP provides no benefits (such as local hiring) for lower income families in Gateway Cities and no protection against rent increases or displacement related to HDIP projects.
• Lack of transparency or accountability: HDIP is funded by tax dollars, yet there is almost no public information, monitoring, evaluation or reporting on HDIP awards and no opportunity for public comment.

MLRI’s assessment of HDIP comes at a critical moment in the Legislature. In her recent tax package, Governor Maura Healey proposed a substantial expansion of HDIP, authorizing $192 million over the next 5 years and raising the annual credit cap from $10 million to $30 million, indefinitely, on top of the $90 million already awarded.

In response, three HDIP reform bills have been filed in the Housing Committee. Senator Jamie Eldridge’s bill, S.870, would directly address the program shortcomings uncovered in the MLRI report. This bill would revise HDIP to provide mixed income housing – i.e., both market rate and affordable — benefits for local residents, targeting weaker market areas, bedroom sizes for families, program accountability, and a more responsible use of taxpayer dollars.

MLRI attorney Liben said, “We understand HDIP’s goal of encouraging market-rate housing in those Gateway Cities that are unable to attract developers to revitalize their downtowns. However, our concern is that the program, which is funded by tax dollars, does not support a reasonable share of affordable units and does not equitably distribute these tax credits to cities most in need. We support the proposals in Senator Eldridge’s bill that would address these issues and would make HDIP stronger, more equitable, and more publicly accountable. There should be no expansion without necessary reforms.”

A copy of the report can be found here.