March 28, 2023
Testimony to Massachusetts Joint Committee on Revenue for HDIP
The Worcester Regional Chamber of Commerce would like to make known its strong support for the Housing Development Incentive Program (HDIP) expansion proposed by Governor Healey and Gateway City legislators.
HDIP is in serious need of reform given the housing crisis in the Commonwealth. HDIP gives Gateway Cities like Worcester the ability to incentivize new housing production on the City’s terms, giving City Hall the leverage to negotiate with developers on creating dense, mixed-income housing on underused priority sites. The subsequent community benefits agreements the developer agrees to encourages the hiring of local residents and underrepresented communities.
The program is a great city-state partnership, with a partial exemption on the new property taxes generated by the development which is negotiated by the City administration and approved by City Council. The state provides tax credits to each approved project.
Since HDIP was created in 2014, it has directly created and will create over 1,100 units of new housing in Worcester, each project redeveloping empty lots and vacant buildings for new use.
The program is designed so that modest, shared investments by the city and state leverage large gains in housing supply. However, HDIP is capped in the amount of state tax credits it can allocate annually. This has resulted in a backlog of $50M in tax credits for projects statewide. Some projects are waiting 3+ years for state credits to get across the finish line. In the current housing crisis, we cannot wait.
Worcester’s City Council just unanimously approved an HDIP tax deal for a mixed-income, 364-unit development by a Worcester-based developer. This incentive was needed to make the project budget work, even at mostly market-rate, because of extremely high construction costs and loan rates.
Also, because of HDIP, the City administration was able to negotiate for 10% of the units to be income restricted to households at 60% AMI or less.
The City proposed a slightly higher exemption than usual on new prop taxes generated by the development because they know the state has no tax credits to give out. This was a creative solution that in the end is still making the City about $6M in new taxes, plus the new housing. However, it isn’t ideal or sustainable for the state to not pick up its part of the deal.
HDIP directly results in more housing in communities like ours that need it most, invests in blighted or underused properties that would otherwise languish for years, and gives Gateway Cities another way to quickly create both income-restricted and market-rate housing.
Director of Economic Development
Worcester Regional Chamber of Commerce