Writer: Esteban Pages
3 min read March 2023 — With higher housing prices and a remote work preference, Massachusetts has experienced population decline while leaders look for solutions, from zoning changes to development and tax incentives.
According to the U.S. Census Bureau, Massachusetts lost more than 7,700 residents between July 2021 and July 2022, with the high-cost, cold weather Bay State’s Greater Boston region seeing its housing prices soar 53% between 2009 and 2020 as demand continued outpacing development. In addition, Massachusetts holds the U.S.’ third highest single-family home values, only behind Hawaii and California, leading people to live further away and commute longer to the office.
“We need an easier way to get people in and out of the city because traffic can be brutal. Businesses may have to consider whether they need office space solely in Boston or if they could operate out of suburban satellite locations. Employee lifestyle may drive such conversations since many people are used to working remotely and no longer want to commute a distance,” Scott Badlinelli, regional president of Santander, told Invest:, noting that mobility and affordability stand at the center of Greater Boston’s prevalent challenges. “Also, affordable housing is a big issue nationally; there is a shortage across the country. To retain young talent, we need to continue to invest in multi-use real estate and other housing options. We have a prebuilt advantage with our university and healthcare systems but without affordable housing, those become less important,” he said.
On the legislative front, the state can capitalize on a law signed by former Gov. Charlie Baker to address these concerns. The Act Enabling Partnerships for Growth, enacted in January 2021, requires 175 communities serviced by the MBTA (with the exception of Boston) to establish at least one multifamily housing zone. The mandate could potentially address the longstanding segregation in the state enacted via exclusionary zoning bylaws that resulted in nearly 70% of the state’s land being zoned for single-family homes. The multifamily mandate is expected to open large extensions of housing in Massachusetts’ higher-opportunity communities to households usually unable to purchase them.
Regarding the state budget, the commonwealth can make use of the $5 billion in American Rescue Plan Act (ARPA) funding from the federal government. The Baker administration, for instance, allocated $240 million in an investment package for workforce development programs. Adding to those efforts, Gov. Healey announced a $742 million tax relief package intent on slashing the short-term capital gains tax from 12% to 5% and triple the estate tax threshold to $3 million.
“Our FY24 budget is what Massachusetts needs to meet this moment and build a strong economy, livable communities and a sustainable future,” said Gov. Healey in a statement. “Combined with our tax relief proposal, we will set Massachusetts up for success by lowering costs, growing our competitiveness, and delivering on the promise of our people. Additionally, we are taking aggressive action to address our housing crisis by creating the Executive Office of Housing and Livable Communities led by a housing secretary who will coordinate across state government and with cities and towns to move us forward on our housing goals.”
The reform is expected to hit gross revenue by $117 million in FY24. On the estate tax side, the proposal dampens the tax burden on smaller estates. Moreover, it combines the household dependent and dependent care credits by stipulating a $600-per dependent credit, including children under 13 years old, people with disabilities, and senior dependents aged 65 and older. With this measure, 700,000 taxpayers will save a combined $458 million.
Other notable provisions of the proposal include the Housing Development Incentive Program (HDIP), which increases the $10 million annual cap on HDIP credits to $50 million in the first year, and $30 million per year subsequently for developers to incentivize more market-rate housing; the Apprenticeships Tax Credit, which expands the list of occupations qualifying for employer tax credits and doubles the statewide cap on credits to $5 million, among others.
The moves come amid a business community that has raised concerns over the increasing difficulty of attracting and retaining workers and companies in a state that has become expensive; especially with the prevalence of remote work, rising housing costs and tax policy. The independent tax policy nonprofit Tax Foundation ranked Massachusetts tax system 34th overall in its 2022 State Business Tax Climate Index.
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