Massachusetts doubles down on conversion tax credits

Massachusetts has awarded $15.3 million in tax credits to five commercial-to-residential conversion projects, a second round of the state's Commercial Conversion Tax Credit Initiative that will create 856 new rental homes in Boston, Dedham, Springfield, Westford and Worcester, according to Connect CRE. Coming after an earlier round of nearly $8.4 million that supported five projects and 339 homes under the Affordable Homes Act Gov. Maura Healey signed in 2024, the two rounds now total 1,195 homes—enough repeated volume that the credit starts to function as a standing assumption in conversion pro formas rather than a one-off grant.

The largest award backs Synergy's adaptive reuse of the historic office building at 294 Washington Street in Boston's Financial District, which will hold 255 rental homes plus retail space; the other four cover an obsolete hotel in Westford, the former Shack's Clothes building in downtown Worcester, four historic buildings in downtown Springfield and two obsolete commercial buildings in Dedham. Healey said the awards will "put underused properties back to work" and called the 856 apartments a way to bring residents and customers back to downtowns and commercial districts.

Massachusetts has buildings sitting empty and communities that need more homes, the governor said, and conversion is one policy lever that addresses both problems at once. That makes the program more than an affordable-housing gesture; it is commercial real estate policy wearing a housing label.

The round works out to roughly $17,900 per home, enough to move the spread on a building with sound bones and lift projected returns without changing the asset, though it will not rescue a structurally vacant tower. Two rounds in a single year carry the real message, telling conversion developers that Massachusetts is prepared to act as a programmatic co-investor and buy down the risk private capital has been slow to price.

Instead of waiting for distressed sellers and local buyers to mark down obsolete commercial space, the commonwealth is setting that mark itself, one award at a time—a policy version of a clearing price. As this publication has argued, office is moving from mark-to-market to trade-to-trade, and here the state is the vacancy-tolerant buyer, trading tax credits for new homes. The test will come in the third round, when the cheapest conversions are taken and the buildings left over are the ones that need more than a credit to pencil.