Cambridge staff outline tax pilots, equity fund and fee waivers to try to revive stalled housing projects

City staff on the Cambridge City joint Housing and Finance Committee outlined a package of local incentives to try to make more housing projects financially viable, emphasizing that no single measure is a silver bullet.

The presentation, delivered by Chris Cotter of the Community Development Department and introduced by Assistant City Manager for Community Development Melissa Peters, identified four classes of local tools: direct public equity (a revolving equity fund to supply lower-cost preferred equity), project-level tax pilot agreements under Chapter 121B, tax provisions such as chapter 59 —50 that staff deprioritized for this effort, and temporary permit-fee waivers. Staff said an inclusionary housing study selected under contract will produce a financial model to test scenarios and is expected in the second quarter of 2026.

Cotter told the committee that regional headwinds ' higher construction-material and labor costs and elevated borrowing costs ' are constraining development and that these local tools can only partially offset those pressures. He said the revolving equity fund, modeled on state and Boston programs, could lower borrowing costs for certain rental projects but would require upfront capital and would likely assist a small number of projects per funding cycle. "It is an investment," Cotter said, describing the fund as preferred equity that would revolve and be repaid over time.

On tax strategies, staff highlighted 121B pilot agreements as a flexible way to negotiate project-specific tax relief in partnership with the Cambridge Redevelopment Authority (CRA). Cotter said those pilot agreements can be tailored and, unlike some other tax incentives, may not need state review, making them quicker to deploy. He said statewide district programs (the OCTAVE program) and a newer chapter 59 provision to reduce taxes for income-certified rental units were studied but deprioritized because of limits on citywide applicability and modest projected impact for new market-rate development.

Staff also recommended exploring limited permit-fee waivers or rate adjustments, noting permit fees typically represent about 1'1.5% of total development costs for large projects and therefore are not likely by themselves to tip marginal projects into feasibility but could be effective when combined with other incentives.

Melissa Peters summarized the goals staff used to evaluate tools: preserve socioeconomic diversity, grow regional housing supply, support sustainable urban form, and protect the city's fiscal health. She and Cotter said the city will next scope financial-impact analyses, work examples of project-specific cases, and return with options for council direction.

The committee did not take a final vote on any incentives during the meeting; staff urged deeper dives and scenario modeling and said they would return to committee with more detailed cost/benefit figures.

Next steps: staff will finalize the inclusionary housing study contract (six-month schedule) and prepare follow-up analyses on pilot agreements, a potential revolving equity fund in partnership with MassHousing, and the fiscal implications of permit-fee changes.