Massachusetts offers tax credits to developers who convert underused commercial buildings into housing through the Commercial Conversion Tax Credit Initiative (CCTCI). In August 2026, the state awarded $15.3 million to five projects that will produce 856 rental units. The credit can cover a financing gap on a conversion, but it is designed for projects that are close to construction, not early-stage concepts.
This article covers what the credit provides, the eligibility requirements, and how applications are scored.
What the credit provides
CCTCI is a state tax credit worth up to 10% of eligible development costs. Eligible costs are construction and substantial-rehabilitation expenses, including site assessment and hazardous-material remediation. They do not include the acquisition price of the building.
Example: a $42 million project with $30 million in qualifying construction costs has a maximum credit of $3 million, not $4.2 million, because acquisition is excluded.
The state also caps awards. In the most recent round, awards were limited to about $3 million per project, one award per development team, and two awards per municipality.
The credit is claimed after completion, not at closing. The state issues a conditional award, the developer builds and leases up, and the credit is claimed only after the state issues final certification. Underwrite CCTCI as post-completion value and plan bridge financing to cover the period before the credit is available.
Eligibility requirements
A project must meet all of the following:
- The building was nonresidential property (under IRC §168) before conversion.
- All or part of the building was leased, or available for lease, to office tenants. Confirm this carefully for hotels, retail, and industrial properties.
- The building was placed in service at least five years before construction begins.
- The completed project is primarily residential and contains at least two units.
- At least 80% of the units are market rate on completion.
- Local zoning already allows the conversion. The credit will not fund a project that still needs rezoning.
- Construction has not started.
The 80% market-rate requirement is set by statute. Affordable units are permitted and encouraged, but the credit is not an affordable-housing subsidy.
Application timing
CCTCI runs as a periodic competition, not a rolling program. The most recent round closed in spring 2026 (pre-applications due March 3, 2026; full applications due April 2, 2026), and those deadlines have passed. A future round is expected but not yet scheduled. Confirm the next window with the Executive Office of Housing and Livable Communities at EOHLC-HDU@mass.gov before committing time and resources.
Each cycle uses two steps. First is a pre-application, which requires a $1,500 nonrefundable fee, an architect’s statement, a sustainability memo, an M/WBE memo, and a support letter signed by the municipality’s chief elected official. A planning-board vote or a councilor’s letter does not satisfy this requirement. Only after the state approves the pre-application can a developer file the full application, which requires all 14 exhibits, including site control, zoning, construction plans, a third-party cost estimate, a committed capital stack, and eligibility certifications.
How applications are scored
The state has published its preferences:
- Project size. Projects with more than 50 units receive preference; the state may reject projects under 25 units. The five recent awards ranged from 48 to 300 units.
- Readiness. The application must show that most or all non-CCTCI funding is committed and that the project can close in 2027. Applications that treat the credit as a prerequisite to advancing are weaker than those showing a documented remaining gap.
- Municipal contribution. The state prefers projects with committed local support beyond a signed letter, such as a TIF, fee relief, or expedited permitting.
- Unit mix. The state requires a range of bedroom types and will not accept a proposal limited to studios and one-bedroom units.
- Adaptive reuse. Rehabilitation is preferred. Demolition and new construction can qualify — one recent award replaced an obsolete hotel — but requires a strong conversion rationale and clear readiness.
Summary
A competitive CCTCI application resembles a near-closing finance package rather than a grant proposal: confirmed eligibility, zoning in place, third-party construction documents, committed capital, municipal support, and a documented explanation of the gap the credit fills. Prepare the eligibility analysis and cost segregation early, secure the chief-elected-official letter, and be ready to file when the next round opens.
David J. Murphy is the Managing Attorney of Murphy PC, a Boston-based real estate and business law firm, and is Of Counsel to McDermott, Quilty, Miller & Hanley LLP. With over 20 years of experience, David counsels developers, sponsors, owners, and investors in commercial real estate transactions throughout New England and other states, with a focus on joint ventures, preferred equity, and complex deal structuring. He can be reached at dmurphy@murphypc.com or 617.993.0650.
This article is for general informational purposes only. It is not legal, financial, or investment advice and does not create an attorney-client relationship. Consult a licensed attorney before acting on anything discussed here. This may constitute attorney advertising.