The bill, as part of the FY 2026 Final Budget, directs the Executive Office of Housing and Livable Communities (HLC) to evaluate the feasibility of a sales tax exemption program for housing construction, specifically targeting multifamily projects that are stalled due to rising material costs from federal tariffs or economic instability. The HLC is tasked with reporting its findings and recommendations by January 1, 2026, which will include an analysis of regional construction cost variations across Massachusetts. The initial analysis suggests that while a sales tax exemption could stabilize project finances, it poses significant administrative challenges, leading to the consideration of alternative solutions such as a targeted tax credit.

The proposed project-specific tax credit aims to offset sales tax costs for new multifamily housing projects or substantial rehabilitations, particularly in communities with median household incomes below 120% of the state average or those that include at least 15% affordable units. The bill includes design considerations to ensure clarity and fiscal control, such as limiting the number of projects eligible each year and including measures to prevent resident displacement. Additionally, the program is set to expire after five years unless extended, allowing for a legislative review of its effectiveness. The bill also explores the potential for a state income tax credit program as a more predictable alternative to address the challenges of rising construction costs, ultimately supporting the Commonwealth's housing production goals.