Senate President Karen Spilka and her leadership team are advancing a measure they believe will help jump-start stalled housing projects around the state, by giving developers a sales-tax exemption on construction materials.
Spilka initially floated the proposal last May while speaking to the Greater Boston Chamber of Commerce. Now she has put the idea into legislation, tucking the sales tax exemption into the Senate’s version of a supplemental budget that was endorsed by the Senate Ways and Means committee on Thursday, and teed up for an April 9 floor debate.
“Everywhere I go, I hear we need housing, housing, housing,” Spilka said in an interview. “That is the number one issue people raise.”
The Senate’s measure would cap total spending on the exemption at $35 million a year. Developers would need to be building multifamily housing projects in communities where the median household income is no more than 120 percent of the state’s average household income, or projects where at least 15 percent of units would be set aside for lower- or middle-income residents.
Tamara Small, chief executive of developer trade group NAIOP Massachusetts, said exempting material costs from the state’s 6.25 percent sales tax could reduce total project costs by at least 2.5 percent.
“We continually hear from our members that construction cost volatility can stall otherwise viable housing projects,” Small said in an email. “This reduction is significant as it can help offset the increased borrowing costs and hard cost escalation that have slowed down housing.”
The proposal first emerged among a list of ideas from a task force assembled by Governor Maura Healey to address the roadblocks to housing construction.
It took on additional momentum last year after Spilka met with Bernadette Jordan, Canada’s consul general in Boston, following the Trump administration’s imposition of tariffs on lumber, steel, and other construction materials from Canada. That prompted Spilka to talk with some developers to see how much of an impact the tariffs were having on housing projects. The impact, she said, turned out to be significant.
Spilka said she floated the income-tax exemption by several of them. She asked, would that make a difference? They told her, she said, it could “turn a red light on a project to a green light.”
So state lawmakers last year required the Healey administration’s housing office to analyze the idea. That report, filed in January, shows that an average multifamily unit in Massachusetts costs $550,000 to build, and roughly one-third of that cost can be attributed to the price of materials. Using those figures, the Senate estimates that the exemption could help jump-start as many as 35,000 housing units over a 10-year period.
The House has already advanced its version of this spending bill, so negotiators for the House and Senate will have to reach an agreement to include the sales-tax exemption before sending the bill to Healey for her signature.
“I would hope this would be an easy ‘yes’ from them,” Spilka said of her House counterparts.
Senator Julian Cyr, co-chair of the Legislature’s housing committee, said he hopes the sales tax exemption will be one of several measures that lawmakers advance this year to help get more housing built.
“My hope is this will help some projects that have been on the margins,” Cyr said. “We know what we need to do to solve the housing crisis. We’re working hard to figure out how we can advance as many policies as possible that will make a dent in the biggest challenge facing the Commonwealth of Massachusetts.”
Jon Chesto can be reached at jon.chesto@globe.com. Follow him @jonchesto.