​​​​​​​Property Tax Exemption for Affordable Rent Accessory Units in Salem

New state law allows Salem homeowners to receive a property tax reduction if they rent their ADU at 70% of fair market rent

On September 23, 2022, Governor Charlie Baker signed into law legislation granting homeowners in Salem the option of exempting the value of an accessory dwelling unit (ADU) on their property from their property taxes, so long as they are renting the ADU, including utilities, for a monthly amount that does not exceed 70% of the fair market rent.

Currently, that means to qualify for the tax discount, the maximum rent and utilities for a studio ADU would be $1,417.50/month, for a one bedroom it would be $1,538.60, and for a two bedroom it would be $1,844.50. Salem homeowners who may be eligible for this property tax exemption should contact the Assessor’s Office at (978) 619-5608. Applications for the exemption must be submitted annually.

The special act establishing this affordability incentive was proposed by Mayor Kim Driscoll in 2021 and was advanced through the legislature in partnership with State Representative Paul Tucker and State Senator Joan Lovely.

“I’m grateful to Governor Baker, Senator Lovely, Representative Tucker, the members of the legislature, and the City Council who all helped move this important special act from concept to reality for Salem,” said Mayor Kim Driscoll. “This landmark law will further incentivize the creation of affordable housing units by enabling homeowners to benefit doubly from creating an accessory unit at their property. Not only will they generate a second stream of revenue from rent, but now they can capture further savings on their property taxes by doing so. For our renters, this measure will be help stimulate the creation of more affordable units, helping in our on-going work to right-size our local housing supply.”

“The passage of this special act ushers in a new age of stability and security for homeowners and renters throughout Salem,” said Senator Joan B. Lovely (D-Salem). “Doubly affective, this landmark law supports property owners by creating additional revenue and tax incentives, while supporting renters through the addition of new, affordable units to Salem’s housing stock. Proud to partner with Mayor Driscoll, Representative Tucker and the City Council on this important measure, and grateful to Governor Baker and my colleagues for pushing this matter forward this session. With inflation on the rise and our affordable housing crisis worsening, the passage of this act could not have come at a more critical time.” 

Final approval of the law comes just weeks after the City of Salem also announced a grant program to help homeowners interested in creating an ADU at their property. Grants of up to $47,500 are available to homeowners to assist with the design and construction of permitted ADUs on the condition that the new unit is rented at 50% of fair market rent. The grant program is intended to help homeowners invest in the creation of deeply affordable ADU rental units by covering a portion of the costs associated with the unit’s creation. This allows homeowners to capture the benefits of the ADU – additional income from rent – and keep the rent substantially affordable at the same time. To review program guidelines and requirements and to apply, visit www.salemma.gov/adu.

“ADUs are an essential part of our age-friendly efforts,” said Dominick Pangallo, co-chair of Salem for All Ages. “Accessory units provide older homeowners with a greater ability to age in place in the community where they live and to generate additional income, which can be especially helpful if they’re living on a fixed income. Because of this, ADUs can help maintain neighborhood stability, enabling older residents to continue to be part of the city where they’ve lived and raised their families. As an added benefit, by requiring low rents for grant-funded ADUs and incentivizing them through the tax break announced today, we can help to create even more deeply affordable rental units for everyone.”