Photo by James Sanna | Banker & Tradesman Staff

The city of Boston won’t offer incentives for housing developers unable to obtain financing for approved projects, although it may reconsider the issue if interest rates drop later this year.

Mayor Michelle Wu said a months-long study of the financial hurdles facing developers indicated that interest rates and higher borrowing costs wouldn’t be offset by the potential public subsidy.

“The scale of the city resources that would be required to close the gap to make a real dent in that pipeline is too huge right now, because interest rates are so high,” Wu said following Tuesday’s State of the City address.

The city has approved approximately 23,000 housing units yet to break ground, Wu estimated. Last year, the Boston Planning & Development Agency approved nearly 7,400 housing units.

Wu had announced that she was planning an incentive program to get housing developments restarted during a September speech before the Greater Boston Chamber of Commerce. And during a December press briefing, BPDA Director Arthur Jemison told reporters that a subsidy program proposal was “definitely taking shape.”

“We all feel the urgency. We want to do this right and there are trade-offs,” Wu said during the same briefing.

Wu didn’t specify a maximum subsidy, but said the administration consulted with commercial real estate executives and academic researchers on various models for the public incentives.

One model was New York City’s recently expired tax exemption program known as 421-a, which offered incentives for projects that include 25 to 30 percent income-restricted units.

Another option would be similar to Boston’s office-to-residential conversion program, which launched in late 2023, and gives office building owners in and around downtown a 75 percent reduction in the residential tax rate for 29 years for housing conversions.

Read our full State of the City coverage:

– What Wu promised in her State of the City address.

– How can Boston build 3,000 new public housing units?

A 15-year tax abatement program also was considered, Wu said.

“We got feedback from the development community that those would not be big enough to close the gap,” Wu said. “We’re beginning to monitor the economic climate if interest rates come down and what that means and continue the same conversation.”

The interest rate environment has helped slow housing production in the city to a crawl, and forced some housing developers to put off plans indefinitely or even sell approved projects they are unable to finance.

In Readville, a major transit-oriented development is scheduled to go to auction on Jan. 19. Developers of the Residences at Readville Station received approval for the 273-unit project in 2020, and received BPDA approval in 2023 to replace 151 condominium units with apartments after difficulties obtaining financing.

Banker & Tradesman staff writer James Sanna contributed to this report.