The redevelopment of a key stretch of Massachusetts Avenue is expected to commence in the fall now that developers have won approval to sell tax credits to finance the project.

A partnership of Flaherty & Collins Properties and Insight Development Corp. earlier this month was awarded rental housing tax credits by the state that will be sold to finance construction of a 61-unit, $11.5 million apartment project at 555 Massachusetts Ave. The project is to include 5,000 square feet of retail space facing Massachusetts.

The site is now green space and parking that wraps around the Barton Tower apartments, a 21-story concrete structure built in 1967 that is operated by the Indianapolis Housing Agency.

The project would occupy only about 40 percent of the developable land surrounding Barton Tower. The balance of the site is slated to be developed with an additional 83 market-rate apartments and another 10,000 square feet of retail space, said Bruce Baird, president of Insight Development, a not-for-profit developer affiliated with the housing agency.

Financing for the market-rate portion isn’t in place, Baird said, because the development team is waiting to see if it can secure financing in conjunction with a much larger project it hopes to build across Massachusetts on a half block now occupied by Indianapolis Fire Department headquarters, IFD Station No. 7 and the firefighters’ credit union.

The Insight/Flaherty & Collins team is one of five developers that submitted a proposal to redevelop that city-owned site. The city hasn’t disclosed the identity of the bidders or the details of their proposals. Baird said his team hopes to find out sometime in April if its bid was successful.

Baird said his team’s project works best if developments on both sides of the street can be wrapped together in the same financing package. “That’s what we’d like to have happen, but we can build the tax-credit portion and will” even if the project across the street goes to another developer. The market-rate portion on the Barton Tower side would probably proceed regardless of the city’s decision, Baird said.

The developer is working with a partnership of Ratio Architects and the architecture firm A2SO4 on a series of five-story buildings that would completely surround the existing tower. The buildings on Massachusetts would have retail on the first floor. Those on Michigan Street, which borders the block on the south, would not. And on East Street, the eastern border, the buildings would be elevated to preserve existing surface parking.

It’s not clear yet what materials will be used. Baird said the design team is pursuing a contemporary design that complements the existing tower. “We won’t be trying to look like the Athenaeum or the Murat,” he said, referring to historic structures south and northwest of the development.

The design work is being finalized now that the rental housing tax credits are in hand. The development team also has turned its attention to placing the credits with a syndicator that will sell the credits to institutional investors.  

The use of rental housing tax credits in financing the project places limits on the income levels of those who occupy the units. Of the 61 units being financed with the credits, more than half will be leased to people with household incomes of between $23,000 and $40,000 a year. The balance will have even tighter income restrictions. The rates for the market units have not been set.