Boston homeowners face a 28% surge in their tax bills if the Massachusetts legislature fails to sign off on a proposal to temporarily raise commercial rates before the end of next month, Mayor Michelle Wu said.
The city is particularly vulnerable to the nationwide slump in office demand because of its heavy reliance on property tax revenue and state restrictions on its ability to tap other funding sources.
That's forced Boston to develop a workaround in an attempt to preserve its budget without burdening homeowners with the brunt of the revenue shortfall from commercial property taxes.
Commercial property values in Boston have fallen 7% in the current fiscal year, reflecting high vacancy rates in older and lower-quality office buildings amid the persistence of pandemic-era remote and hybrid work policies, Wu said in a presentation Wednesday.
The numbers are based on a preliminary assessment that's subject to change as the city reviews parcel-by-parcel data in the coming weeks.
The decline in commercial property values isn't as stark as the mayor's office had initially estimated, in part because of resilience in retail and hotel businesses.
Still, the 28% quarter-to-quarter increase in residential property rates that would be required to compensate for the commercial shortfall is significant, Wu said.
She said her proposal to temporarily increase the city's rate ceiling for commercial properties relative to residential levies is meant to ease some of the sticker shock for homeowners and smooth out their bills.
"When there are shifts and swings within either residential or commercial values, that can have a big impact," Wu said. "We want the environment to be predictable for residents and for businesses."
The Boston office market is stabilizing, albeit at an elevated total vacancy rate of about 23%, according to third quarter data from Colliers.
The Massachusetts House of Representatives approved the tax shift in late July — mere days before the end of the formal legislative session — after Wu agreed to reduce both the maximum rate increase for commercial properties and the duration of the adjustment.
The Senate has yet to follow suit, sparking criticism from Wu, who has said Boston residents should blame the chamber if their taxes increase.
