A proposal to ease the property tax burden on Boston homeowners would put an even bigger burden on struggling office owners.
Boston Mayor Michelle Wu is petitioning to temporarily raise the city's tax cap on commercial properties above the cap on residential properties, Bloomberg reported, an adjustment that would shift the responsibility for filling the city's looming budget shortfall from homes to offices.
The adjustments will be implemented gradually over three years.
More than a third of Boston's tax revenue comes from commercial real estate, a much larger share than cities like Chicago, Miami or New York, so the commercial downturn will be felt more acutely.
According to a previous analysis by Tufts University's Center for State Policy Analysis and the Boston Policy Institute, the city of Boston is at risk of losing more than $1 billion in tax revenue over the next five years.
Because the mayor doesn't want to cut spending, the city will have to raise taxes on homeowners — perhaps its most powerful political constituency — or find another way to shore up its finances.
If other steps are not taken to fill the gap, Boston may have to raise taxes on its residents by as much as 30%.
While home prices are soaring, vacancy rates for office space in Boston are hovering around a record 25%, according to Colliers, so tax revenues from offices are expected to fall, but critics say it's foolish to make up for it with higher taxes.
“You're not going to raise taxes on a struggling industry because it will make them less competitive,” Mitchell Moss, a professor of urban policy and planning at New York University, told Bloomberg. Office tenants could relocate to Cambridge or elsewhere, he said.
There's precedent for the effort Wu is pushing: Boston underwent a similar reclassification two decades ago when the dot-com bubble burst and its commercial market plunged, but a full recovery from that downturn seemed inevitable, whereas the shift to remote work doesn't appear to be.
According to the Center for State Policy Analysis and the Boston Policy Institute at Tufts University, commercial property in Boston is taxed at about a 2.5% rate, while residential property is taxed at a 1.1% rate.
— Holden Walter Warner
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