Boston's commercial property poised to lose more value, and more city revenue, report says
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Boston's tax revenue from office buildings could fall further in the next five years than previous estimates predicted, a report released Thursday says.
Why it matters: The tax revenue drop would leave just two options for city leaders to cover the shortfall — raise property taxes or reduce spending, per the report by the Tufts University Center for State Policy Analysis and the Boston Policy Institute.
Driving the news: The report lays out three potential scenarios detailing a five-year decline in commercial property values and tax revenue.
- The best case: Office values drop 20% to 30%, leading to a $1.4 billion budget shortfall during that timeframe (including a $415 million gap in 2029).
- The middle of the road: Office values drop 35% to 45% over five years, leading to a $550 million shortfall in 2029 and a $1.7 billion budget shortfall overall.
- The worst case: Office values decline significantly, leading to a $660 million shortfall in 2029 and a $2.1 billion budget hole overall.
The city would need to hike its residential property tax rate between 1.27% and 1.38%, depending on the scenario, to fill the five-year revenue gap, per the report.
- Boston's current residential tax rate is $11.58 per $1,000 of a property's assessed value.
What they're saying: "Shrinking demand for office space is not a short-term problem that the city can hope to simply wait out," the report states.
- "It requires a durable, transparent rethinking of budgetary priorities in order to sustain and support Boston's economic future."
The report comes after the Boston City Council unanimously approved a $4.8 billion budget for fiscal 2026.
- The spending proposal now goes to Mayor Michelle Wu's desk.
Flashback: Seeing commercial property values drop after the pandemic, Wu sought to raise commercial property taxes to offset the tax increase for homeowners.
- 70% of revenue for Boston's budget relies on property taxes, and two-thirds of that comes from commercial real estate, per the Boston Globe.
A last-minute maneuver from Boston Sen. Nick Collins torpedoed the city's proposal in the Legislature last fall. Wu has since refiled the property tax bill.