Boston Real Estate Leaders Hope Wu's Second Term Will Be More Development-Friendly

Mayor Michelle Wu has often been at odds with the real estate industry during the four years since she took office, but that could be about to change.

As Wu heads toward a second term following rival Josh Kraft’s departure from the race, real estate leaders say now is an opportune time to forge a more collaborative relationship — especially given how dramatically the city’s real estate landscape has changed. 

When she became mayor, apartment and lab buildings were rising across the city as Boston’s economy soared, but now multifamily construction has hit a 10-year low and the life sciences sector faces record vacancy rates. In this new environment, real estate leaders hope Wu's agenda will focus on ways to jumpstart housing production and grow the city’s economy.

"We think now is a really good time for her to take a look at policies," NAIOP CEO Tamara Small said. "In the past four years, the development industry has changed a lot, and it's very challenging to build in Boston, and this is a really good time to take a look at policies that are in place to determine if changes are needed."

On Monday, Wu addressed a crowd of more than 600 business professionals at a Greater Boston Chamber of Commerce event. She defended her first-term policies as efforts to make the city more affordable for workers and residents, but also emphasized the need to make Boston more competitive for business and development.

"Competitiveness in this economy and this moment means working together to nurture, recruit and promote top talent," Wu said at event, held at the Renaissance hotel in the Seaport.

Kraft, a nonprofit leader and the son of Patriots owner Robert Kraft, dropped out of the contentious mayoral race last week, paving the way for Wu to win a second term in November’s general election. His departure came after he lost to Wu by nearly 50 points in the preliminary election, with 23% of the vote compared to her 72%.

This landslide victory gives Wu more political capital than she had when she first took office, business leaders say, and they hope she will work to help alleviate some of the barriers for development that exist in the city. 

"I think she's in a much stronger position than when she won the last time," Boston political consultant and lobbyist Lawrence DiCara said.

NAIOP’s Small added that she “certainly has the political capital now” to advance her agenda.

"It's a great time to make some politically tough choices," Small said.

Wu didn't announce any second-term policy plans at the Chamber event, but she did lay out her first-term achievements and her ongoing work to make the city more economically competitive.

"Every election is a referendum, and September 9th showed that the people of Boston reward results," Wu said.

The real estate industry’s criticism of Wu’s first term centered around her policies to mandate more affordable housing units in buildings, to double the amount of linkage fees that lab developers must pay and to add sustainable building requirements. She also proposed a commercial property tax hike and rent control policy that didn’t pass. 

In January, the city's zoning commission voted in favor of a policy that requires future large developments to meet net-zero carbon emissions standards once they complete construction. The new requirement added to the Building Emissions Reduction and Disclosure Ordinance 2.0, the city's initiative to reduce air pollution and greenhouse gas emissions from larger buildings.

DiCara said these policies, though working toward larger goals for sustainability across the city, may have contributed to the development slowdown.

"She has stated publicly she's going to be the greenest mayor in America, or something like that, and I think she's really working hard to do that, but at a certain point, if nobody builds anything, it's an academic question," DiCara said.

"There's almost no cranes in the sky, because we went from being a place putting up office buildings and putting up housing, which then became a place putting up labs, which then became a place putting up hospitals and dormitories and other university buildings," he added. "Right now, there's not that much of any of that."

Wu's administration has advanced some efforts to spur housing development since the construction slowdown began.

Last week, the Boston Planning & Development Agency board approved the Plan: Downtown guide, a controversial zoning plan that would allow for buildings up to 700 feet in parts of downtown as long as they are predominately residential.

"Thanks to the hard work from Chief of Planning Kairos Shen and his team, new downtown zoning to protect the historic core and create predictability for new residential development will unlock even more possibility,” Wu said at the Chamber of Commerce event.

DiCara said Wu's efforts to streamline planning, especially in the city's downtown, could help "jumpstart the economy" and spur the development that has been missing from the city in recent years. 

He also said there are other "nontraditional" tools she could deploy to ramp up development, including tax increment financing deals, which would defer taxes on certain projects over a period of time to incentivize development.

Wu said at the event she understands tax incentives do make a difference, pointing to the city's office-to-residential conversion program, which offers a tax abatement to office landlords for a 29-year period if the project dedicates some units as affordable and maintains ground-floor retail uses.

Small said the city's other planning and zoning proposals, including the modernization of Article 80, are steps in the right direction to streamlining and encouraging faster approvals for developments.

"We're excited to work with them as that advances," Small said. "That's just one of many things on our to-do list to ensure we can have an expedited permitting process that brings predictability and clarity to the development process."

While the city’s office and lab markets are still struggling with high vacancy rates, Boston has had a string of corporate relocation wins. Wu pointed to the major deals with toymakers Hasbro and Lego, which join several other companies that have either moved or expanded in the city.

"These aren't small moves. These are global companies with a lot of options," Wu said. "They join other powerhouses who are choosing Boston as the hub of talent and opportunity."

One big unresolved issue between Wu and the real estate industry is the fight over increasing commercial property tax rates.

Boston is especially reliant on property taxes, and falling values of office buildings in recent years have created a substantial budget gap. In March 2024, Wu proposed to increase the commercial property rate to protect residential property owners from a significant tax hike.

The proposal initially generated an uproar from the business community, but in October, the city and business leaders reached a deal to soften the hike for Fiscal Year 2025. However, the tax hike was killed on Beacon Hill at the end of 2024. A month later, Wu refiled the bill, but it has yet to pass. 

"There's always a balance to be achieved in taxation," Greater Boston Chamber of Commerce CEO Jim Rooney said during Monday’s event. "In the world of competitiveness, the people who decide to bring their businesses here, the people who decide to locate here, it's a factor they look at."

Wu pushed back on claims about the burden shift, stating that Boston residents have the highest tax burden across the country, whereas commercial owners' burden is in the middle of the road nationally.

"Everyone in this room knows that Boston is never going to be the place people come to because it's the cheapest to do business," Wu said at the event.

DiCara said there is a chance Wu continues her push to hike property taxes for commercial owners, but he says there is an opportunity to work toward a solution that could benefit all parties. The Boston Municipal Research Bureau has been one of the most outspoken opponents of the tax hike proposal, creating a rift between the fiscal watchdog group and the mayor.

"I think that the Research Bureau and other leaders of the business community, they're prepared to sit down with the mayor on these things. It should not be adversary," DiCara said. "We're really all in it together."