CRE Takes Stock of Wu's Priorities To Prep For Her Second Term

With a second term now assured for Boston Mayor Michelle Wu, business leaders are attempting to map out the road ahead.

Wu won an uncontested election Tuesday night, and with several major wins in the city council, she is likely to keep a majority in favor of her policies. She will start the next term off with strong approval from voters and more political capital in the council.

Although ultimately a sleepy affair, the election has had several twists and turns for the local CRE industry. In May, real estate developer Tom O'Brien considered putting his hat in the ring. Kraft family scion Josh Kraft also mounted an unsuccessful campaign.

Kraft had raised more than $10M in campaign and super PAC financing, Bloomberg reported. The funding came largely from business bigwigs looking to oust Wu for what they saw as unfriendly business policy in her first term. Kraft ultimately didn’t close the polling gap and dropped out in September.

In her first term, Wu weathered national economic headwinds, including higher interest rates, unforeseen tariffs, funding threats from the Trump administration and continuing economic ripple effects from the pandemic.

But there is much Wu and the council can still do to encourage development even in difficult building environments, local CRE leaders say. Some would like Wu to consider softening affordability requirements, sustainability mandates and property tax proposals, for example.

Nixon Peabody partner Jennifer Schultz said local governments still have a lot of discretion on how policies are executed, even in a tough climate. They can shift, roll back or pause policies to meet the moment.

"There are levers, there are mechanisms that could be utilized if the city decided they wanted to," Schultz said.

With more political capital in her court, Wu may have an easier time making her political priorities a reality. Many real estate officials hope that with a new term, she will be interested in strengthening relationships with developers and finding common ground to push projects forward, Schultz said.

"There's the pipe dream, perhaps, that we want to see a real partnership with the city," Schultz said. "The absolute hope is that we can have real talk with each other, grounded in market realities."

Here are some of the policies and items that industry leaders are keeping their eyes on:

Affordable Housing Development And Rent Control

Some leaders hope a second term will jump-start housing production across the city and that Wu will prioritize all types of housing, not just affordable projects.

Over the last four years, Wu has proposed new neighborhood zoning initiatives that prioritize housing development, signed an executive order to streamline approval of affordable housing, and preserved the affordability of existing units.

During her first term, Wu raised the city's inclusionary development and linkage fee policies. She increased IDP for new multifamily buildings of seven or more units from 13% to 20%. She raised linkage fees from $15.39 for all developments to $30.78 for lab space and $23.09 for all other commercial developments.

Critics of Wu’s housing policy contend such changes have done more harm than good to housing development across the city.

"Many on the development side feel the form and execution of policy doesn’t meet affordability goals and only hinders development, which, in turn, means less housing and higher prices," Geosimulate partner Brendan Carroll told Bisnow.

Developing affordable housing in Boston is significantly more expensive than building other types of housing, with each unit costing $678K on average, according to a city-commissioned study. That price is 43% higher than comparable market-rate projects.

Richard Taylor, developer on the Nubian Ascends project in Roxbury, said he hopes Wu can use her heightened political capital to "do things that are unusual and out of the box" when it comes to housing production and economic development. Subsidies alone won’t be enough.

"There's not enough subsidy to have a significant amount of affordable housing. We need some market-rate housing," Taylor said. "When you go to the lumber yard, they don't change the price of a two-by-four just because you're building an affordable unit."

Wu also continues to float the idea of rent control, which the business community has openly pushed back against. In 2023, the Greater Boston Real Estate Board spent roughly $400K on an anti-rent control campaign targeting residents via mail and text messages.

The Property Tax Fight

Wu has proposed hiking the property tax burden on commercial properties to protect residents from shouldering more of the tax base.

Last year, Wu lost the battle on a proposal under which the commercial property tax burden would have increased to 181.5% that of residential owners. The state legislature killed the proposal in December. She reignited the fight early this year, hoping to get more support for the measure.

The proposal came as valuations have fallen for underperforming Boston buildings, including many downtown offices, and the city estimated it may lose more than $1B in property taxes over five years because of it.

The business community has contested the tax hike proposal and argued it would deter new development and business moving forward.

Wu has looked for other ways to take the burden off of residents, including advocating for the state to repeal Proposition 2 ½, The Boston Globe reported. This law limits municipal property tax increases to 2.5% each year.

Article 80 Modernization

In an attempt to modernize the Boston planning process, Wu abolished the old Boston Planning & Development Agency and is reworking the city's large-building review process.

The city's Zoning Commission approved its first changes to the Article 80 process in August. These changes have been the first major updates to Article 80 since its adoption in 1996.

The city's zoning code has been a pain point for developers and other stakeholders, who have argued that its inconsistencies and inequities have led to longer approval times, costly building and less housing production. 

The Builder Coalition Executive Director Dave Madan said the initial work the city has done to modernize the zoning code is making developers’ jobs more "transparent and predictable."

"We'd like to see the administration drive this forward to clean up the zoning code and make density easier to achieve," Madan said in an emailed statement. 

Downtown Recovery And Office-To-Residential Conversions

Wu has made several efforts to revitalize downtown Boston.

In September, the city government passed a controversial plan that would allow residential towers up to 700 feet tall to be built downtown.

In 2023, Wu launched the city's office-to-residential program, which provides a payment-in-lieu-of-taxes incentive for developers. The average tax reduction would be up to 75% of the standard tax rate for up to 29 years.

Since the program's inception, there have been 19 applications filed totaling 1,149 units, according to the city. Of those applications, 11 have been approved and four are under construction.

The program is set to expire at the end of this year, and some business leaders question if it has done enough to meet the housing needs in the city's densest corridor.

"It sounds lovely, but feasibility-wise, only about 10% or 12% of Boston's downtown buildings can even be converted, and that's excluding red tape and costs," The Collaborative Cos. Senior Vice President Laura Gollinger said at Bisnow's Boston Multifamily event in September.

For business leaders, Wu’s next four years will test how City Hall and the private sector can work together to keep development rolling while tackling affordability, tax pressures and downtown recovery.

NAIOP CEO Tamara Small said many business leaders are eager to come to the table to find common ground.

"While we recognize we may not always agree on every issue, we believe that for the City’s long-term fiscal health, now is the time for the business community and government to work together on solutions designed to advance economic growth and housing production in Boston,” Small said in an email to Bisnow.