Boston Commercial Property Values Projected To Drop Further And Strain The City's Budget

The Boston property tax saga continues, as the city released updated property tax figures that paint a worsening picture for the city's commercial real estate tax base.

City officials project commercial property values will decrease once again. They are estimated to decline by 6% over the next year.

In contrast, residential property values are set to increase by 2%, according to figures released Tuesday.

Mayor Michelle Wu wrote a letter to city council members affirming her fight to temporarily shift the tax burden in favor of residents, even in the face of the new estimate.

In the Wednesday letter, Wu urged council members to pass the city's multiyear residential tax relief petition, the same petition they passed twice last year.

"These assessments continue to mirror national economic trends, but under Massachusetts state tax law, without legislative intervention, this will again result in residents shouldering double digit tax increases caused by declining commercial values," Wu wrote.

In October 2024, Wu and business leaders agreed on a new proposal that would increase the tax burden for commercial property owners to 181.5% that of residential property owners. Commercial owners currently pay 175% of the rate that residential owners pay.

In a letter to prominent business leaders, including Greater Boston Chamber of Commerce CEO Jim Rooney and NAIOP Massachusetts CEO Tamara Small, Wu asked the organizations to reaffirm their support for the agreed-upon compromise legislation.

However, the home rule petition stalled on Beacon Hill in December 2024 after Sen. Nick Collins blocked the vote, citing concerns around new property tax data.

The business organizations then dropped their support for the compromise. 

Wu said the city was doing its part to reduce the city budget, including "controlled and delayed hiring," and each city department was asked to propose fiscal year 2027 budgets that are "2% below the current fiscal year."

"These proactive measures reflect our long tradition of strong fiscal management, which has helped the City secure and maintain AAA bond ratings from both Moody's and S&P for the twelfth year in a row," Wu said.

The reignited property tax hike debate comes as the city continues to struggle with vacant office and lab buildings and tepid investment activity.

Boston Policy Institute Executive Director Gregory Maynard said Wu's figures line up with the institute's predictions that the city will have a $2.1B shortfall. This could have far-reaching effects for Greater Boston, he said.

"We need certified property values for FY26 to do a detailed comparison with our predictions, but based just on the information shared by Mayor Wu, Boston appears headed to our worst-case scenario: spillover," Maynard said in a statement.

Business leaders have voiced concerns that a tax hike would be another hit in a tough economic climate, one that might further stall development across the city, NAIOP's Small said. 

"Instead, the City should use the resources available to lower the tax burden for its most vulnerable residents," Small said in a statement to Bisnow. "NAIOP continues to urge the City to closely examine recent anti-growth policies that hinder new development while also exploring ways to diversify its revenue streams to ensure Boston does not rely on any one sector to fund the City’s budget."