10.18.2024

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Look out below: The fallout from the collapse of Boston’s office market may be even worse than previously anticipated for city homeowners and businesses alike, experts warn

Everybody knew it was going to be bad. Maybe just not this bad, though.

Boston homeowners could be faced with big tax increases, not just this year, but every year for the next several, as office tower values crumble amid the shift to remote work.

That was the sobering message the head of the Boston Policy Institute delivered to the Boston City Council at a hearing Thursday, as the city’s looming revenue crisis takes center stage.

The Hub faces a revenue gap of as much as $1.5 billion, and possibly more, over the next few years, as half-empty downtown office buildings decline in value, ruining what has long been a top cash cow for city tax coffers, according to BPI.

Not just a one-time hit, office tower values are likely to continue to drop over the remainder of the decade, only finally bottoming out in 2029, contends Greg Maynard, BPI’s executive director.

And in order to close that gap, city officials will have to raise residential tax rates - not just in one year, but year after year, said Maynard, who launched the City Hall tracker last year with fellow Democratic political consultant Joe Caiazzo.

“We think it’s possible it will be worse than we predicted,” Maynard told Contrarian Boston, an an interview after the hearing. “We don’t see any indication that values will stop dropping. We continue to see fire sale prices.”

Maynard also took aim at the Wu administration’s handling of the issue, saying it continues to try and sugarcoat what is looking to be a very bitter pill for both city homeowners and businesses.

Photo by Venti Views on Unsplash

The Wu administration has ruled out budget cuts and dipping into reserves to close the gap, suggestions made by the Boston Municipal Research Bureau and major local business and real estate groups.

Instead, Boston Mayor Michelle Wu has focused on pushing for State House approval to shift more of the city’s tax burden onto commercial property owners in order to spare homeowners some of the cost.

That would the enable the city to attempt hike commercial tax rates and squeeze more money out of struggling downtown buildings, helping offset what is already expected to be a nine percent increase in residential tax bills.

In a series of town hall style meetings with voters, the Boston mayor is portraying the increases as a one-time event, rather than a permanent shift that will require additional increases in future years until office building values finally bottom out, critics say.

Overall, the Wu administration has only grudgingly come around to acknowledging there was a problem in the first place.

Launched in 2023, BPI made headlines when it released a report back in February forecasting a drop in city revenues of $1.2-$1.5 billion from the major hit the downtown office market has taken.

The Wu administration initially disputed and downplayed the numbers, but has since released its own figures that are actually more dire than BPI’s own forecasts.

The city has pegged the decline in commercial real estate values at 7 percent for the current tax year, more than twice what BPI had predicted. Given those numbers, the revenue gap could be poised to exceed even the already hefty $1.5 billion mark, according to BPI.

“Seven percent is dramatically worse than we anticipated in our modeling,” said Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University, at Thursday’s City Council hearing.

NPR shows its bias: Public radio giant turns to caustic critic of Israeli policy for commentary on the death of Hamas terrorist leader Yahya Sinwar

Talk about winning the battle and losing the PR war.