Boston Mayor Strikes Deal to Avoid 28% Tax Hike on Homeowners

(Bloomberg) -- Boston Mayor Michelle Wu reached a compromise with business leaders to help advance a proposal aimed at protecting homeowners from a sharp spike in property taxes. 

The deal announced on Wednesday seeks to stabilize Boston’s tax system, which relies heavily on commercial property revenue and has been thrown off balance by the slump in office demand. 

Wu’s plan involves implementing a temporary hike in commercial property taxes to help keep the city budget afloat. Without the measure, the average homeowner faces a 28% increase in their quarterly tax bills, she said earlier this month. 

Business leaders initially pushed back against the proposal, arguing higher taxes would deepen the pain for the commercial real estate market, which is grappling with a nationwide slump in office demand. Commercial property values in Boston have fallen 7% in the current fiscal year, reflecting high vacancy rates in older and lower-quality office buildings amid the persistence of pandemic-era remote and hybrid work policies.

In response to those concerns, Wu revised the plaqn, limiting how much the city can shift the tax burden onto commercial properties and shortening the duration of the temporary tax increase to three years, from five years previously.

“This compromise acknowledges the crisis facing the commercial real estate sector, and as we look ahead, we must work together to encourage economic growth,” Tamara Small, chief executive officer of commercial real estate development association NAIOP Massachusetts, said in a statement. 

The Massachusetts House of Representatives approved the tax shift in late July — days before the end of the formal legislative session — after Wu agreed to similar adjustments that would ease the impact for businesses. The Senate had yet to follow suit, sparking criticism from Wu, who has said Boston residents should blame the chamber if their taxes increase. 

The revamped proposal still requires approval from the Boston City Council, both chambers of the legislature and Governor Maura Healey. 

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