Trends in spending and commercial values may keep heat on residential property taxes in Boston
By Katie Castellani, State House News Service
It’s failed to find an audience on Beacon Hill, but Boston Mayor Michelle Wu is standing firm behind her proposed tax burden shift as others continue to warn about declining commercial property values and the growing city budget.
Wu’s proposal (HD 4422) to temporarily shift more property taxes to commercial owners as a way to relieve sharp increases for homeowners has failed to enter the legislative pipeline since senators have yet to assign it to a committee. Sens. William Brownsberger and Nick Collins, who oppose Wu’s proposal, have also revived “tax shock bills” (S 1933 and S 1935), signaling some interest in new residential property tax relief policies.
When asked about the “tax shock” proposals, Wu said they steer much needed funds away from the city while her proposal balances taxes without cutting city funding.
“The way that state tax laws very strictly control the revenues that cities and municipalities have around the commonwealth is a challenge right now in a high inflationary environment where costs of health care for city workers and other costs just to maintain the same level of city services are increasing far faster than two and a half percent,” Wu told the News Service, invoking Proposition 2½, which has limited annual property tax increases for more than four decades. “The proposals that have been put forward all take from funding that would otherwise be going to city services and so there is a direct cost from city services to those proposals.”
The Senate bills (S 1933/S1935) would allow municipalities to offer targeted, locally funded credits or rebates in years with sharp residential tax spikes, or to vulnerable taxpayers such as seniors or MassHealth enrollees.
It’s the second year in a row that Wu’s city council-backed tax shift plans have stumbled at the State House, and third quarter residential property tax bills in Boston are projected to increase by 13%.
Allowing Boston to stray from statewide rules governing the balance between residential and commercial property taxes could open the floodgates for similar requests, senators have warned.
Business groups say that shifting more of Boston’s tax burden onto its commercial sector could weaken the already-struggling office market and create ripple effects far beyond the city’s borders.
A June report from the Boston Policy Institute and the Center for State Policy Analysis at Tufts University found that declining commercial property values are expected to continue falling. Under the report’s best estimate, inflation-adjusted office assessments are expected to fall 35% to 45% from 2024 through 2029. This would create a $1.7 billion hole in the city’s budget over that period.
“My sense is this problem is very real and the city is not taking it sufficiently seriously,” Center for State Policy Analysis director Evan Horowitz told the News Service Tuesday.
In a situation where property valuations are going down, the city can either accept lower tax collections and adjust the budget or raise tax rates to maintain current spending, he said.
“They are choosing to raise tax rates and pretending that it’s not a choice at all, that they’re being forced to do it and someone should rescue them,” Horowitz said.
He said Wu’s tax shift offers a temporary reprieve but the city’s situation calls for a permanent solution.
Part of the permanent solution would be to stop taking the maximum allowable revenue under Prop 2 ½ to “let the rates be what they are” and adjust the city budget accordingly, Horowitz said. The other part of the fix would be to work with other municipalities for more unrestricted general government aid from the state.
The Massachusetts Municipal Association recently released recommendations calling for a $351 million increase in discretionary local aid and adjustments to Proposition 2 ½, a voter law that the Legislature has not interfered with. Their recommendations include phased-in overrides and raising the 2.5% levy growth cap.
“I do think the city needs more state support, because they are hampered in their ability to raise revenues,” Horowitz said. “But they need to first acknowledge that, they get to control their tax rates, and they should set them appropriately, and build a process for doing that. They do not currently have such a process.”
Boston’s budget has grown 26% over the past four years, from $3.8 billion in fiscal 2022 to $4.8 billion in fiscal year 2026, according to a post on Brownsberger’s website. Also, the city’s total property tax levy has grown 26% over the same period and residential property values have risen more than commercial properties so residential taxpayers are picking up a greater share.
Boston’s residential property taxes are also among the lowest in the state because of an allowed 175% shift to commercial property and a large commercial base, Brownsberger’s site says, noting that the city’s residential tax levy ranks 332nd out of the 351 Massachusetts communities as a percentage of personal income.
During a Dec. 9 Senate session, Brownsberger said the decades of Boston increasing spending without “heavily burdening residential taxpayers” seem to be coming to an end.
Boston’s property taxes would be higher without state aid that supports about 10% of the city’s budget, according to Brownsberger. But he said Wu’s proposal is not an efficient solution.
“The proposal would give an additional property tax break even to our wealthiest homeowners, while increasing the burden on struggling small business owners,” Brownsberger said in the post. “Even for businesses that might seem strong economically, if we raise commercial taxes, employees and customers are going to bear much of the burden.”
Office vacancy rates in downtown Boston held steady at 18.8% during the third quarter 2025 and are up from 10% in the same period in 2020, according to an October CBRE report.
Another estimate from Colliers also found vacancy rates in the Greater Boston area – including both the city and suburbs – are stabilizing. The vacancy rate has remained around 24% year to date, according to Colliers’ third quarter 2025 Greater Boston office report released Oct. 23. However, a slowing macro-economy and sluggish job growth could constrain office market recovery in the near-term.
To address office vacancies, Wu said the city has been recruiting new businesses to fill empty desks throughout the city. She pointed to progress with major companies like Hasbro, Lego, KKR and Klaviyo moving to Boston or expanding their office space within the city.
Hasbro, which is planning to move its headquarters to Seaport by the end of 2026, represented the largest office lease deal in the third quarter 2025, encompassing almost 264,400 square feet over seven floors, according to CBRE. Leases signed by KKR and a renewal from BNY Mellon also helped boost quarterly leasing activity to 1.91 million square feet, the highest quarterly leasing volume since 2019. Without the major transactions, the leasing volume would have been about 1.3 million square feet, a 382,000-square-foot increase over the previous quarter.
While this is a bright spot amid the gloomy commercial real estate forecasts, Horowitz said “there is tiny room for optimism.”
“Mostly this is a problem that needs to be solved,” he said. “Values seem to be falling and there’s a lot more decline I think to work through the tax system.”
Wu said the city’s program to convert empty office spaces to residential units has exceeded expectations, so the city is extending it another year. There are 1,517 housing units in the pipeline as a result of the program.
Wu said the city is also working to make Boston “the easiest place to open a business” by streamlining permitting, getting rid of annual fees for certain types of licenses and working with property owners on how best to use city services for projects like fixing up sidewalks and a $110 million revolving fund aimed at sparking more downtown business development.
