Boston in the Urban Doom Loop
The pandemic led to remote and hybrid work, leading to fewer people downtown and less demand for office space, leading to a tax crisis. Now.
What I call the urban doom loop is playing out in Boston, as reported by Brooke Sutherland: 'commercial property values have dropped 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, Mayor Wu said in a presentation Wednesday. The numbers are based on a preliminary assessment that’s subject to change as the city reviews parcel-by-parcel data in the coming weeks.' Unless the state passes an increase in commercial rates before the end of next month, homeowners will see a 28% surge in their tax bills.
The Mayor 'rebuffed suggestions by business leaders that Boston instead trim its budget or refrain from raising overall property levies by the full amount allowed annually under state law, calling those options “financially irresponsible.” Boston would need to cut about $265 million in spending to make up for the drop in commercial property values, comparable to the fire department’s budget or the equivalent of more than 2,000 jobs citywide'.
In conclusion, all parties find themselves between a rock and a hard place. Mayor Wu is going to infuriate voters if the tax increase happens, and infuriate commercial real estate companies if not. Even if commercial rates don't increase, the landlords are hurting because of the urban doom loop, which is stabilizing, but not going back to the before times. And the citizens may be getting a one-time respite, but even if they do the city is falling short on commercial property taxes, and is likely to do so for the foreseeable future.