SPOA Warns Boston's Proposed Apartment Tax Increase Would Harm Renters and Housing Development
The Small Property Owners Association (SPOA) has recently been made aware of a proposal circulating within the City of Boston to more than double the tax rate on large or ”luxury” apartment buildings. This extreme proposal would do significant harm to Boston renters and landlords, deter investment in much-needed new housing stock, and enable the City of Boston to continue its recent pattern of unchecked spending increases. SPOA therefore opposes this proposal and recommends that state legislators evaluating a home rule petition along these lines do the same.
Boston currently taxes all residential properties equally at a millage rate of $11.58 per $1000 of assessed value. This proposal would increase the millage rate for apartment buildings with 30+ units or those classified as “luxury” to $23.60–a 104% increase. For many residential buildings, property taxes are already the largest operating expense; more than doubling this expense would have a disastrous impact on property owners’ bottom lines. For some owners, this change would immediately put them out of compliance with debt covenants; others might be forced into foreclosure.
Renters would be harmed too. When property taxes increase, a significant portion of this increase is passed on to renters. A tax increase of this magnitude would be expected to produce a roughly 20% increase in rents for affected properties,1 causing displacement or financial hardship. Additionally, reduced operating cashflow for owners often results in the deferral of property maintenance or upgrades, worsening renters’ quality of life.
The argument included in this proposal that higher taxes don’t cause higher rents is laughable. This argument is contradicted by many credible research papers and basic common sense. The existence of relatively low rents in Austin, which has high property taxes, is explained by Austin’s permissive development environment, which has enabled a massive expansion of its housing supply, keeping rent growth in check. Boston, meanwhile, has a notoriously restrictive development environment, which has pushed rents higher and makes the comparison to Austin inappropriate. The lack of rigor demonstrated in this comparison made by the City is concerning; government officials seeking to dramatically increase their constituents’ taxes should at minimum strive to accurately represent the expected effects of their proposals.
Furthermore, because valuations for larger residential properties are assessed on the basis of income net of expenses, decreasing this income by increasing tax expenses would decrease assessed valuations. This would decrease the size of the city’s tax base, necessitating further rate hikes–including potentially on homeowners–to counteract this effect.
Boston is in the midst of a housing supply crunch–we desperately need to build new housing in order to improve the city’s affordability. Adding new costs for residential development, as this proposal would do, would only worsen this problem. This proposal is therefore in opposition to the stated goals of both city and state government to increase Greater Boston’s housing stock.
It is also our understanding that the City’s bid to increase taxes here is downstream of its inability to exercise spending restraint. Its budget for FY26 is $4.84B, a whopping 19% increase over FY23, representing an average annual increase of 6%–well in excess of inflation. It is unreasonable for the City to ask property owners to make significant economic sacrifices when it is not willing to impose a basic level of discipline on its own spending habits.
SPOA calls for all property owners, renters, and policymakers to oppose this shortsighted and harmful tax proposal. To improve its fiscal health, Boston’s government should instead focus on enabling more development to expand its tax base and exercising restraint over its spending.
by Chris Lehman and Tony Lopes
