Boston Offers Lifeline to Its 'Desperate' Downtown Office Buildings
The pilot program offers tax breaks to downtown offices that convert to residential.
Boston is the latest urban area looking to solve its housing shortage and drive more downtown foot traffic by converting office buildings into residential properties, its mayor’s office announced this week.
Mayor Michelle Wu introduced a pilot program that incentivizes the conversion of underutilized office buildings to residential through a public-private partnership.
Applications are expected to begin this fall and continue through June of 2024 to help meet the city’s goals of creating housing downtown. The program may be modified to respond to changing market conditions, the mayor’s office said.
“We must take every possible action to create more housing and more affordability so that Boston’s growth meets the needs of current and future residents,” Wu said.
“This program will help us take advantage of the opportunity we have to rethink Downtown as a space where people from all over come together to collaborate, create, live, and play.”
Downtown commercial office building owners will receive reduced property tax rates in return for immediately converting their buildings to residential uses.
A local study found that a rate reduction by up to 75% of the standard tax rate for residential for up to 29 years could provide a strong incentive to encourage conversion, according to the mayor’s office.
To recoup the forgone tax revenue over time, Boston will also require a 2% payment on future sales of the property.
Projects must comply with proposed inclusionary zoning standards and the new stretch code’s energy efficiency standards. Applicants will be encouraged to maintain ground floor retail or other public uses. Projects must begin construction by October 2025 and are subject to paying any forgone taxes if these commitments are not met.
Conversions are not easy and there is a limited number of buildings that are suited for such a project. Boston officials, though, are banking on property owners’ eagerness to escape the current travails of the office asset class.
“To make the finances work — the tremendous costs to redo all the plumbing and all of that — the property value of the commercial building has to have sunk pretty low that they’re getting desperate,” Wu told the Associated Press.