The city is looking to solve at least some of the region’s housing crunch by converting empty downtown office space into residential units.
Mayor Michelle Wu’s office office on Monday announced the initiative that will offer tax breaks of up to 75% to building owners who jump on the chance to convert.
“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,” said Wu in a release announcing the push. “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.”
Post-pandemic vacancies are running about 20%, according to a study released last fall and cited in Monday’s announcement.
The tax discount is intended to offset the high cost associated with converting office space, which is designed and engineered differently, to residential uses.
According to a study conducted as part of the Boston Planning and Development’s ongoing, PLAN: Downtown, a 75% tax cut from the residential rate for a period of up to 29 years “could provide a strong incentive to encourage conversion.”
The BPDA is due to release a draft of its Plan: Downtown initiative in August.
Projects would be facilitated by a public-private partnership between the city, the BPDA and the project proponent and would result in a Payment in Lieu of Taxes (PILOT) agreement for the property going ahead.
In order to recoup forgone tax payments- the city would also require a 2% payment from future sales of the property.
“Through this conversion program, we seek to incentivize lenders, property owners, downtown stakeholders, and the State to partner with the City to increase the production of much needed housing in our downtown core,” said Chief of Planning Arthur Jemison. “This public private partnership opportunity is the right tool to unlock new housing and shape a new, mixed-use neighborhood Downtown.”
Wu’s office said the goal is to begin taking applications this fall. Additional program requirements and details will emerge with the applications open.
The program is being pitched for only a limited time as all applications would be due by June of 2024. Projects would then be required to start construction by October 2025.
Part of the overall set of goals driving the initiative, in addition to creating new units to ease the regional housing crunch, is “having more consistent foot traffic throughout the week to support Downtown businesses.”
“By converting office space into residential homes, we can fulfill the housing needs of our thriving City, while revitalizing and stabilizing our downtown neighborhood,” said the city’s Chief of Housing, Sheila Dillon. “New residents will enjoy the advantages of living in a neighborhood with many amenities, including shopping options, recreational spaces and multiple transportation hubs.”
Wu’s initiative in Boston is just the latest in a push by mayors across the U.S. to revive flagging downtowns struck by post-pandemic workplace changes, especially the move to remote and hybrid working.
Similar efforts are playing out in New York, Washington DC, Chicago, San Francisco, and Philadelphia, among others.