(The Center Square) – Boston is projected to lose $1.4 billion in tax revenue thanks to a decrease in office building spaces over the next five years, a new report has found.
Within the next five years, the Massachusetts capital is set to lose $500 million in revenue annually.
The Boston Policy Institute report argues that lost revenue will likely stem primarily from workers leaving the office and working from home.
Despite the warning, the Institute doesn’t see an immediate solution for the city. “Not only does the hybrid work revolution seem increasingly permanent, but even if downtown offices fill up again, it would take years for price increases to work their way back into appraisals and tax collections,” the report noted.
Hybrid work, which became popular during the pandemic due to social distancing guidelines. But as the pandemic subsided, the new work model continued. A study from May 2023 found that over 70% of employers offer some sort of hybrid work. Reasons why more employers are moving in this direction vary, but paying less for office structures, including taxes on those buildings, is a significant cause.
The effects of the move have not been immediately seen because businesses have long-term leases for their rental location. But the report notes that the problem is already revealing itself, pointing to a report from last October that discovered roughly 20% of office space in the Boston metro area is now vacant.
Facing a similar problem, most cities could face revenue shortages, but Boston, in particular, depends on commercial property tax. Using data from the Center for State Policy Analysis at Tufts University, the report found that more than a third of the city’s revenue comes from the commercial property tax, “by far the highest proportion among major U.S. cities.”
