The average single-family home in Boston is likely to see property taxes go up about 14 percent year over year, city officials said Wednesday, an increase Mayor Michelle Wu argues would be lessened if the state Senate greenlit a city legislative effort that has stalled on Beacon Hill.
Homeowners have been bracing for a spike in residential property tax bills next year after city officials warned they would likely rise to keep the budget balanced.
More than 70 percent of the city’s budget is funded by property taxes. High office vacancy rates have reduced commercial property values and, in turn, hurt commercial property tax revenues. At the same time, residential real estate values have risen, meaning homeowners will face higher property taxes to make up the difference, or the city would have to make steep budget cuts and not collect the full amount of property taxes it’s allowed to by state law.
In a briefing Wednesday, city officials unveiled that preliminary property valuation data, which indicated that the average homeowner will face a double-digit property tax increase next year, but not as high as experts had feared.
The city had previously predicted that residential properties would face a 16.5 percent year-over-year increase based on the assumption that commercial property values would drop by 10 percent, and residential values would increase by 5 percent. The initial data show that split is not as wide as predicted, and that commercial values dropped by an average of 7 percent while residential values went up by 4 percent.
On Wednesday, the administration gave two examples of how that will impact both the average homeowner in Boston and a $5 million commercial property.
The owner of an average single-family home, worth $838,000, paid about $5,500 in property taxes in fiscal year 2024 with the maximum residential exemption, officials said. That number would increase by just under $770 in fiscal year 2025, according to the city. But Wu is aiming to limit that increase for the average single-family home to $270, which would amount to about a 5 percent increase over the previous year.
The owner of a commercial building worth $5 million paid about $126,000 in property taxes in fiscal year 2024. That number would decrease by about $8,400 in fiscal year 2025, the city said. But to help ensure homeowners pay a smaller increase in property taxes, Wu wants the Legislature to approve her plan to make that decrease for commercial real estate much smaller, shrinking it from 6.7 percent to 0.5 percent.
Officials emphasized that those examples are based on preliminary data, and could still change as valuations and property tax bills are finalized.
The city of Boston is already in the middle of its 2025 fiscal year, which started July 1. Because of that, any property tax increase would not be spread out over the fiscal year’s four quarterly bills, but instead be reflected in just the January and April property tax bills. Residents would likely grapple with the sticker shock of seeing a 28 percent increase from their second quarter bill to their third quarter bill in January, city officials said.
For months, Wu has pushed for the power to temporarily shift more of the property tax burden onto commercial property owners beyond what is currently allowed by state law, in order to cushion the blow to homeowners. Her home rule petition to do so was approved by the City Council and passed in the state House of Representatives this summer after last-minute negotiations in which Wu agreed to various compromises on the proposal.
But the measure has been stalled in the Senate ever since. It’s faced fierce opposition from business and real estate groups who argue the measure would hurt small businesses, unfairly burden the already struggling commercial real estate industry, and exacerbate commercial property devaluations, threatening the city’s long-term financial stability.
On Wednesday, Wu also doubled down on her argument that she does not see cutting the budget as a viable alternative to prevent a spike in property taxes for homeowners, as business groups and fiscal watchdogs have proposed. She added that the city would also have to elect to not collect the full amount of property taxes it is allowed to by state law.
“Doing so would be very financially irresponsible, because we’re already behind inflation with the two and a half percent limit, and setting ourselves even further back would just mean trying to find a way to catch up on being able to fund city services in the future,” Wu said.
But Marty Walz, the interim president of the Boston Municipal Research Bureau, said the alternatives the fiscal watchdog group has put forward, such as cutting the operating budget by 1 or 2 percent, dipping into the city’s free cash balance, or providing tax breaks or direct payments to the most low-income and vulnerable homeowners, should be taken seriously.
“This city has never faced a situation like the one it is in today, so the current environment requires current creative thinking and what’s the fairest way to move forward,” Walz said.
Wu met with state Senate President Karen Spilka, Boston’s state Senate delegation, the Boston Municipal Research Bureau, and business and real estate groups at the end of September, but her proposal has not advanced in the upper chamber since then. Wu earlier this week said another meeting has not been scheduled, though she is open to continued conversations.
Time is running out for Wu to get her proposal across the finish line on Beacon Hill. The City Council has to vote to approve both the residential exemption and tax rates in November. Wu’s measure would have to pass by the end of November, so tax bills can be finalized before they’re mailed out in early January.
Niki Griswold can be reached at niki.griswold@globe.com. Follow her @nikigriswold.