FY23 Property Taxes
Thanks to a surging economy in the pre-pandemic period and strategic development policies, property values in Boston have risen steadily. In FY21, property values increased by $14.5 billion (8.2%), and in FY22 property values increased by $7.2 billion (3.8%), currently totaling $197.8 billion.
While the Boston real estate market has demonstrated considerable resilience in the face of the pandemic, the City continues to monitor potential effects on property values.
Tax Share and the Tax Rate
In FY22, residential tax payers account for 42% of the total tax levy. Commercial, industrial, and personal properties account for the remaining 58%.
Classifying properties by residential, commercial, and industrial categories reduces the residential tax rate, the rate per thousand dollars of property value, to the lowest level allowed by law. Without it, residential taxpayers would see their properties taxed at a much higher rate. As can be seen in the graph to the right:
- Rates increased in the years following the Great Recession (FY08-FY13), when property values decreased significantly due to the burst of the housing bubble.
- Starting in FY14, rates decreased for several years thanks to the acceleration of development and the recovery of the economy, and since FY18, they have moved within a narrow range.
- In FY22, the residential tax rate is $10.88 for every one thousand dollars of value. Commercial, industrial, and personal rates are $24.98 for every one thousand dollars.
Property Tax Rates
Proposition 2 1/2
Property Tax Levy and Levy Ceiling
Due to years of strong new growth increases, the City has space between its FY22 net effective tax rate of 1.4% and the tax levy ceiling of 2.5% of total assessed values.
Proposition 2 ½ was enacted in 1980 by voter initiative to constrain and limit the annual property tax levy in Massachusetts cities and towns. The law includes two types of limits:
- The Levy Limit - Each year, the City can raise its tax levy by up to 2.5% over the previous year’s levy limit. New growth, which represents additions to the City’s tax base over the previous year, is added to the levy as well.
- The Levy Ceiling - The tax levy cannot exceed 2.5% of the total assessed value of all real and personal properties in the City.
To learn more about tax collection and assessments in Boston, please use the following resources:
Property Tax Levy Increase by Type
Property tax growth from new growth has exceeded growth from the allowable 2.5% increase in 15 of the last 21 years.
During the last six years, the City saw notable construction projects in Boston enter the City property tax base for commercial, mixed-use, and residential properties. According to the Boston Planning & Development Agency (BPDA), the revenue from building permit fees during FY20 indicated the potential for $8.2 billion in construction activity compared to an estimate of $7.4 billion in FY19. More recently, the BPDA Board's approval of 14.6 million square feet of development in 2021 indicates ongoing strength in the pipeline.
In FY23, the City expects new growth of $60 million, a decrease from prior year's actual that reflects economic uncertainty and lagged effects of the pandemic, including the two-month non-essential construction pause in spring 2020. As was observed during the Great Recession, new growth revenue is volatile and depends on the development cycle and the local, state, and national economies.