If voters pass a draconian, statewide rent control measure this fall, they’ll be lighting $300 billion in property values on fire. iStock illustration.
Talk about playing with fire.
Some of the most affluent and politically progressive cities and towns in Massachusetts are the staunchest supporters of a draconian, statewide rent control proposal.
After initially hesitating, Boston Mayor Michelle Wu last month came out in favor of a ballot measure that would cap rent increases in every single town and city across the state at the rate of inflation, technically up to 5 percent but usually much lower.
The Boston City Council voted 9-3 to endorse the rent control question, while local officials in tony Brookline, Somerville, hipster Northampton, home to Smith College, and nearby Easthampton, and uber progressive Amherst, took similar measures. Cambridge has also been a hotbed of support for rent control proposals over the years.
Supporters of the rent control push, Keep Massachusetts Home, kicked off their campaign back in September in Somerville’s Union Square.
$300B in Property Values at Stake
Overall, Greater Boston and pockets of affluent communities across the state have seen a huge run-up in real estate values over the past three decades.
Highly paid professionals have flocked to a city and region that has seen, until recently, years of strong and steady growth in knowledge-based industries like life sciences, research, tech and financial services.
And yes, as new construction has lagged demand, simply buying a home has become a seven-figure affair, while apartment rents have gone through the roof.
Yet here’s the thing: Cities and towns like Boston, Brookline, Cambridge, Somerville Northampton and Easthampton, which have reaped some of the biggest budgetary benefits from the explosion in real estate values, are also likely to have the most to lose from a new, statewide rent control law.
A new report by the Center for State Policy Analysis at Tufts University finds that cities and towns across the state could lose $300 billion in residential property values over the next 10 years should the rent control measure get a green light in November from Massachusetts voters.
Boston Would Face $160M Hit
Just take Boston, which has seen its tax base nearly double from an inflation-adjusted $116 billion in 2004 to $220 billion today.
While new office towers and lab complexes certainly played a big role in expanding the city’s tax base, so did dozens of new, luxury condominium towers and apartment buildings.
Boston has been able to use that extra money for a range of housing and various social-service programs aimed at helping the city’s lower-income residents.
Boston has also been spared for decades from brutal budget crises like the ones it suffered in the 1970s, when a big drop in property values and a declining tax base forced the closure of fire stations and other city services.
Statewide, cities and towns would see a 6 percent to 9 percent decrease property tax values, rising to 14 percent over the course of a decade, the Tufts study found.
But Boston would be particularly hard hit. For starters, homeowners would see their property values decline by 9 percent by 2029, according to the Tufts study, commissioned by the Greater Boston Real Estate Board.
In dollar terms, that would be a pretty rapid shortfall of $160 million in a city that’s already proposing to cut between 300 and 400 teachers next year to make its next budget pencil out, despite a 4.5 percent overall increase to the schools’ budget.
32 Percent Tax Hikes?
But the city would face a double challenge, with residential taxes already rising to make up for the collapse of the office market, which has devastated downtown tower values, long a cash cow for the city.
In order to deal with both the fallout from rent control and the crumbling of office tower values at the same time, Boston may have no choice but to jack up taxes by 13 percent on homeowners and 8 percent on businesses over the next three years.
The alternative would be to slash city services, close schools and lay off hundreds of teachers and other municipal employees left and right.
Long-term, Boston could see a quarter of its residential property tax base erode, which would require a cumulative 32 percent hike in rates paid by homeowners by 2036.
This, in the same city whose rent control-supporting mayor treated a much smaller hike was a five-alarm affordability fire worth spending significant political capital to tackle. The hit from rent control would be even worse, the Tufts study says.
“Over just a few years, hikes of that magnitude could push more homeowners and businesses out of Boston, creating a dangerous mix of high vacancy rates and declining economic activity,” the report warns.
Brookline and Somerville would also take double-digit hits over the long term, while college towns – think Northampton, Easthampton, Amherst and Cambridge – could fair even worse.
“Every city and town would face substantial property tax losses, but the hit to urban areas and college towns would be especially acute, with projected declines of 15-20 percent,” the report warns.
Scott Van Voorhis
Rent control activists are playing with fire with their ballot measure, considered the toughest rent control law in the country.
And if it passes, it won’t just be landlords who will get burned, but a lot of other people as well, from homeowners to local officials faced with suddenly empty tax coffers.
Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
