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BOSTON - Monday, July 10, 2023 - Mayor
Michelle Wu today announced the City will launch a new “Downtown Office to Residential Conversion
Pilot Program,” a
public-private partnership program to incentivize the conversion of
underutilized office buildings to residential use in Downtown this
fall.
The program, which is anticipated to begin accepting applications this fall, will be administered jointly by the Boston
Planning & Development Agency (BPDA), Mayor's Office of Housing (MOH),
and the City of Boston Finance Cabinet to help meet City goals of creating housing units Downtown and having more consistent foot traffic
throughout the week to support Downtown businesses. This program may be
modified to acknowledge and respond to changing market conditions.
“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 Mayor Michelle Wu.
“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.”
“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.”
“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 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. This initiative aligns with this administration’s
dedication to creating accessible and equitable housing in every
neighborhood, strengthening our small businesses and commercial centers.”
The program would offer owners of commercial
office buildings Downtown reduced
property tax rates in return for
immediately converting their buildings to residential uses. Based on
studies prepared for the City as part of PLAN: Downtown, a rate reduction by up to 75% of the standard tax rate for residential
for up to 29 years could provide a
strong incentive to encourage conversion. This would be implemented through
a public-private partnership that will enable the BPDA, the City, and the
proponent to enter into a payment in lieu of taxes (PILOT) agreement. These terms were developed with the
assistance of outside experts in order to make residential construction
economically possible in the short term given the high cost of such
conversions. These projects will also receive the support of the new Ombudsperson’s office at the BPDA to help with streamlining the approvals
process from other City departments following BPDA Board approval. Final program parameters will be defined
when applications are made available this fall.
The program is planned to be time-limited and will only accept applications
through June of 2024. To be eligible,
projects must comply with the proposed Inclusionary Zoning standards when
approved; and the new Stretch Code’s energy efficiency standards.
Applicants will be encouraged to maintain ground floor retail or other
public uses. Projects will be
required to start construction by October 2025, and will be subject to paying any forgone
taxes if these commitments are not met. In order to recoup the forgone tax
revenue over time, the City will also require a 2% payment on future sales of the property.
Following the release of a Downtown Revitalization Report released in October of 2022 that showed post-pandemic commercial office space vacancy
rates are approximately 20
percent, Downtown
neighborhood planners facilitated several conversations with developers to
gather information on interest in residential conversions and possible
pathways to achieve more housing Downtown. The BPDA also contracted HR&A Advisors Inc. to produce a report on the feasibility
of office conversion in Downtown Boston and the Financial District. This
research all suggested that partnership from the City was the only
financially feasible path forward for private development to complete
residential conversions. The study was conducted alongside PLAN: Downtown,
the BPDA’s ongoing Downtown planning initiative, a draft of which will be released in August 2023. This program furthers the Plan’s goals to
increase residential growth downtown and revitalize the area through a
greater mix of uses while also preserving the historic urban fabric that
makes Boston’s Downtown so unique.
The program is part of Mayor Wu’s ambitious
growth agenda for
Boston, which is focused on advancing the City’s resilience, affordability,
and equity goals in order to make Boston the best city in the country to
raise a family. The agenda also includes the creation of a City Planning and Design Department operating under the direction of Chief of
Planning Arthur Jemison, and the appointment of
Katharine Lusk to lead the newly created Planning Advisory Council which was created to coordinate
planning processes across City departments. The Mayor also committed to
update Boston’s zoning code to create thousands of additional housing units
in Boston’s squares and corridors and reform the Article 80 process to increase speed and
predictability for development.
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