On July 10, 2023, Boston, Massachusetts Mayor Michelle Wu announced that the city will launch a new Downtown Office to Residential Conversion Pilot Program to help revitalize the downtown area with new residents, as recommended in the 2020 book, RECONOMICS: The Path To Resilient Prosperity.
The program is a public-private partnership designed to incentivize the conversion of underutilized office buildings to residential use in downtown this fall.
“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,” he continued.
Anticipated to begin accepting applications this fall, the program will be administered jointly by the Boston Planning & Development Agency (BPDA), the 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.
The program may be modified to acknowledge and respond to changing market conditions, thus making it adaptively managed (as also recommended in RECONOMICS: The Path To Resilient Prosperity).
“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 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,” she added.
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.
“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,” she explained.
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 redevelopment.