The Gardencrest Apartments development in Waltham is one of the properties that would be affected by a new tax plan proposed by that city’s mayor.
Efforts to shift Waltham’s tax burden to apartment developments of nine units and more is drawing the ire of public officials, landlords and housing policy experts just days after the idea was unveiled by Mayor Jeannette McCarthy.
“It’s going to be a big problem,” predicted Thomas Meagher, president of Northeast Apartment Advisors, who said one client has already calculated that their property would see taxes double and possibly triple, depending on which measure introduced by McCarthy is taken into account.
By one plan, the city would establish a special tax rate for multifamily properties of nine units or more that would be set at $15 per thousand dollars of valuation, up from the current residential rate of just over $10 per thousand dollars that such buildings are currently charged. In another version, McCarthy calls for multifamily assets of that size to be taxed at the city’s commercial rate, exceeding $24 per thousand dollars of valuation at present.
Gregory Vasil, chief executive officer of the Greater Boston Real Estate Board, said his organization is “perplexed” by McCarthy’s missives. At present, he said, the board is reviewing the initiatives and trying to weigh their implications, although he expressed “serious concerns” about the concept at face value. “It sends a chilling message to a lot of our members about developing properties in Waltham and whether Waltham is a friendly environment to do business in,” said Vasil, adding that the idea could also set “a dangerous precedent” that might cool interest in the community over the long term.
Others tracking the situation also expressed concern. “We’re trying to get a handle on it right now,” said the manager of one large Waltham apartment complex contacted by Banker & Tradesman last week The manager, who requested anonymity, said the 200-plus unit development just received a tax increase 35 percent above the previous year rate a few weeks ago, and estimated the McCarthy plans would result in at least another 45 percent boost for the local owners. With the cost of heat included in the rent, the landlord would “almost certainly” have to pass on a measure of any tax hike to the tenants given the corresponding spike in energy prices, acceded the manager.
“There’s no way for it not to impact the tenants,” said the manager, a notion shared by Waltham City Councilor Kenneth Doucette, who said he was surprised by McCarthy’s proposals and equally fearful that tenants will bear the brunt of any financial levy placed on the assets. One large-scale apartment property – representing 6 percent of the city’s rental stock – is the Gardencrest Apartments located in Doucette’s district. After working with Home Properties of America three years ago when the New York real estate investment trust acquired the 696-unit complex, Doucette said he had been impressed by the firm’s willingness to keep rental rates down for low-income tenants in the sprawling development.
‘A Substantial Disincentive’
If McCarthy’s proposals were to pass, Home Properties might indeed be tempted to raise rates, said Doucette, noting that many of the longtime residents are not in what would be described as luxury units. By Doucette’s estimates, Gardencrest could see its levy jump from just over $700,000 last year to $1.63 million should the shift be made to a commercial valuation. That would equate to about $1,330 per unit. “The early figures are kind of scary,” said Doucette, adding that he was not consulted by McCarthy prior to her introducing the measures to a City Council committee last week.
Calls to McCarthy were not returned by Banker & Tradesman’s press deadline, while other city councilors called also were unavailable. The owners of various apartment developments in Waltham also did not respond to inquiries, including officials at Home Properties. According to one real estate expert, the prospect of legal action might be preventing landlords from speaking out, although the observer also maintained that the industry will rally against McCarthy’s initiatives. The manager of the Waltham apartment complex who spoke under condition of anonymity termed it “an issue for everyone,” and called on affordable housing advocates to step forward, as well.
Doucette said he hopes to work with renters and their supporters to determine how the proposals would impact tenants. “We need to define who the little people are,” he said in response to the notion that some renters are well heeled enough to absorb a rental increase. Doucette also questioned whether the tradeoff would be equitable, opining that McCarthy’s plan would not result in savings to homeowners commensurate with the likely hike that would be foisted upon renters.
The apartment manager also noted that homeowners in Waltham receive an annual exemption, one not available to renters, and receive additional tax deductions. The debate was framed by Gov. Mitt Romney’s State of the State address last week as well, said the manager, given that he expressed the longstanding need for affordable housing in the region as key to its future competitiveness. “Meanwhile, our mayor is trying to drive the prices up,” complained the manager.
Meagher expressed similar concerns over any increase in multi-family taxes, calling such initiatives “a substantial disincentive to developing new multi-family housing” and adding that the globalization of the economy mandates that governments do what they can to keep their markets competitive. The cost of housing is a critical reason Massachusetts has lost population for each of the past two years, he added. Another possible outcome suggested by Meagher and Vasil would be for apartment owners to convert their units to condominiums. “It is potentially devastating to the rental market,” said Vasil, maintaining that a mass wave of conversions could be especially onerous on low-income and elderly tenants.
