What Difference Does Commercial Development Make? Part 1: Taxes

Out there in the streets, I’ve been listening to a lot of you. Outside of the fact that very few of you are interested in living next to a 20+ story tower of luxury apartments, even fewer of you are interested in renting a Studio apartment there for $2500/month. Not too many of us that live here are excited by the ongoing march of luxury upgrades and renovations forcing us from our existing housing.

One thing that has come up a lot though is a desire for more commercial development in Somerville. But why does commercial real estate matter?

The bottom line for the city is: taxes. Commercial property is taxed at a much higher rate than residences. A quick look at the Somerville Assessor’s Office page shows that the tax rates for commercial properties are $18.81, versus $11.67 for residential, per $1,000 value.

But that’s not the only difference. Homes (including multifamily buildings where the owner occupies at least one of the units) are eligible for a residential exemption. That means $235,399 of the houses value is exempt from taxation – which saves every homeowner $2,747 per year in taxes.

What that all adds up to is a big difference for the city’s coffers. How big?

$500,000 condo: $3,087 annual taxes
$500,000 store: $9,405 annual taxes

$800,000 condo: $6,589 annual taxes
$800,000 office: $15,048 annual taxes

In short, every commercial space brings the city 3x the revenue of every residential space.

This is why commercial development matters – it can reduce the burden of the city’s budget which now falls almost entirely on homeowners. It’s no accident that Somerville residents pay twice the taxes that our neighbors in Cambridge pay – and have less residential exemption as well.

With more commercial development, we can stop the relentless residential property tax increases the city has planned for us. We can keep seniors on fixed incomes in their homes. We can keep rents from endlessly escalating on families and young adults alike.

With enough commercial development, we can meet all the city’s immense financial burdens – and we can even provide a benevolent landlord credit to encourage affordable rents in our neighborhood.

We can do better. Insisting on commercial development instead of endless luxury condo construction is a big part of how we can keep housing affordable in Somerville.