The following column was published in the September 15 edition of Banker & Tradesman.
With the 2019–2020 Massachusetts legislative
session approaching the halfway point, it is a good time to take
stock of where things stand and what legislative proposals could affect
the commercial real estate industry.
The current legislative session began in
January 2019 and will conclude on July 31, 2020. With more than
7,000 bills filed to date – and more
expected – Massachusetts legislators have the ability
to make dramatic changes affecting every aspect of society.
As legislators consider proposals affecting commercial real
estate and economic development, in general, they must also
consider the economy for the year
ahead. The Greater Boston market is currently viewed
as a stable market for investment; and while vacancy and
unemployment rates remain low, warning signs of a
coming economic downturn are on the horizon.
The pace of economic growth in Massachusetts has
not kept pace with that of the nation over the past year. In the
second quarter of 2019, Massachusetts GDP grew at a 1.4 percent
annualized rate, while U.S. GDP grew at a 2.1 percent rate. In
addition, in August, the 10-year Treasury yields fell below the rate on 2-year
notes for the first time since 2007. This inverted yield curve has been an
indicator of coming recessions for the past 50
This, combined with escalating trade wars and
geopolitical uncertainty, highlight the need for careful consideration of
the potential statewide impact of legislative proposals.
While it is nearly impossible to predict how the session
will end, legislative leaders have expressed an interest in tackling some
significant policy issues including tax revenue, housing and
climate change. Given the impact these issues will have on commercial real
estate, the details matter.
Revenue has been a popular word on Beacon Hill in recent months, with numerous transfer tax proposals filed. The bills all seek to create revenue for a variety of funding priorities, including affordable housing, climate change, education and transportation.
However, the transfer tax is not the best approach
to adequately address these issues, particularly since the revenue will be
pegged to the real estate market.
With anticipated market instability, these
taxes many not serve as a stable funding source. If passed,
they will increase the cost of housing and commercial development, which has
the potential for negative ripple effects throughout the economy.
Given the environmental, public health, safety and economic development threat posed by climate change, legislation on this issue is expected this session.
The House passed H. 3846, An Act Relative
to GreenWorks, in July. It is a $1.3 billion energy and
resiliency bill designed to offset climate change, creating a new grant program
for cities and towns throughout Massachusetts to fund projects focused on
climate resiliency. It is modeled after the
successful MassWorks infrastructure program and builds on the
Environmental Bond Bill passed in 2018.
Climate change affects all residents of
the commonwealth. Therefore, the burden for addressing this issue should
Unlike transfer tax proposals, which only target a subset of
the population and may drive up the cost of
housing, GreenWorks is a far more equitable approach and should be a
top priority for the legislature.
Finally, one of the most significant economic issues in need of legislative action is the current housing crisis.
The supply of housing is not keeping up with demand, which
in turn is driving up rents and home sale prices. An Act to Promote
Housing Choices (H.3507) provides a clear framework for cities and
town to encourage new housing production.
The bill, which has the support of the Massachusetts
Municipal Association, the real estate industry, affordable housing groups like
CHAPA and business leaders, allows cities and towns to adopt zoning best
practices by a simple majority vote, rather than the current two-thirds
Whether it’s senior housing or multifamily housing,
countless units are never built because of the need for a supermajority
vote. Given the broad support for this bill, the legislature needs to act
on this legislation in advance of spring town meetings,
where countless projects will be up for review at the local
While these are only a few of the issues expected to
move this session, it’s clear that decisions made at the State
House over the next 10 months will have a significant
impact on the real estate industry for years to come. NAIOP
will continue to work with legislators to ensure that the economic impacts
of legislation are considered and that Massachusetts remains a great
place to live and work.