Is your Parking Spot Worth its Weight in Gold?
"The way humans hunt for parking and the way animals hunt for food are not as different as you might think."
-- Tom Vanderbilt
This year for the first time, some of Boston's homeowners received two tax bills: one for their residential dwelling and one for their parking space.
The change is the result of a new policy being implemented by the Commissioner of Assessing and the Appellate Tax Board. The rationale offered by the Assessing Department is that the policy is meant to ensure an equitable tax burden for parking space owners.
Parking that is bundled together with residential property has long been subject to taxation, with the parking space component included in the assessed value. There are also stand-alone parking spaces that have been taxed, prior to the implementation. However, many of the garage spaces constructed in recent years, with parking spaces not attached to the dwelling, have gone untaxed. The intention is to tax these assets through a uniform application of the new policy.
The tax rate for parking spaces is set at the same rate as the rate for residential properties: $12.58 per thousand dollars of assessed value.
Parking space owners can apply for relief in the form of an abatement in January only, citing comparable parking spaces taxed at a lower level, or pointing to sales of comparable parking spaces at prices lower than their assessed values. (As always, please consult a professional for specific tax advice.)
What effect will this policy change have on parking space rental and sale values?
In the short term, the new tax could prompt some parking space owners to push their rents to the limit to cover the incremental cost.
It also may adversely impact the sale values of stand-alone spaces. Unless rents for these spaces increase, the net effective yield to investors will be lower, and the operating costs borne by space owners will be higher. It is entirely possible that the market price of parking spaces could adjust downward commensurately.
On the other hand, Boston's parking market is characterized by short supply and inelastic demand on the part of landlocked homeowners who will do just about anything to find a space for their late model luxury vehicle.
A safe bet is that buyers and renters will absorb the new tax, and market values for spaces won't be getting cheaper anytime soon.
Sources: City of Boston Assessing Department, LINK Boston.
Find this story and more in our Fall 2014 Open Letter to South End Stakeholders. Read all about the latest real estate trends, forecasts, and an in-depth look at the South End community.