Cambridge City Manager Yi-An Huang released a memo on Thursday announcing the proposed property tax rates for FY 2027. If passed by City Council, commercial properties will be taxed $16.99 per thousand dollars of value, and residential properties will be taxed at $6.95 per thousand dollars of value. This marks a 21 percent increase in the commercial rate, and a four percent increase in residential rate compared to last year, for a total increase of a little less than seven percent.
City council will vote on the proposed levies during their meeting on Monday, Sept. 28. The Council has typically approved the rates, though sometimes the item is charter-righted, as happened in 2025.
While commercial property tax rates in the high teens aren’t unprecedented (going as high as $21.50 in FY 2013 before decreasing for about a decade), this is the second big jump in the commercial rate in as many years. Last year, the city made headlines for increasing the rate by 22 percent, for a total increase of 47 percent since FY2025.
Like last year, the assessed value of Cambridge residential properties grew, but not by enough to cover the amount that commercial property values fell. For the second year in a row, the total assessed value of Cambridge properties went down by about $3 billion. Despite commercial properties making up a smaller proportion of total assessed property value in the city, like last year they’ll be on the hook for 62 percent of total tax revenue.
While this sounds grim for commercial property owners, increases in commercial property tax rates won’t always translate into increases in property tax bills.
“So if I had a commercial building that was worth $100 million two years ago, and then last year was worth $90 million, and then this year it’s worth $80 million, the tax rate may have gone up, but I may be paying the same actual dollar amount of taxes,” said City Councillor and Finance Committee Co-Chair Patty Nolan in an interview with Cambridge Day. “For many small businesses, very few will see an actual 21 percent increase.”
The city will remain solidly below its levy limit, at 82 percent of the maximum amount it is allowed to tax by state law. However, municipalities can’t set a rate that’s more than $25 per $1,000 of value. If Cambridge commercial property rates continue to go up by the same amount as they have in the last two years, the city will hit its levy ceiling in two years. It will then have to make a choice: hike rates for residential property taxpayers, or cut budgets.
What about Prop 2½?
In 1980, Massachusetts passed Proposition 2½, which set a levy limit constraining the year-over-year increase localities can raise in tax revenue to 2.5 percent. The law, which took effect at the start of fiscal year 1982 (July 1981), also established a levy ceiling, under which total assessed property values can’t be taxed by more than 2.5 percent, or $25 per $1,000.
But, when assessed property values go down, municipalities need to tax a higher proportion of assessed property value — otherwise, they would lose revenues used for essential needs such as maintaining roads and paying teachers and police. The levy limit is not calculated based on the year-over-year change in the total tax rate, but rather its total year-over-year cap in tax revenue.
So, the city can increase the tax rate on commercial or residential property by more than 2.5 percent over the previous year without violating Prop 2½ when property values go down. That’s because the city has a smaller tax base to begin with.
In addition, Prop 2½ applies to the maximum amount a city is allowed to tax, not the amount that it chose to tax the previous year. A city can also increase total tax revenue by more than 2.5 percent in one year depending on how far the levy was set below its capacity the previous year — which is what happened in Cambridge this year. In FY2026, the city raised 80 percent of its total allowed tax revenue. This year, it went up to 82 percent of a cap that was already higher. The levy limit is always increasing, even if property values are not.
Another quirk: Cities can generate revenue above the levy limit by taxing new growth in the assessed property value. This allows increases in property values due to new construction to be folded into the tax base. But with heightened construction costs stagnating development, the amount Cambridge is able to tax on new growth has gone down.
Of course, municipalities in financial jeopardy can always try to go above Prop 2½ limits by putting an override to the voters. These have been a common feature in other cities and towns, who on occasion will vote to tax themselves more. Cambridge has had one override vote, in 1982 — right after Prop 2½ went into effect. That override passed, which meant the city didn’t just increase its levy limit for that year, but set its base for future years at a higher level.
Will Cambridge face an override vote in the next couple of years? Nolan said it was a possibility but “I don’t expect it to happen.” She cited the city’s history of moderate budget increases.
The rate versus your rate
The type of residential or commercial property someone owns affects their tax bill. People who own condominiums, which have seen sluggish growth in property values, will likely not see much of a change in their tax bill. Owners of single, two- and three- family homes, however, could see taxes go up by about $800 or more.
Source: City of Cambridge
Note: Values are median prices.
* Factors in 30% discount for owner-occupied homes.
Individual residential rates are also drastically impacted by whether or not they are owner-occupied. Those who live in the homes they own receive a 30 percent discount on their tax bill, and may be eligible for additional exemptions depending on owner age, family structure, disability status, or status as a military veteran.
On the commercial side, property types hit hardest by declining property values will absorb less of the 21 percent increase. Tax bills for office space will mostly be unchanged, while those who own space for retail shops, restaurants, and hotels will see a bigger hike.
Nolan said she and other city officials have reached out to business owners ahead of the meeting to ensure they were aware of the increases, but emphasized the importance of trying to keep residential rates low.
“While it may seem reasonable to say, well, let’s just raise the taxes for residential [payers]. If we want to continue to be conscious of and sensitive to the middle class in Cambridge, I think we have to tread very carefully,” she said. “You may not have an extra $1,000 just hanging around.”
Source: City of Cambridge
Note: “Commercial tax rate” refers to the tax rate applied to commercial, industrial, and personal property. References to commercial property values refer to the combined value of commercial and industrial property, but excludes personal property.
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