
<PAGE>
 
                                                                     EXHIBIT 8.3

                          GOODWIN, PROCTER & HOAR LLP

                              COUNSELLORS AT LAW
                                EXCHANGE PLACE
                       BOSTON, MASSACHUSETTS 02109-2881
                                                         TELEPHONE (617)570-1000
                                                        TELECOPIER (617)523-1231


                               As of May 5, 1998


Bay Apartment Communities, Inc.
4340 Stevens Creek Blvd. - Suite 275
San Jose, CA 95129

Avalon Properties, Inc.
15 River Road
Wilton, CT 06897

     Re:  Certain REIT Tax Matters
          ------------------------

Ladies and Gentlemen:

     This opinion is rendered in our capacity as counsel to Bay Apartment 
Communities, Inc., a Maryland corporation ("Bay"), whose principal office is 
located at 4340 Stevens Creek Boulevard, Suite 275, San Jose, California 95129, 
in connection with the filing of a Joint Proxy Statement/Prospectus (the "Joint
Proxy Statement/Prospectus") included in the Registration Statement on Form S-4 
(the "Registration Statement") filed by each of Bay and Avalon Properties, Inc.,
a Maryland corporation ("Avalon"), with the Securities and Exchange Commission 
under the Securities Act of 1933, as amended, and declared effective on May 5,
1998.  In rendering this opinion, we have reviewed the Agreement and Plan of
Merger, dated as of March 9, 1998, by and between Bay and Avalon (the "Merger 
Agreement"), the Joint Proxy Statement/Prospectus and such records, certificates
and other documents as we have deemed necessary or appropriate for purposes of 
rendering the opinion set forth herein.  The foregoing documents are referred to
herein as the "Documents."

     In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures, (ii) the authenticity of all documents submitted
to us as originals, (iii) the conformity to the original documents of all 
documents submitted to us as copies, (iv) the authority and capacity of the 
individual or individuals who executed any such documents on behalf of any 
person, (v) the conformity to the final documents of all documents submitted to 
us as drafts, (vi) the accuracy and completeness of all records made available 
to us, and (vii) the factual accuracy of all representations, warranties and 
other statements made by all parties.  We also have assumed, without 
investigation, that (i) all documents, certificates,
<PAGE>
 
                          GOODWIN, PROCTER & HOAR LLP

Bay Apartment Communities, Inc.
Avalon Properties, Inc.
As of May 5, 1998
Page 2


representations, warranties and covenants relied upon in rendering the opinion 
set forth below, and that were given or dated earlier than the date of this 
letter, continue to remain accurate insofar as relevant to the opinion set forth
herein from such earlier date through and including the date of this letter and 
(ii) all representations made "to the best knowledge of" any person(s) or with 
similar qualification are and will be true, correct and complete as if made 
without such qualification.

     In rendering the opinion below, we have relied on certain representations 
from Bay and Avalon set forth in certificates (collectively, the "Certificates,"
and each a "Certificate") relating to Bay's and Avalon's qualification as a real
estate investment trust.  We also have relied on the statements regarding the 
operation and ownership of Bay, Avalon and their affiliates contained in the 
Documents.  We have made no investigation of the accuracy of such 
representations or statements, and the following opinion is expressly 
conditioned on the accuracy of such representations and statements.  We have 
assumed that the Merger and related transactions contemplated by the Documents 
will be consummated in accordance with the Documents and as described in the 
Joint Proxy Statement/Prospectus (including satisfaction of all covenants and 
conditions to the obligations of the parties without amendment or waiver 
thereof) and that all entities have operated and will operate in accordance with
governing documents and applicable laws.

     The opinion expressed below is based on the Internal Revenue Code of 1986, 
as amended (the "Code"), the Income Tax Regulations and Procedure and 
Administration Regulations promulgated thereunder, and existing administrative 
and judicial interpretations thereof, all as they exist as of the date hereof.  
Any changes to the foregoing authorities may result in modifications of the 
opinion expressed below.

     Based upon and subject to the foregoing, we are of the opinion that 
commencing with the taxable year ending December 31, 1994, the form of 
organization of Bay and its operations and anticipated operations as described 
in the Certificates and the Documents are such as to have enabled Bay to qualify
as a real estate investment trust under the Code and to continue to so qualify 
for the taxable year ending December 31, 1998 and for subsequent years, provided
that in each such year Bay meets (or, with respect to that portion of Bay's 1998
taxable year ending on the date hereof, has met) the applicable asset 
composition, source of income, shareholder diversification, distribution, record
keeping and other requirements of the Code necessary for a corporation to 
qualify as a real estate investment trust.

<PAGE>
 
                          GOODWIN, PROCTER & HOAR LLP


Bay Apartment Communities, Inc.
Avalon Properties, Inc.
As of May 5, 1998
Page 3


                                    * * * *

     We express no opinion with respect to the transactions described herein 
other than the opinion expressly set forth herein.  This opinion is furnished 
for the purpose of being included as an exhibit to the Registration Statement, 
and we hereby consent to the filing of this opinion as an exhibit to the 
aforementioned Registration Statement and to the reference to this firm under 
the captions "Certain Federal Income Tax Considerations" and "Legal Matters" in 
the Registration Statement and the Joint Proxy Statement/Prospectus which is a 
part thereof.

                                              Very truly yours,



                                              /s/ GOODWIN, PROCTER & HOAR LLP
