When Property Taxes Are Unstable, Value Becomes Volatile

• Revenue roulette: Boston’s shifting revenue math is exposing how quickly changing property values can upend a city’s financial foundation.

• Day care is having a day: Institutional and private investors are pouring money into early education properties as childcare demand grows.

• In-store buy-backs: Retailers are increasingly buying real estate instead of leasing.

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Editor’s Pick

When Property Taxes Are Unstable, Value Becomes Volatile

The recalibration of property tax policy in Boston has again highlighted the fragility of municipal revenue systems built on commercial real estate valuations. Under proposals by Mayor Michelle Wu, the city is moving to raise residential property taxes by roughly 13 percent starting in January, largely driven by a steep decline in the value of commercial buildings as the office market slumps. That increase equates to about $780 annually for the average homeowner. Meanwhile, commercial owners may see minor decreases, on average saving roughly $210, though rates depend on location and property type.

That shift is more than a local oddity, it reflects a broader national pattern. States and municipalities are rethinking how they assess and levy property taxes in reaction to changing property values, budget pressures, and shifting economic conditions. Take Vermont: as of December 2025, the state projects a nearly 12 percent increase in property tax bills next year, driven by rising education costs and school spending, even as enrollment declines. That’s on top of a nearly 41 percent increase over the past five years. Meanwhile, in Ohio, lawmakers are debating a suite of property-tax reforms aimed at reshaping valuations and limiting future tax hikes by giving county auditors more control over home valuations and capping “inside millage” increases (the kind that are raised without a public vote). The goal is to slow or stabilize tax burdens on homeowners.

Even more dramatically, some states like Florida are flirting with deeply rethinking, or entirely eliminating, traditional property tax regimes. The idea of abolishing property taxes in states like Florida has gained discussion in policy circles and among some lawmakers, though details on how such a transition would work remain murky and politically fraught. Reports suggest the proposal could go before voters, but questions about how to replace lost revenue for schools, infrastructure, and public safety remain unanswered.

These shifts carry serious implications and require a recalibration of how risk, return, and long-term value are assessed. In markets like Boston, rising residential-tax burdens may suppress demand for owner-occupied housing. In states like Vermont, higher tax bills could dampen buyer appetite, especially among retirees or middle-income households, potentially cooling certain housing sub-markets. In Ohio, reform efforts could mitigate future volatility but uncertainty over valuation standards or local millage hikes adds a layer of unpredictability. And in states entertaining full property-tax repeal or radical restructuring, investors must weigh the benefits of lower holding costs against the risk of service-level cuts, regulatory upheaval, or new types of taxes (income, sales, user fees) replacing the lost property-tax base.

What’s becoming clear is that the old assumption of stable, flat, or slowly rising property taxes as a background constant for valuation may no longer hold. Instead, tax policy itself is emerging as a material macro factor—one that can swing values, influence occupancy or ownership decisions, and suddenly reshape market dynamics. For anyone investing or operating real estate today, paying attention not just to vacancy rates or cap rates but also to legislative sessions, budget votes, and state revenue pressures may be critical to successfully forecasting returns.

Overheard

Childcare and Preschool Facilities Attract Growing Capital

Investors are giving early education properties a closer look as childcare centers, preschools, and other learning facilities show remarkably strong fundamentals. Demand for early childhood education continues to climb as more families return to work, dual-income households become more common, and younger demographics reshape both suburban and urban markets. That steady demand is turning these buildings into something investors increasingly view as reliable, income producing assets.

Part of the appeal comes from the structure of the leases and the reliability of the operators. Many early education providers sign long-term agreements with built in rent escalations, and a surprising number of them have strong credit profiles. The sector also benefits from a degree of recession resistance, since early education is tied more to societal necessity than discretionary spending. Institutional players and private equity groups have been making larger commitments in recent years, and transaction activity in this niche has begun to outpace several more traditional commercial property categories.

The rising interest in early education properties suggests a shift in how investors define essential service real estate. If this asset type becomes more established, developers and owners could begin integrating early learning spaces into mixed use projects and community-centered developments. Underwriting may start treating these tenants more like medical or civic users, with long duration, dependable occupancy. At a moment when office and some retail categories face uncertainty, early education real estate may quietly become one of the steadier, more strategically useful corners of the commercial property landscape.

Retail Chains Shift From Leasing to Owning

The latest wave of retail real estate activity shows major chains rebooting expansion—not by signing new leases, but by purchasing property. After years of lease-based growth, several retailers have snapped up prime retail real estate, in some cases becoming landlords themselves. With retail vacancy at historically low levels and construction of new retail space constrained, ownership offers a path to control rent escalation, secure a long-term footprint, and hedge against a volatile leasing market.

That shift isn’t happening in isolation. Supply remains tight because new retail construction has slowed sharply in many markets deliveries of new space remain well below long-term averages, while older retail inventories are being demolished or repurposed. At the same time, demand is increasingly concentrated among discount, off-price, grocery-anchored, and service-oriented tenants — retailers whose business models are less threatened by e-commerce and more dependent on stable, physical presence.

For the broader commercial real estate landscape this may signal a structural recalibration. As retailers convert from tenants into property owners, the traditional landlord-tenant model weakens. That could shrink the stock of speculative retail landlords, reduce leasing-driven volatility, and increase pressure on legacy landlords with large portfolios of leased space. For investors and lenders, retail real estate, especially well-located, value-driven, and discount-oriented properties, may become a safer bet than previously thought. And for developers, the barrier to new retail construction remains high, reinforcing the advantage of ownership for those with capital and long-term vision.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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