Beantown is facing a fiscal crisis that could soon ripple across other major cities, according to a new study from the Boston Policy Institute and the Center for State Policy Analysis. The report warns that plummeting office property values are threatening a vital source of local government revenue, with consequences that extend far beyond the city’s borders.
The researchers analyzed Boston’s financial outlook in light of rapidly declining office building prices, a follow-up to a similar study they conducted last year. While their previous findings were already unsettling, the latest data paints an even grimmer picture. What once seemed like a worst-case scenario now appears “outdated and overly optimistic,” the study notes, underscoring the urgency of the situation. It is a sobering warning for the city and its fate could soon be mirrored in other metropolitan areas where concerns about property tax revenue have been mounting for years.
The vulnerability is stark: once-coveted office buildings are now selling for half their previous values, dealing a severe blow to property tax collections—a cornerstone of Boston’s municipal budget. The decline has been sharper and swifter than anticipated, exacerbated by what the study calls a “lack of decisive action.”
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While some may point to the relative strength of Class A and trophy office properties as a sign of hope, the researchers caution that these high-end buildings account for only about 10% to 15% of the city’s office inventory. Meanwhile, banks have tried to stave off disaster by employing “extend-and-pretend” tactics, keeping struggling properties off the market. But as office vacancy rates soared from 8% in 2019 to nearly 24% in 2025, more properties have changed hands at lower prices, dragging overall valuations down even further.
For Boston, the outlook is bleak. The study projects that general office values will fall by 35% to 45% from 2024 levels, based on recent sales and weak fiscal year 2025 tax collections—a sharp downgrade from last year’s estimate of a 20% to 30% decline. This is particularly troubling because commercial property taxes are Boston’s single largest revenue source, accounting for 35% of the city’s income. By comparison, residential property taxes make up 29%, other taxes 13%, state aid 11%, and all other sources net another 11%. No peer city—whether New York, Chicago, Denver, San Francisco, or Washington, D.C.—relies as heavily on commercial property taxes as Boston does.
The budgetary impact is staggering. The city faces a shortfall that could balloon from $135 million in 2025 to more than $550 million by fiscal year 2029. Over the next five years, the cumulative deficit is expected to reach $1.7 billion. Yet, Boston has not reduced spending or lowered its revenue projections. Instead, officials have responded by raising property tax rates, a move that will force homeowners to absorb a 25% increase over 2024 rates.
Even under the most optimistic scenario—a 20% to 30% decline in office values through 2029—the city would still face a $1.4 billion budget gap over five years, with a $415 million shortfall in 2029 alone. The report rebuts the notion that Boston’s budget will somehow “self-heal,” bluntly stating, “there’s no magic here,” only automatic tax rate hikes to fill the gap.
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