Skyrocketing home prices over the last year may soon hit current homeowners in the form of property taxes. Housing experts are predicting property taxes to climb higher in 2021 than the 4% uptick in 2020.
Many city governments lost revenue during the COVID-19 pandemic and, as reassessments kick in, homeowners may be faced with a soaring bill. Property taxes are expected to increase by about 6.5% in 2021, according to realAppeal, a company that helps homeowners appeal property tax bills.
“Many of our clients who are older and living off of Social Security or pensions are beginning to wonder whether or not they’ll be able to remain in their homes as their property tax bills continue to rise,” Frank DiZenzo, chief revenue officer of realAppeal, told realtor.com®.
Property taxes are collected by local city governments to help pay for services like fire, police, and schools. Jurisdictions follow different timetables of when they reassess home values and update bills. Property taxes are usually calculated as a percentage of a home’s taxable value. When home prices rise, they often do too.
The 2020 housing boom may “take a couple years to fully translate into dramatically higher property tax bills because counties usually reassess property values every few years, often three-year intervals,” Brian Davis of Spark Rental, which provides software for housing providers, told realtor.com®.
About 34 states restrict how much taxes can increase in a single year too, providing some level of protection to homeowners. For example, California limits that assessed home values cannot grow more than 2% in a year until the home is sold—Florida limits growth in primary residences to 3% per year. Forty-six states, as well as Washington, D.C., also offer some sort of homestead exemption, which can lower taxes for homeowners who use the home as a permanent residence.
“In addition to increases in home values and their assessments, we’re seeing many county tax jurisdictions increase their property tax rates as well, to bolster their revenues after suffering from reduced collections from other sources,” DiZenzo told realtor.com®.
Commercial properties may have suffered during the pandemic with abandoned office buildings. Local governments may need to rely more on residential tax collections to make up for that loss.
Property taxes can vary drastically from state to state and city to city. Metro areas in Alaska, Colorado, Washington, Georgia, and California had the highest property tax rises last year. For example, in Anchorage, Alaska, average property taxes increased by $987.65 or 26.2% over one year, according to ATTOM Data Solutions, a real estate research firm.
Property taxes tend to be lowest in the South. For example, in Alabama, homeowners pay some of the lowest in the country with an average of $841 a year paid in 2020, according to ATTOM Data Solutions. The highest overall property taxes tend to be in the Northeast, California, Texas, and New Jersey. New Jersey has the highest average property tax bills at $49,196.
Source: https://magazine.realtor/