Rising property tax bills terrorize homeowners in some states, but others protect the homeownership dream.
Horror stories abound of homeowners getting blasted with a huge property tax increase that could make their residence unaffordable. In Hamilton County, Ohio, for example, many homeowners received bills in early 2024 that wereas much as 500% higher than their previous tax payment. Some feared a foreclosure would loom in their future if they couldn’t pay the bill.
While homeowners love to track the rising value of their residences, the prospect of skyrocketing property taxes is not so appealing. But state and local governments rely on property taxes to fund their budgets, particularly for schools. Some states have regulations that manage to keep property tax bills in check and protect homeowners, but many don’t.
According to a recent report by ATTOM, a real-estate data analytics company based in Irvine, Calif., the average tax on a single-family home increased 4.1% to $4,062 in 2023—following a 3% jump the previous year. Total property taxes for homes rose 6.9% in 2023 compared with 2022, which was the largest jump in five years and nearly double the increase in 2022.
However, regulations and tax policies vary from one location to another even within a state, so the crisis of unsustainable tax bills isn’t universal. In addition, inflation has distorted people’s understanding of how real property tax burdens have changed in recent years, says Adam Langley, associate director of tax policy at theLincoln Institute of Land Policy, a nonprofit think tank in Cambridge, Mass. that researches effective solutions for land and taxation policies.
“From the second quarter of 2020 to the second quarter of 2024, per capita property taxes increased nearly 25%—a seemingly huge rise,” Langley says. “But total inflation over that period was 22%, per capita income grew 29% and housing prices rose 48%. After accounting for inflation, per capita property taxes increased just 2%.”
Still, that jump can be a burden to homeowners facing rising costs, especially those on a fixed income.
Caps on Taxes
High property tax rates usually reflect some combination of either heavy reliance on property tax in states with low sales and income taxes, low home values that drive up the tax rateneeded to raise enough revenue, or higher local government spending, according to the Lincoln Institute.
“Nearly all states impose some type of limit on property taxes, but how the limits work and their impacts on taxpayers and local governments vary in important ways,” Langley says. “Even without tax caps, local governments will usually reduce property tax rates when values rise significantly, so that taxes do not rise too fast.”
In most cases, reducing property tax rates – a common practice in many parts of the country, but not everywhere - is all that is needed to prevent a spike in property tax bills when home values are rapidly appreciating, he says.
“One policy that can encourage local governments to reduce tax rates when property values rise isTruth in Taxation’,” Langley says. “These laws require disclosure of proposed increases in property tax revenues—whether due to increases in tax rates or property values—and a public hearing on the proposal. The local governing body is usually required to vote for any increase in the levy; they can’t simply leave tax rates unchanged and let taxes increase while doing nothing.”
Utah has some of the strongest Truth in Taxation requirements in the nation, according to Langley, and research shows that it has constrained growth in property taxes without the negative consequences of other types of tax limits.
In Canada, cities have used a variety of methods to control property tax burdens, such as diversified tax strategies, balancing budgets without heavy tax increases, and gradual property tax increases. In Vancouver, significant tax rate reductions have been implemented over the past decade through efficient fiscal management.
Texas Legislation Punches Back on Property Taxes
In Texas, which doesn’t have a state income tax, property taxes were among the highest in the nation – and growing ever higher as home values rose in one of the fastest-growing states in the country. For several years, legislators grappled with how to control the spike in taxes.
In 2023, they took a Texas-size step with a $12.7 billion package that includes tax breaks for homeowners and money for school districts. School budgets are typically the biggest consumers of property tax revenue. In Texas, school funding usually represents the biggest portion of Texans’ property tax bills, according to theTexas Tribune.
That 2023 package was layered on top of 2019 legislation that established tighter limits on how much local governments and school districts can raise property taxes each year. In November 2023, voters approved a measure to boost the homestead exemption – for residents who live in their home as their primary residence – from $40,000 to $100,000.
According to the Texas Tribune, “Lawmakers allocated $5.6 billion to pay for the bump in the exemption. In addition, the state had already set limits on how much property assessments can be increased in one year at 10%. Voters also sent $7.1 billion to school districts to bring down their tax rates. Seniors and homeowners with disabilities received additional tax relief under the 2023 tax law.”
The Texas Tribune reviewed 50 homeowner’s tax bills and found that all of them saw their property tax bills drop as a result of the 2023 legislation.
For example, “The longtime owners of a home in the Gilbert-Emory neighborhood in west Dallas, which is quickly gentrifying, did see their school property taxes drop to zero last year. Their home’s market value more than tripled between 2018 and 2023, and their city and county taxes rose by double-digit percentages in that time. But their total tax bill was 22% lower at the end of that five-year period.”
Circuit Breaker Option Protects Some Homeowners
Property tax “circuit breakers,” which are programs that provide a tax credit to offset property taxes above some threshold percentage of income, are the best option for ensuring that homeowners aren’t overburdened by property taxes, Langley says. For example, a circuit breaker could offset property taxes above 5% of income.
“They can be really valuable for seniors on fixed incomes, low-income homeowners in gentrifying neighborhoods or workers who lost their jobs,” Langley says.
Some locales offer property tax deferrals.
“Property tax deferrals can be a good option for seniors,” Langley says. “They allow homeowners to delay payment of their property tax until their home is sold or inherited, at which point the deferred taxes are due, usually with some interest. They allow homeowners who are housing-rich but income poor to draw from an otherwise illiquid asset—their home equity—to pay their current taxes and stay in their home.”
Policy Recommendations and Criticisms
The Lincoln Institute’sresearch on property tax across 50 states found that some ways to protect homeowners while continuing to provide the essential revenue for local governments include quality assessments and property revaluations for accuracy, along with state aid formulas to address the discrepancies in revenue in different locations. Property tax relief measures such as circuit breakers and deferrals are important to protect the most vulnerable homeowners.
While many homeowners pay property taxes through an escrow account with their mortgage lender, the Lincoln Institute recommends that all homeowners should be allowed to pay property taxes monthly to reduce the burden of lump sum payments.
When property values rise rapidly, its critical for local governments to reduce tax rates to keep property taxes affordable, Langley says. However, he recommends against blanket tax limits.
“States can provide targetedproperty tax relief to help homeowners with the heaviest tax burdens, with property tax circuit breakers and tax deferrals, but they should resist the temptation to impose tax limits on local governments,” he says. “A statewide tax limit imposes a one-size-fits-all limit on very different local governments—making it harder for them to respond to changing circumstances and to reflect the spending preferences of their local constituents. In the long-term, tax limits can reduce the quality of local services, including schools.”
Homeowners can lobby their legislators and elect officials who recognize the dangerous burden that tax increases can place on property owners. For individual property tax relief and concerns, homeowners can check their county tax assessment website or enter their address for a free estimate at Ownwell.com, a company that helps homeowners address property tax issues based in Austin.
Property Taxes Can Be Fixed. Here’s How.
Rising property tax bills terrorize homeowners in some states, but others protect the homeownership dream.
Horror stories abound of homeowners getting blasted with a huge property tax increase that could make their residence unaffordable. In Hamilton County, Ohio, for example, many homeowners received bills in early 2024 that were as much as 500% higher than their previous tax payment. Some feared a foreclosure would loom in their future if they couldn’t pay the bill.
While homeowners love to track the rising value of their residences, the prospect of skyrocketing property taxes is not so appealing. But state and local governments rely on property taxes to fund their budgets, particularly for schools. Some states have regulations that manage to keep property tax bills in check and protect homeowners, but many don’t.
Some places are even rolling back property taxes back and turning to other funding sources. One of them, North Dakota, is set to vote in November on eliminating property tax altogether.
How Bad is the Property Tax Crisis?
According to a recent report by ATTOM, a real-estate data analytics company based in Irvine, Calif., the average tax on a single-family home increased 4.1% to $4,062 in 2023—following a 3% jump the previous year. Total property taxes for homes rose 6.9% in 2023 compared with 2022, which was the largest jump in five years and nearly double the increase in 2022.
However, regulations and tax policies vary from one location to another even within a state, so the crisis of unsustainable tax bills isn’t universal. In addition, inflation has distorted people’s understanding of how real property tax burdens have changed in recent years, says Adam Langley, associate director of tax policy at the Lincoln Institute of Land Policy, a nonprofit think tank in Cambridge, Mass. that researches effective solutions for land and taxation policies.
“From the second quarter of 2020 to the second quarter of 2024, per capita property taxes increased nearly 25%—a seemingly huge rise,” Langley says. “But total inflation over that period was 22%, per capita income grew 29% and housing prices rose 48%. After accounting for inflation, per capita property taxes increased just 2%.”
Still, that jump can be a burden to homeowners facing rising costs, especially those on a fixed income.
Caps on Taxes
High property tax rates usually reflect some combination of either heavy reliance on property tax in states with low sales and income taxes, low home values that drive up the tax rate needed to raise enough revenue, or higher local government spending, according to the Lincoln Institute.
“Nearly all states impose some type of limit on property taxes, but how the limits work and their impacts on taxpayers and local governments vary in important ways,” Langley says. “Even without tax caps, local governments will usually reduce property tax rates when values rise significantly, so that taxes do not rise too fast.”
In most cases, reducing property tax rates – a common practice in many parts of the country, but not everywhere - is all that is needed to prevent a spike in property tax bills when home values are rapidly appreciating, he says.
“One policy that can encourage local governments to reduce tax rates when property values rise is Truth in Taxation’,” Langley says. “These laws require disclosure of proposed increases in property tax revenues—whether due to increases in tax rates or property values—and a public hearing on the proposal. The local governing body is usually required to vote for any increase in the levy; they can’t simply leave tax rates unchanged and let taxes increase while doing nothing.”
Utah has some of the strongest Truth in Taxation requirements in the nation, according to Langley, and research shows that it has constrained growth in property taxes without the negative consequences of other types of tax limits.
In Canada, cities have used a variety of methods to control property tax burdens, such as diversified tax strategies, balancing budgets without heavy tax increases, and gradual property tax increases. In Vancouver, significant tax rate reductions have been implemented over the past decade through efficient fiscal management.
Texas Legislation Punches Back on Property Taxes
In Texas, which doesn’t have a state income tax, property taxes were among the highest in the nation – and growing ever higher as home values rose in one of the fastest-growing states in the country. For several years, legislators grappled with how to control the spike in taxes.
In 2023, they took a Texas-size step with a $12.7 billion package that includes tax breaks for homeowners and money for school districts. School budgets are typically the biggest consumers of property tax revenue. In Texas, school funding usually represents the biggest portion of Texans’ property tax bills, according to the Texas Tribune.
That 2023 package was layered on top of 2019 legislation that established tighter limits on how much local governments and school districts can raise property taxes each year. In November 2023, voters approved a measure to boost the homestead exemption – for residents who live in their home as their primary residence – from $40,000 to $100,000.
According to the Texas Tribune, “Lawmakers allocated $5.6 billion to pay for the bump in the exemption. In addition, the state had already set limits on how much property assessments can be increased in one year at 10%. Voters also sent $7.1 billion to school districts to bring down their tax rates. Seniors and homeowners with disabilities received additional tax relief under the 2023 tax law.”
The Texas Tribune reviewed 50 homeowner’s tax bills and found that all of them saw their property tax bills drop as a result of the 2023 legislation.
For example, “The longtime owners of a home in the Gilbert-Emory neighborhood in west Dallas, which is quickly gentrifying, did see their school property taxes drop to zero last year. Their home’s market value more than tripled between 2018 and 2023, and their city and county taxes rose by double-digit percentages in that time. But their total tax bill was 22% lower at the end of that five-year period.”
Circuit Breaker Option Protects Some Homeowners
Property tax “circuit breakers,” which are programs that provide a tax credit to offset property taxes above some threshold percentage of income, are the best option for ensuring that homeowners aren’t overburdened by property taxes, Langley says. For example, a circuit breaker could offset property taxes above 5% of income.
“They can be really valuable for seniors on fixed incomes, low-income homeowners in gentrifying neighborhoods or workers who lost their jobs,” Langley says.
Some locales offer property tax deferrals.
“Property tax deferrals can be a good option for seniors,” Langley says. “They allow homeowners to delay payment of their property tax until their home is sold or inherited, at which point the deferred taxes are due, usually with some interest. They allow homeowners who are housing-rich but income poor to draw from an otherwise illiquid asset—their home equity—to pay their current taxes and stay in their home.”
Policy Recommendations and Criticisms
The Lincoln Institute’s research on property tax across 50 states found that some ways to protect homeowners while continuing to provide the essential revenue for local governments include quality assessments and property revaluations for accuracy, along with state aid formulas to address the discrepancies in revenue in different locations. Property tax relief measures such as circuit breakers and deferrals are important to protect the most vulnerable homeowners.
While many homeowners pay property taxes through an escrow account with their mortgage lender, the Lincoln Institute recommends that all homeowners should be allowed to pay property taxes monthly to reduce the burden of lump sum payments.
When property values rise rapidly, its critical for local governments to reduce tax rates to keep property taxes affordable, Langley says. However, he recommends against blanket tax limits.
“States can provide targeted property tax relief to help homeowners with the heaviest tax burdens, with property tax circuit breakers and tax deferrals, but they should resist the temptation to impose tax limits on local governments,” he says. “A statewide tax limit imposes a one-size-fits-all limit on very different local governments—making it harder for them to respond to changing circumstances and to reflect the spending preferences of their local constituents. In the long-term, tax limits can reduce the quality of local services, including schools.”
Homeowners can lobby their legislators and elect officials who recognize the dangerous burden that tax increases can place on property owners. For individual property tax relief and concerns, homeowners can check their county tax assessment website or enter their address for a free estimate at Ownwell.com, a company that helps homeowners address property tax issues based in Austin.
By Michele Lerner, Associate Editor
Michele Lerner is an award-winning freelance writer, editor, and author who writes about real estate, personal finance, and business.Also Read