More than $363 billion in property taxes were levied on single-family homes last year, up almost 7% from 2022 and the largest hike in the past five years, according to Attom Data Solutions LLC. SMOLAW11

Austin Business Journal writes, "Many U.S. homeowners saw their property tax bills rise last year — perhaps substantially, depending on market.

In 2023, $363.3 billion in property taxes were levied on single-family homes, up 6.9% from $339.8 billion in 2022, according to an analysis of 89.4 million U.S. single-family homes by Attom Data Solutions LLC. That increase is nearly double the 3.6% growth rate seen in 2022 and is the largest hike in the past five years.

The average tax on single-family homes increased 4.1% in 2023, to $4,062.

Attom CEO Rob Barber wasn't available for a phone interview by deadline, but in response to emailed questions, he said the reason behind substantial property tax increases for homeowners can vary widely from one area of the country to another. Those factors can include increased expenses for local government operations and salaries for public school employees (often mandated by union agreements), maintaining or building new schools and government facilities, and inflation.

Still, Barber noted that even with the average tax burden up nationally in 2023, the rate of increase was relatively moderate compared to monthly inflation rates experienced throughout 2022 and 2023.

Effective property tax rates increased in much of the country last year because of a slight year-over-year decline in overall home values and higher tax bills, with Attom finding the average home value dropped 1.7% in 2023. That decrease in values, along with rising taxes, resulted in a small increase in effective rates.

States with the highest effective property tax rates are in the Northeast and Midwest, led by Illinois (1.88%), New Jersey (1.64%) and Connecticut (1.54%). New Jersey also has the highest average property tax in the nation, with an average single-family home property tax of $9,488 last year. That's almost 10 times the average of $989 in West Virginia, which had the nation’s lowest average levy last year, according to Attom.

Will the commercial real estate market affect residential property taxes?

The recent uptick in residential real estate taxes comes as many aspects of the commercial real estate market are facing upheaval — office space in particular.

Assessed values on office buildings have been successfully challenged in many municipalities recently, resulting in significant value reductions and a much lower tax bill for those property owners. As the commercial real estate market goes through a reset, it prompts questions about whether local jurisdictions are having to become more reliant on residential owners' property taxes, at least in the short to medium term.

Barber said fluctuations in residential levies often are contingent on shifts in the local tax base.

"These flow from new developments or influxes of new businesses, thereby broadening the tax base and mitigating potential tax escalations," he said. "Conversely, downturns may ensue due to vacancies in retail or office spaces resulting from business closures or relocations. This typically results in the depreciation of commercial properties, consequently reducing tax liabilities for these establishments and heightening the tax burden toward homeowners."

Looking ahead, it's possible municipalities will look to residential owners to shoulder more of the property tax burden as the commercial real estate sector adapts to evolving work and shopping habits, Barber said.

"In the foreseeable future, governing bodies may encounter challenges in constraining property tax hikes for homeowners, particularly in areas grappling with substantial vacancies in shopping districts or underutilized office spaces," Barber said, adding that impact will vary depending on location.

He said when commercial properties see tenant turnover, those owners may qualify for property tax reductions based on assessments tied to rental income from retail or office leases. That subsequent shortfall in revenue requires actions to make up for it, often leading to bigger tax hikes for homeowners.

Danielle Hale, chief economist at, in a phone interview said home prices have gone up so much in recent years that even if government bodies do adjust the rate levied on residential property owners, most are still collecting more on a dollar basis, which means property owners are having to shell out more on a dollar basis.

She said in markets where the commercial tax base is a substantial share of the market, those areas are likely seeing more of the tax burden shift to the residential side of the ledger.

"Given the weakness in the commercial real estate market, that's not likely to resolve very soon," she added. "I think that’s going to put pressure on local governments to either cut back on spending or shift more of the tax burden to individual tax owners."

How do taxes affect the housing affordability picture?

While property taxes — and how much they could rise in the future — don't get a lot of attention from first-time home buyers, they are a factor in mortgage calculations, Hale said.

Taxes are not likely to be top of mind for first-time buyers, who tend to take on a lot of mortgage debt, because those buyers make smaller payments in the beginning, she said. As mortgage balances get paid down, especially with a fixed-rate mortgage, property tax payments tend to become more apparent for those who stay in their homes for longer, Hale said.

She added that in an environment where housing affordability is stretched for many buyers, rising property taxes represent another cost that isn't improving the overall affordability picture.

Barber said rising property taxes add to monthly expenses, an important factor for people looking to buy a house or deciding whether to keep their current home.

"Depending on the geographic area, a 4% increase in property taxes could result in an additional expenditure of several hundred dollars a year," Barber said. "While not deemed substantial, it's a factor worthy of consideration for households experiencing financial constraints.""


Source: Austin Business Journal

Written by: Ashley Fahey

Published: April 8, 2024

Posted by Grossman & Jones Group on


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