Property Taxes Jumped in 2023, But the Impact Will Not Be Felt Equally

An article (unfortunately behind their paywall) was just published by The Business Journals which looked at the significant increase in property tax bills that are being sent to homeowners with the total tax generated up by 7% versus 2022 & the largest hike in 5-years.

The piece - authored by Ashley Fahey - stated that, according to ATTOM Data Solutions , $363.3B in property taxes were levied on single-family homes in 2023, up 6.9% from $339.8B in 2022 with the average bill for homeowners rising by 4.1% to $4,062.

The analysis showed that states with the highest effective property tax rates were 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.

Of course, no one enjoys paying taxes, but the arguments around this particular topic are rather disparate.

On the one hand – given the pace that home values have risen in recent years – it appears to some that this is a rather small price to pay. However, this is certainly not a universal position.

Those who know me will probably not be surprised that my concern is centered around the impact of taxes on the nation’s first-time buyers. Given that mortgage rates are still hovering around 7%, this additional financial burden is far from insignificant for these would-be homeowners who were not like many of us who were able to take advantage of the historically low rates that were seen in 2021.

Moreover, I am also concerned with retiree owners – especially those on fixed incomes - as this is a significant burden for them.

And there are more intangible impacts from rising taxes on older owners – specifically in California – and it comes in the form of the notorious Proposition 13 which, when enacted in the late 1970’s, capped property tax increases.

Although wildly popular back then, the consequences have been significant with owners essentially receiving a property subsidy which exists as long as the owners didn’t sell. This lowered mobility and, therefore, sales which certainly limited housing supply and led to prices rising at a faster rate that would have been seen had this measure not been enacted.

But I digress....

Ultimately, these taxes do assist municipalities and city governments provide basic services but – given significantly lower tax revenue coming from the depressed commercial real estate sector – I do not expect to see any relief on the horizon.