On today’s show we are talking about property taxes.
We have experienced dramatic increases in costs for owners of multi family apartment properties over the past couple of years. The biggest contributors have been the cost of capital as a result of rising interest rates and the rising cost of insurance.
In some areas of the southern United States, insurance costs are up by 500%-700%. Insurance increases of 30%-50% are routinely being reported by property owners that I speak with.
The cost of providing government services naturally has increased as well. Local governments derive the majority of their revenue from property taxes and to a lesser degree from development impact fees.
From time to time the jurisdictions can also alter the formula they use to determine property value. For example in the wake of the 2008 crisis, property values fell widely across many parts of the United States. The net result was that the assessed value for tax purposes also fell. Many property owners appealed their tax assessments and were successful in having their property taxes reduced significantly.
Of course the cities in which the values fell did not have a corresponding fall in operating expenses. They still needed to pick up the trash, cut the grass, pay the school teachers, provide police and fire service and so on.
In response, some cities changed the formula by which the property values were assessed.
The housing market surged during the pandemic sending the value of the typical U.S. home 37% higher than in February 2020 prior to the crisis.
Cities and counties typically reassess property values every year or two, although some regions have gaps of several years between reassessments. That means homeowners are just now seeing the real estate boom reflected in their tax bills.
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Host: Victor Menasce
email: [email protected]
