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How Property Taxes Climb, Even If Home Value Drops
Millions of homeowners are finding out that their property taxes are either holding steady or climbing, even as their house may be worth much less. There may not be much they can do about it.
In Ohio, Cuyahoga County's fiscal officer, Wade Steen, has been taking many calls from unhappy homeowners. He says they most often live in a community where voters passed a recent levy. That's a property tax measure that boosts funding for things such as schools and libraries.
"Shaker Heights comes to mind, where the voters have voted for those school levies, which is going to naturally raise the taxes that they pay," Steen says.
With about $3,700 paid per $100,000 of home value, the Cleveland-area community of Shaker Heights has the highest property tax rates in the state. Voters approved major school levies in 2006 and 2010. Some residents may grumble, but most enjoy what levies provide.
"We have garbage pickup in our backyard. If they miss my house, and I call, they'll make a special run on another day," says Myra White, who's lived in Shaker since 1964. "On Halloween, there are firetrucks and police cars driving around. I guess that's just kind of for fun, but it's also like a patrolling thing. It's almost ... I hate to say this, but it's a little bit of a concierge environment."
Levies are often the only recourse school districts and other agencies have for increased funding. Kevin O'Brien of the Great Lakes Environmental Finance Center says that's because the recession has forced states to slash budgets, sending less money to counties and municipalities.
"This hurts communities. Not having the revenue that they anticipated from the prior years, and having to carry the same number of staff and the same body of services," O'Brien says. "So they have to find creative ways to cover the gap."
Fixed Rate For Property Taxes
Another reason for property taxes not see-sawing with home value could be state law. In the 1970s and '80s, many legislatures passed bills designed to keep property tax collections from automatically going up with inflation.
"Voters fail to remember that through the '80s when property values were going up astronomically, their tax bills were holding fairly steady, maybe increasing modestly," Steen says. "But yet we never heard anyone say, 'Geez, my property value has doubled in five years. This is great, but my taxes aren't doubling.'"
However, the flip side to these laws, which are found in nearly 40 states, is that when home values plummet, the assessment rate can increase to keep revenues at that fixed rate. That's what's happening now.
Cracking Down On Old Assessments
Homeowners might also take their government to task if it doesn't do annual assessments.
"I live in Virginia, and they reassess property every year, but right across the river in Maryland, they're on a three-year assessment cycle," says Jacqueline Byers, who heads research for the National Association of Counties. "So what can really happen to them is that their property taxes will be high, even in a down economy because they're using data for the value of their property that's two, three years old."
In other words, the assessment in Byers' example would be based on years when home values were higher, and therefore do not reflect the current value.
So what can homeowners do? In most cases, people can challenge their assessment — if they feel it's not accurate and can back up that claim.
Ohio's Cuyahoga County projects 26,000 property valuation complaints this year, almost twice the number from 2011.