House Values Fall 30%, But Property Taxes Keep Rising

[NNN0LHI]

http://www.benzinga.com/10/12/725270/house-values-fall-30-but-property-taxes-keep-rising

By Charles Hugh Smith
December 22, 2010 9:50 AM

Even though home values have plummeted by a third, property taxes are increasing: welcome to the Great Middle Class Squeeze.

You might think that with home prices off by 30% or more since the housing/credit bubble popped in 2006, property taxes would have declined by a similar percentage. But you'd be wrong: they've gone up. As if the massive reduction in home equity wasn't enough of a blow to the Middle Class, they're also paying higher property taxes.

Though house prices have declined roughly 30% nationally since the 2006 peak of the housing bubble, property taxes have continued their decade-long rise, jumping $45 billion (over 10%) since 2008.

Local governments are responding to declining revenues by jacking up all taxes and fees. To counteract sharp declines in property values, municipalities are raising their property taxe rates, squeezing more out of properties even as they drop in value. Though there are local variations, the result is the same: property taxes are rising.

[RUMMYisFROSTED]

1. Nice.

[madrchsod]

2. our homeowners insurance went up....

the house value has dropped 10% but insurance went up 5% from last year. we are re-accessing our coverage.

[Tesha]

5. Did the cost to rebuild your house go down?

Or just the amount for which you could sell the land and building(s)?

Tesha

[Tesha]

3. Why would anyone expect real estate taxes to drop?

Did it somehow become 30% cheaper to run local
governments?

Tesha

[NNN0LHI]

6. Union autoworkers recently took a 50% cut in pay

Did you think pay cuts were going to be just for them?

Don

[Tesha]

9. So I'll ask again, more directly:

What should local governments cut to save 30%? Which services
will you entirely give up (because that's what we're really talking
about to achieve those sorts of bottom-line cuts)?

Tesha

[jtuck004]

32. Give me a list and a red marker. I will show you.

It's hyperbole to threaten eliminating most programs. It is reasonable to say there will be a lower level of services.

98% of the people you deal with have most or all their wealth, if they have any, in their home. They are watching their home lose its value. One in 5 is unemployed through no fault or choice of their own, and their health insurance is eating their lunch. Now a city wants to come along and say they should keep paying, and more. That is going to be a tough sell, and I am not sure it is even moral, because some kids and people are denied food in the process.

And if there is a real disagreement, well, that's what local elections are for.

This country was, and to some extent still is, running itself on borrowed money, whether at the personal or governmental level. Thanks to our moving the labor-intensive industries out of the country, and the financial crisis we are in after getting rid of the protections of the New Deal, we have gotten away from producing wealth and value. Little demand, business closing, 30 million people unemployed or underemployed, over 40 million (a new record) people on food stamps, one in three of the workers that are left are back to an income of $20,000 or less.

Cities built themselves around that borrowed money, and now that it is going away their costs are going to have to go down. There are federal and state tax increases (sometimes called "fees") as well. And if that means we do with a lower level of service, say street department, police, fire, and a good number that work in building and planning - since that's kinda slow now.

First, you should see if there is any way to encourage growth. Cities, with the support of their business community, could figure out things to do that make it easier to start a small business, encourage some to move there, etc.

How about any employee that makes over 100,000 a year, and works some overtime in their final years so they retire at full salary or more? In what city is that fair? In what school system?

Contracts with other municipalities are being trimmed. Employees are being laid off, because the volume of work is no longer what it was.

They have water districts here with just a few thousand customers each, but every single one has an entire staff, engineers, equipment, etc. That whole thing could be combined into a city-managed facility for less cost.

There are lots of ways if one wants to look around. Look at the city leaders that were taken out in handcuffs in California in the last few months. That town will eventually save a bundle from that one.

It really depends on the governmental entity.

[Statistical]

10. When housing prices rose 30% in 4 years did it get 30% more expensive to run local governments?

So when your house goes up - real estate taxes go up.
When you house goes down - real estate taxes go up.

[Tesha]

12. Did your property taxes go up 30%?

Mine didn't. Here in New Hampshire, even if the overall
property valuation goes up, the tax rate changes in an
inverse proportional fashion except as the town's/city's
own budget goes up.

Tesha

[Statistical]

13. I would say that is the exception rather than the rule.

My property taxes have doubled from 1998 to 2008.
I was paying roughly $2,100 in 1998. They kept the assessment & rate flat from 2008 to 2010. This year it is $4,387.

So if taxes double and then fall 30% shouldn't the city be able to make ends meet without raising the rate?

I intend to appeal the assesment in 2011 as it is roughly 25% inflated and as result cut my real estate taxes by ~$1000.

[The Straight Story]

18. Because the taxes are based on the value of property. Values decline, taxes should as well

when property values were going up, revenues went.

[Tesha]

22. No, taxes are based on the assessed property value times the tax rate.

And the assessed property value doesn't necessarily shift
rapidly as the market value shifts.

Beyond that (and as I mentioned above), the tax rate can
(and does!) vary inversely with changes in the assessed
value.

Tesha

[customerserviceguy]

27. You've hit the nail on the head

Property tax assessments are just a means of apportioning a budget that has already been decided on. If a community wants to use a 1% levy on $1 billion dollars worth of property to raise $10 million dollars, that's fine for the year before the recession. If the value of that property drops to $500 million, then they need a 2% levy to raise the same $10 million.

On the other hand, a populace that sees it's property values dropping as a function of lowered incomes will probably demand that elected officials reduce that $10 million budget to something more manageable, such as a $7.5 million budget, and only a 1.5% levy is needed in the above scenario.

[DJ13]

4. Someone should file suit over this as an illegal tax increase

Most municipalities have laws in place that any tax increase must go before the voters, dont they?

[littlewolf]

8. no usually the only tax increase is for schools

[Bonhomme Richard]

7. People don't get that when the federal government cuts taxes

it also cuts payments to the states which cut their payments to the cities which have to raise property taxes to run the schools, fix roads, etc...There is no free ride.

[Statistical]

11. Has federal cut payments to states? I doubt it.

Just because we cut federal taxes doesn't mean payments were cut to states. IIRC payments to states were increased in 2009 & 2010 as part of stimulus bill.

[Bonhomme Richard]

14. They certainly have to CT and I'll bet your own state.....

if you look into it.

[Statistical]

16. Nope. Not true in 2009. We will need to wait & see for 2008.

http://www.census.gov/prod/www/abs/fas.html

Average per capita federal aid to states in 2008: $1519,in 2009: $1789.

For CT it looks like roughly $1600 in 2008 and $1950 in 2009 (I only saw the chart not table for more exact numbers).

[Bonhomme Richard]

20. You can't go by that. There were federal funds that...

the state received that was used to support the towns. Those funds were cut but other funds came from the feds to stimulate the economy or support unemployment payouts with Obama. Things like that. Where you need to look is the general funds that the towns receive from the state. I suspect that the amount of money your town gets for education, for example, from the state has declined over the past 4 or 5 years. I know that our state was particularly hit with the shrub tax cuts.

[Chemical Bill]

19. Let's get complex, shall we?

The feds mandate programs, for example NCLB standardized testing and Medicaid coverage. The amount of money that flows from the feds to the states is supposed to cover these mandates. I read that when NCLB passed, New Hampshire figured it cost $1000 more than the money sent to cover it per student. Our population is aging, and requiring more federally mandated services in health care and human services, per capita. I admit that I don't have all the figures here, but my point is that the increasing federal mandates can easily outstrip the federal funds sent to the states to pay for them, even when it can be shown that the dollar amounts are bigger from year to year.

Bill

[Chemical Bill]

15. Plus my state cut taxes for the rich...

and then cut money to cities and towns. The repuke governor used stimulus money to give more tax cuts to the rich (well, he said he used it to avoid layoffs, which wouldn't be needed if he hadn't cut taxes for the rich).

Bill

[xchrom]

17. Doesn't each individual home owner have to contest if balues

In their area have been coming down.

It was that way in Oakland.

[ProgressiveProfessor]

24. Sometimes the assessor will make accross the board changes

In the past we used to appeal our assessment in CA when things went down.

[Cutatious]

21. Property taxes are a criminal racket and extortion

They should be eliminated and replaced with income taxes just like federal and state taxes. Raise the state tax to whatever amount is required to fund the local counties/towns. It would eliminate the rich/poor divide of monies spent locally.

Retired people on a fixed income do not need to be extorted of their money just so they can live in peace in their own home they worked all their life for.

[Name removed]

23. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Cutatious]

26. Did you read what I wrote and who are you calling "asshole"?

I said raise the god damn state tax to cover it.

[Gabi Hayes]

28. ahhhh! you've just gotten a very DU Christmas Welcome.....

you should feel right at home

btw my property taxes have gone up over 50% in the last three years. this year my property was re-valued (after a re-assessment filing) at less than half what it was last year. can't wait to see what happens to the actual tax next year, as the rates haven't been set

also....you'd love the seen from Tom Wolfe's 'The Behavioral Sink,' in which two New Yorkers get into it over some sort of traffic imbroglio. The first protagonist calls the second an asshole, which prompts the response (remembered for over 40 years), "Who you callin' asshole, asshole!"

cheerio!

[Cutatious]

29. Thanks for the refreshing outlook

After 25+ years living in Vermont and paying about six grand a year on a 150 year old broken down farmhouse I gave it away to my ex and moved south. The tax extortion tax sickness is still here but not nearly as bad since state taxes cover the schools etc and retired people can survive.

Some wonder why in VT old timers sell off their farms to developers and it is nearly always because the property taxes make living there impossible. I say let the workers and income tax cover society like it used to and let us overworked old timers enjoy out lives since we carried the tax burden for all the young whippersnappers alive today.

[ProgressiveProfessor]

25. Exception of course is California

Where the property tax rate is fixed and we just passed a new initiative that limits fees as well.

[quaker bill]

30. True in my case

But this is because the "Save our homes" ammendment passed in FL a decade ago limited assessed value increases to a maximum of 3 percent per year, and during the bubble the fair market value rose at a 15+ percent per year rate. Because of this, even though the fair market value of my house has declined, my assessment is still well below the actual value of my property even in this market.

Federal transfer payments to local governments have also declined. Once more than 1/3 of the budget at the agency I work for, now $0.

[Paper Roses]

31. I just found out that property taxes will go up for the coming year.

My house insurance took a big jump. It placed a replacement value on this old house at about double what it had been. I did go to see my agent and he did some calculations that dropped my payment some.

I am now taxed based on a value that is more than I could ever sell this house for. The assessment is about right. The tax rate for my town is going through the roof.

I was told that the increases were necessary partly to fund the medical insurance and pensions of town retiree's. We sure must have a lot of folks that were on the town payroll. I am told that a lot of them now live out of and rent their houses here.

I have faced the reality that I have to sell this house to survive but that I would get nowhere near market value now because there is so much real estate in town for sale right now.

What was a home and a retirement investment is now a very pricey liability. I love my house but the SS check doesn't begin to cover living and paying the taxes. I applied for a Senior abatement but was declined because I have SS and last year, I had unemployment insurance. That ran out last May Next year I can apply again. Wait until they see what I have been living on for a year. They won't believe how little comes in for SS recipients. Of course they would never consider giving any consideration to the fact that unemployment insurance is not that much money. I missed the income cap by $187.00. For those few dollars, I lose the $1000.00 abatement.
So it goes.

[Vinca]

33. If you genuinely think they valued your house too high, you can always appeal.

It's been my experience that they'll drop it a bit just for showing up and carping. If the value is really out of whack, present evidence to prove it. Find similar houses in similar neighborhoods and compare values. It seems the local assessors are not necessarily trained all that well and make errors such as basic measurement mistakes.

[DailyGrind51]

34. The unemployed and under-employed also own homes and pay property taxes.

How do you pay for a 30% increase in property taxes when your unemployment check barely covers utility bills and groceries?