Understanding Property Taxes

Property taxes quietly shape real estate returns more than most investors realize. A new 2024 map of median property taxes across the U.S. highlights a massive spread: from ~$900 in West Virginia and Alabama to over $9,000 in New Jersey. That’s a 10x difference in annual holding cost for similar assets. A few observations worth thinking about: ✅The Northeast dominates the high end → strong public services, but heavier carry costs ✅Lower-tax states in the South/Midwest → often more cash flow-friendly ✅High-price states (like CA, WA) still generate large tax bills even with moderate rates ✅Property taxes aren’t static; they directly impact long-term yield and exit assumptions For investors, this isn’t just a line item; it’s a strategy. In markets with high property taxes: → Rent growth needs to keep pace → Expense ratios are structurally higher → Underwriting mistakes get amplified over time In lower-tax markets: → Cash flow looks better on paper → But often comes with different demand drivers and risks At the end of the day, property taxes are one of the most predictable, but often overlooked, forces in real estate performance. If you’re underwriting deals across multiple states, this is one variable you can’t afford to ignore. Source: U.S. Census Bureau (ACS 2024 1-Year Estimates, Niccolo Conte, Christina Kostandi), Visual Capitalist #RealEstate #RealEstateInvesting #Multifamily #PropTech #CRE #Investing #HousingMarket #DataDriven #MarketResearch

New Paper! Low property taxes concentrate ownership among the elderly, while higher property taxes enable more young families to own homes. With Josh Coven, Abdoulaye Ndiaye, and Sebastian Golder. Background: the bulk of the housing stock is owned by 50-70 year old empty nesters aging in place with spare bedrooms, while young families with children face crowded housing despite a higher need for space. See also Redfin research: https://lnkd.in/eYR5n8fu The key insight from the paper: Property taxes act like a "forced mortgage" — upfront price is lower, capitalizing the taxes, alongside higher ongoing payments. Just like a mortgage would do. This tradeoff helps financially constrained young families overcome down payment barriers. Consistent with this logic — areas with higher property taxes have more young homeowners, fewer empty bedrooms, and more children as % of population. House prices and price-to-rent ratios are lower. We compare TX (high property tax) vs CA (low tax due to Prop 13) housing markets. Home ownership rates among the young are extremely low in California — how much of that is driven by low taxes and high prices? We build a structural lifecycle model which matches a key aspect of the data—homeownership gradients in CA are very steep, ie young people don't own while old people do. By contrast, in TX, in both data and model we see more young homeownership—but less elderly homeownership. Raising CA taxes to TX levels would increase overall homeownership by 4.6% and young household ownership by 7.4%. Higher property taxes in CA lead to 18% lower house prices. This enables more young, financially constrained families to buy homes despite higher ongoing tax costs. Our results highlight how asset taxes like property taxes can significantly impact prices and allocations, especially with financial constraints. Higher taxes can actually make homeownership more accessible to young families, while low taxes can lock such families out. Paper: https://lnkd.in/eM796tcx Substack: https://lnkd.in/edwCqNGz 

For the past decade, housing policy has been dominated by the search for “transformational” solutions to the affordability crisis. Some have helped. But too many have made headlines, absorbed public dollars, and failed to deliver at scale. Bob Simpson’s latest piece is a useful reminder of something housing practitioners understand well: affordability is built on math, not magic. Property tax abatements are among the least glamorous tools in local government, and also among the most effective. When rents are restricted, development costs have to come down or the deals don’t work. Property taxes are often one of the largest fixed operating expenses in multifamily housing. Reduce that burden, and suddenly projects pencil that otherwise wouldn’t. Homes get built. Affordability endures. What makes this article especially compelling is how clearly it connects abatements to outcomes policymakers actually care about: lower rents, reduced reliance on direct subsidy, increased investment, and economic benefits. This isn’t theoretical. Cities like San Antonio, Buffalo, and Dallas are already proving it works at scale. There’s no silver bullet for housing, but there are proven levers. We should spend less time innovating for innovation’s sake, and more time scaling the tools we already have. Worth the read. https://lnkd.in/eM7aUiGp

🏡 Property taxes matter more than most buyers realize. According to this graphic, Illinois ranks #2 in the nation for effective property tax rates, behind only New Jersey. While purchase price gets most of the attention, the true cost of homeownership includes: ✔️ Property taxes ✔️ Insurance ✔️ HOA assessments ✔️ Maintenance ✔️ Financing costs For many homeowners, property taxes can increase monthly housing costs by hundreds—or even thousands—of dollars. As a real estate broker, I’ve seen buyers focus on finding the perfect home only to discover later that the annual tax bill significantly impacts affordability. It’s one of the reasons I always encourage clients to evaluate the total monthly cost, not just the list price. For homeowners, high property taxes also influence: • Home values • Buyer demand • Retirement decisions • Relocation to lower-tax states Whether you believe higher property taxes are justified by the services they fund or think they discourage homeownership, there’s no question they play a major role in real estate decisions. If you’re buying or selling, understanding the full financial picture is just as important as finding the right property. 📍 Were you surprised to see Illinois ranked #2? #RealEstate #IllinoisRealEstate #PropertyTaxes #HomeBuying #HomeOwnership #ChicagoRealEstate #HousingMarket #FinancialPlanning

Most multifamily owners are trying to raise rents. The smartest ones are lowering property taxes. Here’s why: We reduced property taxes by $150,000 on one workforce housing asset. That $150,000 went straight to NOI. At a 6.5% cap rate, that created $2.3M in value. No renovation. No lease-up risk. No new debt. DSCR improved from 1.33 to 1.50 overnight. That changes refinance terms. That changes lender confidence. That changes exit value. But here’s the part people miss. On workforce housing, lowering taxes does not just increase value. It creates breathing room. Breathing room to preserve affordability. Breathing room to avoid rent spikes. Breathing room to reinvest in the property instead of passing costs to families. Property tax strategy is not just finance; it is preservation. Same property. Same residents. Seven-figure impact. That is real estate math with a mission!