Where Have Property Taxes Increased the Most?

ValuePenguin’s analysis revealed that the U.S. metro areas with the largest increases in property tax were not proportional to those areas with the highest increases in median home value.

This tax is money above and beyond that of your home insurance and mortgage — a charge for the land and value of your home. While not all states levy income taxes, every state has property taxes. These funds tend to support local construction, education and services to better the community. For your home specifically, a way to calculate your estimated property tax cost is by multiplying your assessed value of the house by the property tax rate in your area.

Key findings:

Metro areas with the largest increases in effective tax rate

Northeast homeowners, and particularly those within Connecticut, faced some of the largest increases in their effective property tax rate. Across the top 10 metropolitan areas, there was a 0.61% increase in the effective property tax rate over the past decade. But residents of the Kingston, N.Y., metro area faced the largest increase of 0.82%, which helped lead to a $1,573 increase in median real estate taxes per year for homeowners.

In nine of the 10 metro areas with the largest effective tax rate increases, the median home value dropped over the last decade. However, larger decreases in home value didn't necessarily lead to more significant increases in property tax rates. For instance, the Salinas, Calif., metro area saw the largest decrease in median home value, $141,500, yet the effective tax rate increased by only 0.29%.

Similarly in Madera, Calif., home values had the largest percentage decrease, dropping by 28% over 10 years, though the effective tax rate increased by just 0.27%. And in Odessa, Texas, which had the largest percentage increase in home values at 113%, the property tax rate declined by just 0.1%.

Metro areas with the biggest changes in median taxes paid

Over the past 10 years, just 13 of the 283 metropolitan areas we surveyed in the U.S. experienced a decrease in median real estate taxes paid. In the majority of these regions, there was a relatively low difference in the effective tax rate — instead, the decrease was driven by a drop in median home values.

The influence of falling home prices on property tax was particularly pronounced in states like Florida, where the subprime mortgage crisis severely affected the value of real estate from 2008 onwards. While Florida's median home value bounced back by 2017, some places may have struggled to keep pace with the overall statewide recovery and ended up paying a lower level of property taxes.

In contrast, there were 22 metro areas in which the median homeowner paid at least $1,000 more in property taxes in 2017 than in 2007. The cause differed, with some regions experiencing particularly large increases in home values, whereas others faced above-average increases in their effective tax rates.

For instance, the San Jose-Sunnyvale-Santa Clara, Calif., Austin-Round Rock, Texas, and Corvallis, Ore., metro areas each experienced over $100,000 increases in their respective median home values since 2007. This rise in home prices caused the median real estate taxes in each metro area to increase by $2,625, $1,475 and $1,297, respectively, even though the average change in effective tax rate across these metro areas was 0%.

Metro areas with the biggest decreases in effective tax rate

The effective tax rate declined in just 45 of the 283 metropolitan areas we analyzed, or 16%. And across the 10 metro areas with the largest decline, the median real estate taxes paid still increased by an average of $395.

How are property taxes calculated? What causes them to change?

Property taxes are levied by state and local governments on homeowners, and the taxes are often used to fund local public services. Therefore, the property tax rate for homeowners in a given year may vary based on the budget of your school district or county. They will also increase or decrease based on your property's value.

Property taxes are calculated by multiplying your home's assessed value by the sum of applicable millage rates, then subtracting any tax credits you're eligible for.

[list title=Factors used in calculating your property taxes:"] Assessed home value: Depending on the county you live in, how your home's value is assessed and how frequently it's assessed will vary. Assessments typically take place every one to five years and are often based on the market value of homes similar to yours that have been sold. However, we recommend referring to your local government's guidelines for how property taxes are assessed within the county. Tax credits: You may be eligible for tax credits for a number of reasons — for instance, they're frequently available to seniors or people with disabilities. Millage rates: A millage rate represents how much you would pay in taxes per dollar-value of your home, with one mill representing 1/1000th of a dollar. There are separate millage rates for the different parties your property taxes go to. [/list]

Property tax limits are in place in most of the U.S.: 44 states plus the District of Columbia. These limits are imposed at the state level and restrain the rate at which assessed values can grow annually, the property tax rate or the rate of growth in property tax revenue annually.

How do property taxes impact homeowners?{#impact}

Assuming they took out a mortgage to finance their home purchase, property taxes can represent a significant additional monthly expense for homeowners. The taxes are usually paid by the homeowner as part of their monthly mortgage payments, along with principal, interest and insurance, into an escrow account.

Someone with estimated annual property taxes of $4,200 a year, therefore, will contribute $350 per month into escrow as part of their mortgage payment.

Lenders may also require that borrowers deposit several additional months of property tax payments in case tax bills are ultimately higher than lender estimates.

Property taxes aren't the only unexpected closing expenditures homebuyers may face, either, as many insurance costs also need to be paid upfront. Lenders may require new buyers to pay up to a year's worth of homeowners insurance premiums before finalizing their purchase, along with two additional months of premiums as a deposit.

Using the nationwide average annual home insurance premium of $1,445 as an example, this up-front payment for 14 months’ worth of homeowners insurance would come out to just over $1,685. And title insurance, legally required in all real estate transactions, can range anywhere from $1,300 to nearly $2,800, depending on the value of your home.

Methodology and full results

ValuePenguin calculated the effective tax rate in each metropolitan area by comparing a region's median real estate taxes paid and median home value. We only used data for owner-occupied houses and contrasted figures from 2007 and 2017, the most recent year for which data is currently available. Metropolitan areas were excluded from our analysis if data was missing for one or both years surveyed.