Rising Property Values Generating Big Property Tax Bills

By James Donahue

May 2005

The great American dilemma is that most people on fixed or moderate incomes are being priced out of home ownership.

My wife and I bought our first home in the 1960s. I remember sweating over the price of that two-story, four-bedroom home with two bathrooms and a two-car garage in a quiet, tree-shaded neighborhood. The price was $24,000.

Before we selected that house, a real-estate agent showed us numerous other fine homes that ranged from $6,000 to $100,000. That high-priced house was owned by a judge who came from a wealthy family. It was a virtual mansion located on a bluff overlooking Lake Michigan. It featured a private dock and well manicured grounds that were obviously professionally cared for.

Today the starter house we purchased is probably valued at much more than the mansion we gawked at during our quest for a home. In fact, modest two-bedroom homes in most neighborhoods throughout America are priced at $100,000 or higher. As the population boom goes on, and building supplies diminish, the cash value of the standing houses all over the land is rising beyond the reach of most would-be home buyers.

With the fast rise in value is found another serious problem. Property taxes, rated at a percent of the cash value of the property, are soaring. Surprisingly, this is becoming a real dilemma for local school districts that depend upon extra voted operating millage.

Back when the annual tax bill was $40 or $50 a year for city, school and county operations, folks didn’t mind tacking a few extra dollars on the tax lien to pay for new school buildings or to cover raises for the teaching staff.

Now, however, with tax assessments rising to the thousands of dollars, property owners are in rebellion. They are quick to reject any voted request for additional property taxes, and are signing petitions to force reductions in the tax burdens they can’t fix at the polls.

All of this has not escaped the attention of state lawmakers who are caught in the same financial dilemma with their own homes. Consequently they are hearing the cries of a growing list of disgruntled homeowners loud and clear.

The problem: how to fix this in a fair and equitable way without hurting schools and local governments. Schools need a more secure way of getting the money they need to stay solvent. Local governments are caught in the middle, claiming a need for more operating cash as well. And long-time homeowners are saddled with tax payments that are getting as costly as the annual payments on their mortgages.

“People are facing being taxed out of their homes,” one retired Lake Tahoe homeowner complained. He said taxes for his home jumped from $2,200 in 1990 to $12,000 last year.

That a person is a homeowner is a misnomer. He or she might have bought and paid for the home after years of hard toil and monthly mortgage payments. But miss one year of property tax payment and government has the legal right to seize the property and put it up for tax sale.

In other words, fail to pay the tax and you lose the property within the year.

The question then is . . . does anybody really own a home? How much security do we have if the house we paid for and occupy can be taken away from us so quickly by the government created to serve and protect us?

(Let one sibling get caught by the police hiding marijuana in your home and making a business of selling it on the street, and authorities have the legal right to seize the property, sell it, and use the money to run the local narcotics unit.)

As jobs dwindle and more and more skilled tradesmen are forced to take low-paying public service jobs, the home ownership dilemma intensifies. When we lived briefly in high-priced Sedona, Arizona, about ten years ago, many of the store clerks and gas station attendants were living in tents in the nearby national forest. They rode to town on bicycles and old cars to wait on the wealthy who lived in million dollar priced homes throughout that community.

Expect the Sedona scenario to swell to encompass much of the nation as house prices and tax levies skyrocket.