Homeowners are struggling to pay their property taxes – is it time for the state to offer a break?
Many homeowners are struggling to pay the bills and are going into debt just to pay their mortgage and property taxes. The legislature, over the last few years has increased property taxes significantly. Combining those increases with the outbreak of COVID-19 and the subsequent loss of income, this has put a huge financial burden on the homeowner.
There are two primary reasons homeowners have seen significant increases to their property taxes in the last few years.
The first primary reason for the increase in property taxes is the high demand for housing and a 10 year low in housing inventory. This has pushed assessed home values to a record high and subsequently the taxes that are owed.
Secondly, the 2007 McCleary education funding court case forced the legislature in 2017 to restructure the taxing authority of the state and local school districts. For most homeowners, this didn’t significantly change the overall amount of property taxes being collected for education, just who was collecting the taxes. In 2018 and 2019, however, with a different legislature, the local levy cap was removed allowing local school districts to pass new levies. The change in 2019, incidentally, has recreated the situation that promoted the need for the McCleary legislation in the first place.
In 2017, the state legislature passed a 22% increase for schools, boosting the property tax from $1.89 to $2.40 per thousand dollars of assessed value. The local levy rate was decreased by a similar amount to offset the state increase. In 2018, lawmakers increased the state property tax rate again, this time by another 12% to $2.70 per thousand. Then in 2019 the legislature authorized school officials to increase local property taxes by 40% from $1.50 to $2.50 per thousand.
With local and county governments also increasing property tax rates, the homeowners in Washington have seen unprecedented increases in the amount of property taxes they are paying.
While COVID-19 will have an impact to the real estate market, the underlying issues with lack of housing inventory and high demand will continue past the crisis and may not significantly affect the projected increase in property values over the long term. This means the assessed values potentially will still be high in 2021.
While an increasing home value is good for long term equity, it doesn’t help the homeowner now. That equity, in many cases, is inaccessible. This is where the legislature and state government can offer some temporary relief to bridge the gap until things stabilize in the economy.
During this time of uncertainty, the legislature and state should consider immediate relief by offering a property tax deferral, reduction in rate or suspension of penalties in a similar fashion to the B&O tax programs the governor’s office recently announced.
Many other government agencies are considering similar proposals, Washington State should do the same to help our homeowners stay in their homes.