New Report on Effective Property Tax Rates

Effective property tax rates often appear to be related to household income, the value of homes in the area, and how recently those homes have been sold.

Building on previous research examining effective property tax burdens on owner-occupied homes by state and metropolitan areas, NAHB economist Natalia Siniavskaia published a new paper reporting effective property tax rates by county and census tracts.

The research should be useful for prospective homebuyers and businesses in the housing industry interested in comparing effective property tax payments across narrowly defined geographic areas.

An effective property tax rate is simply the amount of property tax paid divided by the value of the home, thus giving an apples-to-apples comparison of true tax burden for homes in various locations.

The alternative to an effective rate measurement is to compare statutory tax rates, which can be misleading given differences in assessment rules, tax credits, and other complicating factors.

The report presents tables of effective property tax rates for more than 3,100 counties, mapped above, and also discusses factors that help explain differences in those rates.

As expected, a large portion of inter-tract differences can be explained by their regional location, with tracts located in the Midwest, Northeast and Texas paying considerably higher property tax rates per $1,000 of value, compared to tracts in the South and West regions.

Despite dramatic declines in housing values, homeowners continue to pay about the same nominal level of property tax payments, thus leading to higher effective tax rates. This is due to lags in accruate assessments by taxing jurisdiction, but also out of necesssity due to declining sources of state and local tax revenue during the recession.

- Courtesy of NAHB