“Property Taxes vs Blight – a Lesson in Counterproductivity”
California just signed into effect a new Blight law, giving homeowners a chance to fix code violations before local agencies move in to enforce the code. For a long time now I’ve wondered why our property tax structure penalizes property owners who take care of their property, while letting those who run their property into the ground pay less.
In upstate NY, homeowners who add to the existing structure of their home are known to leave the siding off because property taxes are only reassessed when the addition is complete. Everywhere you look, there is a house clad only in weather proof insullation, blighting the otherwise pristine landscape.
Aside from the safety issues related to blighted properties, there are greater economic issues. In many cities where mil rates are north of .40, property owners may never see home values rise. Why? Because for every $1000 of additional taxes, there is an $83 uptick in monthly mortgage payments.
So why would someone actively shop for a home in high tax cities with their troubled school systems? I think one reason is because that’s where their family is and they want to stay close but there is also a segment of the population whose pre approval precludes them from buying in the outlying towns, where the mil rates are lower, but the buy in rate, especially for an updated, move in ready house is higher. Unlike lucky homebuyers featured on HGTV’s Property Brothers, these buyers don’t have ready cash to bring a diamond in the rough back from the dead in a suburban town. They have just enough to make the down payment and need concessions to make the higher closing costs, which include 8 months of escrowed taxes. Sellers, in high tax cities, are forced to list at lower prices than comparable houses located in more desirable suburbs, to adjust for a tax bite that could be upwards of $600 per month.
I understand governments need a certain amount of money to operate. Why not tax property owners who refuse to care for their properties at a higher rate than those who do take the time and spend the money? I think it would be a win/win for everyone.
You can read the article this blog was based on here.