PolicyLower perty Taxes For owners Can Mean Higher RentsByRoger Valdez, Contributor. Forbes contributors publish independent expert analyses and insights.
Roger Valdez writes housing economics and policy. AuthorJul 03, 2025, 09:30am EDTLower perty taxes for single-family s and higher ones for apartments is a transfer of wealth.
More from poor renters to wealthy owners. Getty perty taxes have a way of becoming complicated quickly, especially when it comes to apartment buildings.
One of the arguments often made by people who own and operate multifamily housing is that perty taxes form a big part of fixed costs.
Rules and regulations that limit rent collection trap owners without a way to keep their buildings solvent. Worse, fixed doesn’t mean they taxes are fixed at the same rate.
Usually, perty taxes go up and they can’t be avoided. Rent is the only way to offset the costs of rising perty taxes, and when rents go up, people get upset and a “crisis” ensues.
A review of a deep study of the effect of perty taxes by the National Multifamily Housing Council (NMFHC) is a good place to start when trying to understand this dynamic.
The review is titled, Unequal Burdens: Exploring Effective perty Tax Variation and the Regressive Nature of Apartment perty Taxes, and is a look at a deeper study of the topic by The Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence called, “50-State perty Tax Comparison Study: For Taxes Paid in 2023.
” That report is complex and I haven’t yet fully digested it.
But the NMFHC overview is good as entry point to that work and a good review of how perty taxes ultimately effect rents and thus the quality of life of people with less money.
It’s worth restating what I’ve said in writing and in presentations all over the country: rental housing is a marginal. Money coming in must match the money being spent on operations.
If that is not at least in balance, the will fail and go bankrupt. Apartments are just a restaurant, retail outlet, or a bowling alley.
If the costs of maintaining the capital assets of the building and paying staff and other costs exceed income, there is no.
In spite of this obvious fact, many people in the general public and policy makers think of rental housing as different, passive income.
Perty owners simply collect the rent checks, deposit them, and go back to the beach.
Or, as the NMHC post puts it, “all else equal, higher effective apartment perty taxes increase overhead costs for housing viders; this translates into viders being forced to raise rents to offset the cost, impacting the ject’s viability and/or affordability levels.
” It’s repetitive, but saying more than once and in different ways is for emphasis but especially to counter moves banning eviction during the pandemic; that move meant many people who lost their jobs couldn’t pay rent, but local jurisdictions didn’t stop collecting perty taxes.
And often, those perty taxes fall more heavily on apartment buildings. First, the way local governments tax perty favors single-family s.
Often, single-family owners or those paying mortgages benefit from lower assessments and many exemptions those for senior citizens or veterans.
Those lower rates and exemptions end up being shifted to commercial perties and apartments.
MORE FOR YOU Another challenge is that taxes vary by jurisdiction, and the Lincoln study looks at all 50 states. There are some highly localized factors that impact taxation in different jurisdictions.
Some states and local jurisdictions rely heavily on perty taxes while others lean more on income or sales tax.
Interestingly, jurisdictions with higher valuations – places with lots of perties that are assessed to be worth more money – can have lower tax rates.
That is, when there is inflation in the housing market, perty tax rates can effectively go down because the same money can be raised as a percentage of tax without raising rates.
For example, a building with a value of $1 million dollars and a tax rate of 5% would generate $50,000 in revenue while a perty with the same rate but a value of $100,000 would only generate $5,000.
State and local governments can also boost taxes to cover deficits or more spending, and they can impose perty classifications which hit commercial and apartment perties harder than single-family.
This classification practices grinds against policy directives that those same governments might have on sustainable growth.
Taxing single-family perties less encourages more inefficient land use and punishes dense housing with higher costs, costs that get passed on to renters.
The Lincoln and Fiscal Excellence quantifies this vividly. Higher perty taxes for apartments and lower taxes for single family mean higher rents subsidize. More single-family equity.
Screen shot of chart by The Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence As the NMHC post describes, “the extent to which apartment buildings subsidize steads can be captured by the ratio of the effective tax rate on apartments to that of steads.
Doing so duces an average “apartment-stead classification ratio” of 1. 44, meaning apartments pay an effective tax rate 44% higher on average than steads.
” These ratios reflect deliberate policy decisions, pushing people to buy houses rather than rent even when they can’t afford a mortgage.
The irony of this is that while state and local politicians fret over a “housing crisis” their perty tax polices often speak louder than their speeches housing, ultimately pushing up rents while favoring those with more money who can afford a mortgage.
In the end, it is a transfer of wealth from the poorest Americans to the wealthiest.
Whatever positive urges elected officials have toward reducing regulation must be coupled with, even alloyed with better perty tax policy.
The benefits of land use and zoning reforms given with one hand, can easily be taken away with the other in the form of excessive perty taxes. Editorial StandardsRes & Permissions.