Homeowners with similar properties can pay drastically different property taxes in Portland, according to a new report commissioned by the League of Oregon Cities. Furthermore, homeowners with artificially low property taxes can see a corresponding boost in the value of their property.
The report looked at the unintended effects of Oregon’s tax limiting ballot Measures 5, 47, and 50.
The report’s authors calculated the effect of property taxes on the sales price of Portland homes between the years 2010 and 2013.
In Oregon, property taxes are calculated based on the so-called assessed value of a home. In the mid 1990s, Measures 47 and 50 capped increases in the assessed value of homes in Oregon at 3 percent per year.
Since that time, the market value of homes in some neighborhoods, particularly in inner Southeast and North Portland, has grown rapidly, in some cases by more than 8 percent a year. The study says property taxes in those neighborhoods haven’t kept pace.
Tom Potiowsky is Director of the Northwest Economic Research Center, which published the report. I would not say it’s fair. I really think there should be a little closer tie to the value of the home that you have and what you pay in property taxes,” Potiowsky said.
The report found that homes in North Portland neighborhoods like Boise and Eliot are taxed on less than 45 percent of their market value. And the report’s authors say those lower tax rates make the properties more attractive to buyers.
They estimate the lower taxes could add between $6,200 and $30,000 to the value of properties there. According to the study, the average market value of homes in Portland between 2010 and 2013 was about $314,000.
“What’s interesting about this, is that the property values that really get the biggest break are in areas that have recently gentrified,” says Jerry Johnson, a land-use economist familiar with the report. His firm, Johnson Economics, is based in Portland.
By contrast, the report says neighborhoods that have not seen rapid growth in property values, including Powell, Lents and other neighborhoods East of 82nd, have comparatively high property taxes and a corresponding loss in sales value. The report found that the state taxes homeowners in these neighborhoods on 75 percent of their property’s market value, and that the proportionally higher taxes reduce the value of the average home in Lents or Powell by $3,100 to $15,000
The trend is perhaps best illustrated by this map, which shows the ratio of market value to assessed value in Portland neighborhoods. Neighborhoods colored blue show where property values have risen more quickly than tax rates, while red areas show places where property values have grown slowly and taxes have kept pace. The report noted that similar trends may be taking place in other cities, like Bend, where property values have grown more quickly than 3 percent a year.
Potiowsky says the report was intended to start a conversation about the equity of the tax system. He says Oregon’s property tax reforms did make those tax rates more stable for homeowners.”Part of the reason we had (Measures) 5, 47, 50 come along was people were worried they were going to be taxed out of their homes,” he said. But, he says, they also created inequities.
Economist Johnson says the the recent economic downturn may have helped to bring market values and assessed values somewhat more in line. “If you really took a longer term trend that included the big market correction we had, the growth rate isn’t so remarkably high,” he said.
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