Property taxes surge nearly 60% in Tampa, Jacksonville since 2019; rising home values, climate disasters exacerbate Florida's housing affordability crisis

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Redfin reports property tax bills have increased since 2019 in nearly every major U.S. metro. Florida is home to three of the five metros with the biggest hikes due to the pandemic-driven homebuying boom and the increasing intensity of climate disasters.

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Florida is home to three of the five major U.S. metros where property tax bills have increased most since before the pandemic, exacerbating the difficulty of affording a home in the Sunshine State. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

The median monthly property tax bill has risen most over that period in Indianapolis, where the typical homebuyer pays 66.7% more today than they would have in 2019, bringing their monthly tax bill to $205. Atlanta comes in second, with a 65.8% increase to $239. Next come three Florida metros: Jacksonville, where property taxes have increased 59.6% to $228 since 2019, Tampa (56.7% to $250) and Miami (48.1% to $367). This is according to a Redfin analysis of property taxes for single-family homes among the 50 most populous U.S. metropolitan areas, as of August 2024.

Property taxes have surged in Florida over the last five years for several reasons:

• Rising home values. Florida’s home values have skyrocketed over the last half-decade, partly due to the pandemic-driven homebuying boom in the Sunshine State, with many out-of-town buyers moving in and pushing up prices. While Florida prices have since fallen from their peak, assessed home values–which drive property tax bills–are much higher than before the pandemic.
• The increasing frequency and intensity of natural disasters. Florida has increased property tax rates to invest in climate-resiliency projects. Property taxes are an especially important way for governments to pay for those projects in states like Florida and Texas that don’t have state income taxes.
• Florida’s increasing population. The state’s increasing population has also caused increased demand for government services, like schools and roads, which can motivate municipalities to raise taxes; inflation also plays a role because those services cost more than they used to.

“Florida was alluring for remote workers during the pandemic because of its relatively affordable housing. Somewhat ironically, the state’s population boom has driven up home prices, and property taxes along with it,” said Elijah de la Campa, a senior economist at Redfin. “The cost of owning a home has gone from affordable to unaffordable for a lot of local Florida residents and out-of-towners. Home prices that are much higher than in pre-pandemic times and the disaster-driven surge in HOA and insurance costs are now pricing homebuyers out of the market. The increase in property taxes is the last straw for some prospective buyers. Homebuyers have realized they may save money by paying no income tax, but their property tax bill will increase.”

Demand for homes in Florida has already fallen, and Redfin economists expect it to keep falling because homes are no longer affordable enough to make up for increasingly destructive natural disasters.

Increasing home values and inflation are also major drivers for the big property tax increases in Indianapolis and Atlanta. It’s worth noting that there are many idiosyncratic reasons municipalities raise property taxes, and those aren’t captured by Redfin’s metro-level analysis; for instance, perhaps a government issued a big new bond or a new administration is making a major infrastructure investment. In Atlanta, for example, taxes increased from 2019 to 2023 partly because budgets for parks and city operations increased.

Nationwide, property taxes, in dollars, have increased nearly 30% since 2019 to a monthly median of $250. The average effective tax rate across the U.S. is 0.67%, down from 0.77% in 2019; the effective tax rate has declined over that period because home prices have increased more than the tax rates set by local governments. Even though the effective tax rate nationwide has declined, homeowners feel the burden of increasing property taxes because they’re paying more, in dollars, than they used to.

On a metro level, monthly property tax bills have increased in 48 of the 50 most populous metros since 2019. They have declined in just two: Las Vegas, where they’ve decreased 4.3% to $167, and Pittsburgh, where they’ve decreased 1.7% to $233.

There is a silver lining to higher property taxes for homebuyers and homeowners. Even though they’re paying more out of their pocket every month, property tax revenue is used to improve schools and parks, and those things can make a neighborhood more desirable and push up home values. Additionally, upping property taxes (as opposed to income taxes) discourages speculative investors from buying up homes and makes it more likely homes will be purchased by people who live in them.

Metro-level highlights

Property tax bills are highest in New York and New Jersey, lowest in the Sun Belt

• New York and New Jersey homebuyers have the highest property tax bills. Nassau County, NY (Long Island) has the highest median monthly property taxes, in dollars, clocking in at $905. It’s followed by Newark, NJ ($848), New York ($821), San Jose, CA ($782) and New Brunswick, NJ ($706).
• Median monthly property tax bills are lowest in Phoenix ($151), Nashville, TN ($152), Charlotte, NC ($157), Las Vegas ($167) and Detroit ($174). Effective property tax rates are fairly low in those Sun Belt states (under 0.5%), and while rates are higher in Michigan, homes there are inexpensive.

Effective property tax rates are highest in Texas, lowest in the Sun Belt and California

• Effective property tax rates are highest in Texas. Effective tax rates are highest in Austin, TX (1.8%), followed by Newark, NJ, San Antonio, Houston and Chicago, each of which have a 1.7% rate.
• Effective tax rates are lowest in Nashville, Phoenix, Las Vegas and Charlotte, each with rates of 0.5% or less.
• Effective tax rates are also low in California, with rates of 0.7% or less in every major metro in the state: Anaheim (0.5%), Los Angeles (0.6%), Oakland (0.6%), Riverside (0.7%), Sacramento (0.7%), San Diego (0.6%), San Francisco (0.5%) and San Jose (0.5%). It’s worth noting the effective rate is quite low in California largely because proposition 13 puts a lid on how much property tax rates can increase.

New Yorkers spend 10% of their monthly income on property taxes, more than anywhere else

• The typical New York buyer spends 10% of their income every month on property taxes, a higher share than any other major metro. Next come Newark, NJ (9%), Austin (8%), Nassau County, NY (8%) and New Brunswick (7%).
• In Nashville, Phoenix, Charlotte, Las Vegas and Denver, buyers put between 2% and 3% of their income toward property taxes—the lowest shares in the nation.
• The typical U.S. homebuyer spends 4% of their income on their property tax bill, essentially unchanged from 2019.

For many Texans, property taxes make up roughly 20% of monthly housing bill

• Property taxes make up 20% of the median housing bill in Austin, more than anywhere else in the country. Next come Newark (19%), San Antonio (19%), Houston (19%) and Fort Worth (18%).
• Property taxes make up about 5% of housing payments in Nashville, Phoenix, Las Vegas, Charlotte, and Anaheim, a smaller share than anywhere else in the country.
• Nationwide, property taxes make up 8% of the typical homebuyer’s housing bill.

To view the full report, including an interactive graphic, additional metro-level data and methodology, please visit: https://www.redfin.com/news/property-tax-homebuyer-increase-florida

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

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Source: Redfin

Released October 28, 2024