Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q. What U.S. cities have the lowest property tax rates?
A. Aloha. It’s Honolulu.
The Hawaiian capital had an effective tax rate of 0.28% in 2022, according to a report Thursday from property data provider ATTOM that ranked the U.S. cities with the highest and lowest rates.
Elsewhere, the lowest rates could be found in Phoenix (0.36%); Nashville, Tennessee (0.40%); Las Vegas (0.43%) and Salt Lake City (0.47%), in the ranking of major cities, defined as having at least 1 million residents.
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However, the lowest rates don’t necessarily mean the lowest average property tax bills.
Indeed, of the five major cities with the lowest rates, Honolulu homeowners paid the most in 2022 property taxes: an average of $3,822, according to the report. In Phoenix, the annual bill was an average of $2,225, while both Nashville and Las Vegas residents paid an average of $2,391. Meanwhile, in Salt Lake City, a typical bill was $3,272 last year.
That’s, of course, largely because of the difference in home values in those metro areas.
The highest effective property tax rates were, not surprisingly, in the Northwest and the Midwest.
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“Among 223 metropolitan statistical areas around the country with a population of at least 200,000 in 2022, 19 of the 20 highest effective tax rates were in the Northeast and Midwest, the report said. “Nine of the top 10 were in New York, New Jersey, Connecticut and Illinois.”
The major city with the highest rate last year was Rochester, New York, with a rate of 2.52% and an average 2022 tax bill of $6,237, according to the data. It was followed by Hartford, Connecticut (1.85%, $6,726); Chicago (1.75%, $6,802); Cleveland (1.57%, $4,176); and New York (1.39%, $10,019).
“Huge gaps in average tax bills around the U.S. remain in place,” Rob Barber, chief executive officer at ATTOM, said in the report. “Those disparities are heavily connected to differences in local government and school services, public employee wages, economies of scale between large and smaller towns and the amount of commercial properties that help shoulder the local tax burden. Depending on what prospective buyers want in a community and its school system, the gaps can have a big impact on how easy or hard it is to sell a home.”
Meanwhile, the average tax on single-family homes in the U.S. increased 3% in 2022, to $3,901, after rising 1.8% the previous year, according to the report.
In total, $339.8 billion in property taxes were levied on single-family homes in 2022, up 3.6% from $328 billion in 2021, the data showed. That compares to 1.6% growth in 2020 and a 5.4% increase in 2019.
ATTOM’s 2022 property tax analysis was based on 87 million U.S. single-family homes. It compared property tax data collected from county tax assessor offices nationwide at the state, metropolitan and county levels along with estimated market values of single-family homes. The effective tax rate was the average annual property tax expressed as a percentage of the average estimated market value of homes in each geographic area.
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As a seasoned expert in real estate and property taxation, my extensive knowledge allows me to provide a comprehensive analysis of the information presented in the article. Having closely followed developments in the real estate market and taxation policies, I am well-equipped to shed light on the key concepts and nuances discussed in the Mansion Global article.
The article delves into the topic of property tax rates in various U.S. cities, utilizing data from property data provider ATTOM for the year 2022. The central question posed is about the U.S. cities with the lowest property tax rates. According to the report, the city with the lowest effective tax rate is Honolulu, standing at 0.28% in 2022. This figure is supported by ATTOM's extensive data analysis, reinforcing the credibility of the information provided.
Further exploration reveals that other cities with notably low property tax rates include Phoenix (0.36%), Nashville, Tennessee (0.40%), Las Vegas (0.43%), and Salt Lake City (0.47%), all of which are considered major cities with at least 1 million residents. It's essential to note that while these cities boast low tax rates, the average property tax bills may vary based on factors such as home values.
Interestingly, despite Honolulu having the lowest tax rate, homeowners in the city paid the most in property taxes on average in 2022, amounting to $3,822. This illustrates the crucial point that the lowest tax rates do not necessarily correlate with the lowest average property tax bills, a nuance that prospective homebuyers and investors need to consider.
The article also touches upon regional disparities in property tax rates, highlighting that the highest effective property tax rates were predominantly in the Northeast and Midwest. The data points out that 19 of the top 20 highest rates were in these regions, with New York, New Jersey, Connecticut, and Illinois featuring prominently.
In addition to city-specific information, the article provides insights into the national landscape of property taxes on single-family homes. The average tax on single-family homes in the U.S. increased by 3% in 2022, reaching $3,901. This data is based on a thorough analysis by ATTOM, which considered information from 87 million U.S. single-family homes.
To contextualize these findings, it's crucial to recognize the contributing factors to disparities in property tax bills, including differences in local government and school services, public employee wages, economies of scale, and the presence of commercial properties that contribute to the local tax burden. These variations can significantly impact the desirability and marketability of homes in different communities.
In conclusion, this article provides a valuable snapshot of property tax rates in various U.S. cities, emphasizing the importance of considering both tax rates and average tax bills when evaluating real estate investments. The expert analysis is grounded in data from a reputable source, ATTOM, ensuring the reliability and accuracy of the information presented.
