Florida’s leaders are considering a far-reaching remedy to cut the soaring costs of owning a home: ditching property taxes…
“People are getting crushed not just by home insurance but by property taxes,” said GOP state Sen. Jonathan Martin, who is sponsoring a bill that would require a study on the elimination of property taxes be completed by October. “That American dream in Florida is taking five figures a year in local taxes.”
Revolts against property taxes have erupted elsewhere in recent months as homeowners’ tax bills have risen alongside home values. Property values in the U.S. increased 27%, adjusted for inflation, between January 2020 and July 2024, according to the Tax Foundation, a think tank.
“You’re seeing a groundswell of opposition to property taxes generally”—one reminiscent of a wave of protest in the 1970s and 1980s that triggered ballot measures including Proposition 13 in California that capped property taxes, said Jared Walczak, vice president of state projects at the Tax Foundation.
A number of states including Wyoming, Kansas and Montana are weighing significant property-tax limitations, he said. In November, voters in North Dakota rejected a ballot measure that would have eliminated property taxes.
This is the double-edged sword of property taxes in the United States: homeowners like their property values going up but they do not like it when their property taxes adjust to that increased value. In the short-term people do not want to pay more in taxes even as in the long-term they will benefit from selling at a higher price.
So what other taxes might people be willing to pay if property taxes are reduced or done away with? There would be other ways to generate revenue that would not be tied to property values. More taxes on driving? Higher sales taxes? Increased tax rates on business activity?
It would also be interesting to see how local governments would adjust to the change in funding. Would other tax formulas equal the same amounts that come now through property taxes? Who would make up the shortfalls in funding?
Why this particular concern? We could start with a broad statement: there is a need for cheaper housing in many American metropolitan areas. The rise in housing prices in recent years has priced out many residents from quality housing or living near where they work or residing in places they want to. This is not just true in the most expensive urban areas like Manhattan or San Francisco; there is a need for housing in numerous suburban areas.
At the same time, affordable housing can mean different things in different communities and among different actors. Is affordable housing about providing broad housing opportunities to most people who could live in a region? Or is it for lower-income residents? Or is it for seniors? When suburbs discuss affordable housing, I think they have different populations in mind depending on the local history and context.
The last few decades demonstrated that affordable housing is not a concept many suburban communities welcome. It has particular connotations. It may be perceived as a threat to existing property values. It is for particular residents. Few American suburbanites seem to want to live adjacent to affordable housing, even if they are for the concept in general.
So what might happen in 2025? There surely will be discussions at the federal, state, and local levels about affordable housing. Different levels of government and different actors may want to use different levers to encourage affordable housing. What kind of carrots or sticks might be offered? The 2024 presidential campaigns had different thoughts. Could there be significant shifts either way in the next year? If Americans continue to be concerned about their own economic standing, the issue of housing prices will not go away. But who will act and what might they do?
Just how accurate are those numbers, though? Until the house actually trades hands, it’s impossible to say. Zillow’s own explanation of the methodology, and its outcomes, can be misleading. The model, the company says, is based on thousands of data points from public sources like county records, tax documents, and multiple listing services — local databases used by real-estate agents where most homes are advertised for sale. Zillow’s formula also incorporates user-submitted info: If you get a fancy new kitchen, for example, your Zestimate might see a nice bump if you let the company know. Zillow makes sure to note that the Zestimate can’t replace an actual appraisal, but articles on its website also hail the tool as a “powerful starting point in determining a home’s value” and “generally quite accurate.” The median error rate for on-market homes is just 2.4%, per the company’s website, while the median error rate for off-market homes is 7.49%. Not bad, you might think.
But that’s where things get sticky. By definition, half of homes sell within the median error rate, e.g., within 2.4% of the Zestimate in either direction for on-market homes. But the other half don’t, and Zillow doesn’t offer many details on how bad those misses are. And while the Zestimate is appealing because it attempts to measure what a house is worth even when it’s not for sale, it becomes much more accurate when a house actually hits the market. That’s because it’s leaning on actual humans, not computers, to do a lot of the grunt work. When somebody lists their house for sale, the Zestimate will adjust to include all the new seller-provided info: new photos, details on recent renovations, and, most importantly, the list price. The Zestimate keeps adjusting until the house actually sells. At that point, the difference between the sale price and the latest Zestimate is used to calculate the on-market error rate, which, again, is pretty good: In Austin, for instance, a little more than 94% of on-market homes end up selling for within 10% of the last Zestimate before the deal goes through. But Zillow also keeps a second Zestimate humming in the background, one that never sees the light of day. This version doesn’t factor in the list price — it’s carrying on as if the house never went up for sale at all. Instead, it’s used to calculate the “off-market” error rate. When the house sells, the difference between the final price and this shadow algorithm reveals an error rate that’s much less satisfactory: In Austin, only about 66% of these “off-market Zestimates” come within 10% of the actual sale price. In Atlanta, it’s 65%; Chicago, 58%; Nashville, 63%; Seattle, 69%. At today’s median home price of $420,000, a 10% error would mean a difference of more than $40,000.
Without sellers spoonfeeding Zillow the most crucial piece of information — the list price — the Zestimate is hamstrung. It’s a lot easier to estimate what a home will sell for once the sellers broadcast, “Hey, this is the price we’re trying to sell for.” Because the vast majority of sellers work with an agent, the list price is also usually based on that agent’s knowledge of the local market, the finer details of the house, and comparable sales in the area. This September, per Zillow’s own data, the typical home sold for 99.8% of the list price — almost exactly spot on. That may not always be the case, but the list price is generally a good indicator of the sale figure down the line. For a computer model of home prices, it’s basically the prized data point. In the world of AVMs, models that achieve success by fitting their results to list prices are deemed “springy” or “bouncy” — like a ball tethered to a string, they won’t stray too far. Several people I talked to for this story say they’ve seen this in action with Zillow’s model: A seller lists a home and asks for a number significantly different from the Zestimate, and then watches as the Zestimate moves within a respectable distance of that list price anyway. Zillow itself makes no secret of the fact that it leans on the list price to arrive at its own estimate…
So the Zestimate isn’t exactly unique, and it’s far from the best. But to the average internet surfer, no AVM carries the weight, or swagger, of the original. To someone like Jonathan Miller, the president and CEO of the appraisal and consulting company Miller Samuel, the enduring appeal of the Zestimate is maddening. “When you think of the Zestimate, for many, it gives a false anchor for what the value actually is,” Miller says.
Multiple factors are at play here. Who has what information about housing and housing values? How is the value calculated? And what is the distribution of the comparison of the estimated value to the actual sales value? Some of this involves data, some involves algorithms.
It also sounds like part of the story is that Zillow has built one of the more effective brands in this space. Even if the estimates are not exactly right, people are drawn to Zillow. What would happen if competitors advertised that they are more accurate? Would this be enough to move people from using Zillow?
Given all of this, who can build the most accurate number might not be the “winner.” Is the goal to best model the housing market or is the goal to attract users? These two goals might go together but they might not.
Skepticism about this rise continuing at this rate could emphasize multiple unusual factors at play. A global pandemic. Interest rates shooting up. A quick turn toward working from home. A slow-down in housing construction, particularly for less expensive homes and starter homes. And housing prices do not always go up every year – they ten to over decades but not at every point.
On the other hand, why shouldn’t this rise continues? Where is a bunch of new housing going to come from? Will mortgage rates drop dramatically soon?
This statistic came from an article that primarily discusses how these rising prices mean many are priced out of the market. Those with resources already, particularly those with equity in a home, can better compete for the limited number of houses.
Whether values continue to increase or slow or even decline could go a long way toward affecting who can pursue the American Dream of homeownership.
Persistently high home prices and elevated mortgage rates are keeping potential home buyers on the sidelines. Sales of previously owned homes in the first nine months of the year were lower than the same period last year, the National Association of Realtors said Wednesday.
Existing-home sales in September fell 1% from the prior month to a seasonally adjusted annual rate of 3.84 million, NAR said, the lowest monthly rate since October 2010. Economists surveyed by The Wall Street Journal had estimated a monthly decrease of 0.5%.
Three quick thoughts in response:
The article hints at the consequences of this low level of sales. The mortgage industry is not originating as many mortgages. Potential homebuyers do not have as many options to choose from and the prices are higher. Not mentioned: does this mean this is helping to keep home values high? Or how much less economic activity does this all add up to?
Why are home sales measured in absolute numbers? Compared to 1995, I assume there are more potential homes that could be sold in the United States because there are more homes. If we looked at the percentage of existing homes sold, wouldn’t the lower activity even be more clear?
The expectation in this article and elsewhere seems to be that home sales should be at a higher level or should be growing in number. How cyclical are these numbers? How realistic is it to expect ongoing growth in this area? Looking at the chart in the article going back to 1981, it looks like there are 3 rises in growth followed by periods of lower numbers.
By itself, I am not sure what this particular figure compared to change over time means. What happens in the long run if the trend continues or it does not?
How’s that going to happen? Tax incentives for builders, perhaps an expansion of the low-income housing tax credit, but mostly, a $40 billion fund that would “empower local governments to fund local solutions to build housing [and] support innovative methods of construction financing.”
It’s not clear exactly what an innovation fund entails. Maybe the closest antecedent is a new, $85 million HUD program called “Pathways to Removing Obstacles to Housing,” or PRO Housing, which this summer issued 17 grants of a few million dollars each. The projects that got money include buying land for affordable housing in Rhode Island, retooling a digital application process in New York City, and hiring staff to fast-track affordable housing proposals in Denver.
It was a super competitive process, with $13 in requests for every $1 in award. Which raises the question: What can an annual outlay of $100 million (the PRO budget for next year) do to solve a problem as big as a deficit of 3 million homes? “State and local governments look at each other all the time, so those little examples can bear a lot of fruit,” said Chris Herbert, director of the Joint Center for Housing Studies at Harvard and a fan of the program. “There’s not a lot of money out there, but these grants can become an example for other places.”
Note what those two programs share: A focus on more housing, period, even if it’s not necessarily restricted to low-income Americans. That’s a subtle, crucial shift in federal priorities that reflects the growing sense that Washington must intervene to create more housing at all price points, not just for the poorest households with the most urgent housing needs.
Focusing on more housing overall could have several benefits:
It could be popular across residents who might be feeling the need for more and cheaper housing. Promoting such programs could garner more widespread public support.
Could fit the theory that providing more housing overall will help moderate prices across the housing spectrum.
At the same time, it is not entirely clear that such an approach would lead to the outcomes politicians and residents want. Do people generally want more housing (or is this limited to particular places)? Will reduced prices in housing brought on by increasing the supply reach the people who need the most housing help? What large-scale programs can help increase housing and flexibility even as different jurisdictions and locales approach housing differently at the local level?
All of this might just need to be worked out. Perhaps the shift above reflects an ongoing frustration among at least a few that not enough is happening regarding promoting housing.
According to residential real estate website Redfin, less than 10 metro areas in America are now worth $1 trillion in collective real estate home values. Most of those areas make sense for the list, like New York, Boston and Atlanta (the latter of which has a metro population of more than 6 million people). Anaheim, on the other hand, has a population of about 350,000 people, and for years fought to disengage itself from the ignominious nickname “Anacrime,” despite being home to the so-called happiest place on Earth…
The Orange County city reached its recently minted status due to an explosion in the real estate market in that area, with home prices up more than 12% over the past year, Redfin says. To source its findings, the Seattle-based company relied on aggregate home sale data for almost 100 million homes across the U.S.
San Francisco, meanwhile, has not reached trillion-dollar status yet, but that’s only because the city itself is so small. When combined with other large area real estate markets in San Jose and Oakland, the number jumps to a staggering $2.5 trillion. The other cities that did cross the $1 trillion threshold are Chicago, Washington, D.C., and Phoenix.
Nationally, the biggest overall rise in home values comes from more rural and suburban areas, Redfin says. The high cost of homeownership in Anaheim specifically points to ongoing issues in California around housing supply and affordability. Orange County has long been a wealthy area in aggregate, with pockets of affordability. Now, many prospective homeowners may be feeling the squeeze to leave, departing for less expensive homes in places like the Inland Empire and Bakersfield.
To some degree, this measure may not have much value. The biggest metro areas are on this list. (Missing are Dallas and Houston.) Have a lot of people and have relatively high prices and a place ll make this list.
On the other hand, Anaheim does seem like a bit of a surprise. It is a suburb of Los Angeles. In 1950, it had just over 14,500 residents. It grew tremendously in the postwar era. According to the Census Bureau, it has a median housing value of over $713,000.
What other suburbs could be close to joining this list? They would need to be large and expensive. This would rule out many communities in the Northeast and Midwest where suburbs tend to be smaller. Are there some Sunbelt or West Coast suburbs that could join the list soon?
Instead of getting together with your rivals and agreeing not to compete on price, you can all independently rely on a third party to set your prices for you. Property owners feed RealPage’s “property management software” their data, including unit prices and vacancy rates, and the algorithm—which also knows what competitors are charging—spits out a rent recommendation. If enough landlords use it, the result could look the same as a traditional price-fixing cartel: lockstep price increases instead of price competition, no secret handshake or clandestine meeting needed…
According to the lawsuits, RealPage’s clients act more like collaborators than competitors. Landlords hand over highly confidential information to RealPage, and many of them recruit their rivals to use the service. “Those kinds of behaviors raise a big red flag,” Maurice Stucke, a law professor at the University of Tennessee and a former antitrust attorney at the Department of Justice, told me. When companies are operating in a highly competitive market, he said, they typically go to great lengths to protect any sensitive information that could give their rivals an edge.
The lawsuits also argue that RealPage pressures landlords to comply with its pricing suggestions—something that would make no sense if the company were merely being paid to offer individualized advice. In an interview with ProPublica, Jeffrey Roper, who helped develop one of RealPage’s main software tools, acknowledged that one of the greatest threats to a landlord’s profits is when nearby properties set prices too low. “If you have idiots undervaluing, it costs the whole system,” he said. RealPage thus makes it hard for customers to override its recommendations, according to the lawsuits, allegedly even requiring a written justification and explicit approval from RealPage staff. Former employees have said that failure to comply with the company’s recommendations could result in clients being kicked off the service. “This, to me, is the biggest giveaway,” Lee Hepner, an antitrust lawyer at the American Economic Liberties Project, an anti-monopoly organization, told me. “Enforced compliance is the hallmark feature of any cartel.”
The company disputes this description, claiming that it simply offers “bespoke pricing recommendations” and lacks “any power” to set prices. “RealPage customers make their own pricing decisions, and acceptance rates of RealPage’s pricing recommendations have been greatly exaggerated,” the company says.
It will be interesting to see how the courts decide in this area.
I would be curious to hear how this process differs from the way housing prices are determined. The “correct price” does not just emerge. There are a set of actors – such as realtors, appraisers, and websites – that contribute. There are local histories that inform current and future prices. The housing market follows particular patterns and I recommend reading sociologist Elizabeth Korver-Glenn’s 2021 book Race Brokers: Housing Markets and Segregation in 21st Century Urban Americaon this topic.
Is the primary difference that there is not a centralized tech source for housing prices? (But maybe there is – how much has Zillow and its Zestimate changed the game?) Or are the new actors viewed with more suspicion than others (tech sector versus realtors)? Or are we in a particular social moment where high costs of housing prompt more questions and thoughts about alternative?
On the other hand, fewer homeowners like the idea of paying higher property taxes. Particularly in states with higher property taxes, like Illinois, this is a constant source of frustration: don’t we pay too much? How come other states get away with much lower property taxes?
But, these two forces might just be linked. If your property is worth more, the taxes you pay on that property are likely to go up. In other words, the kind of property appreciation many homeowners want means higher taxes on that more valuable property. (This is not always the case: the value may go up but the property tax rate goes down or some program or exemption limits the property tax amount.)
In a dream world for homeowners, their property would get more valuable and they pay less in taxes. It does not often work this way so instead they may complain about having to pay more in the short term for the ability to gain more money down the road when they sell the property.
Home prices and apartment rents in Austin, Texas, have fallen more than anywhere else in the country, after a period of overbuilding and a slowdown in job and population growth.
That marks a sharp reversal from previous years when Austin’s real-estate market was sizzling. The city attracted waves of remote workers on six-figure tech salaries. Others arrived after companies such as Tesla and Oracle moved offices there, taking advantage of lower taxes and less business regulation. Austin’s economy grew at nearly double the national rate, and it became the country’s 10th-largest city.
Now, it is contending with a glut of luxury apartment buildings. Landlords are offering weeks of free rent and other concessions to fill empty units. More single-family homes are selling at a loss. Empty office space is also piling up downtown, and hundreds of Google employees who were meant to occupy an entire 35-story office tower built almost two years ago still have no move-in date.
On one hand, falling prices are good news for residents. Housing is more affordable. People have more options. Getting in to better housing can mean better day-to-day experiences plus the opportunity to develop wealth.
On the other hand, falling prices mean less demand for development. This could mean slower population growth. Status is tied to population and interest actors have in snatching up properties. Tax revenues will be lower than they could be if property values do not shoot up.
Many American communities experience this tension. Property owners want values to go up. They do not necessarily want to pay higher taxes with these rising values but they will be happy when they sell the properties. More people want housing at reasonable prices. But, relatively few people want to live in places known for low housing values or people may not want to live in places where property values do not go up.
Legally Sociable 