In an effort to slow the double digit increase in taxes, there is a new…
In 2018 Local Governments will drive foreclosures: property taxes increase 70%
Local governments will likely kick off the next round of foreclosures, albeit not intentionally. Why? How? If you opened your mailbox, your assessed property value has likely increased and depending on the area, increased substantially. One area in Denver increased its assessed values by 70%! Remember you pay 17 taxes in 2018 so you haven’t seen any changes yet on your actual taxes. All the recent tax initiatives are like a credit card; it feels good when you purchase it, then you forget how much you spend until the bill comes. The huge bills are coming shortly!
For 2018 tax cycle many areas increased in value substantially (up to 70%) that will flow through to increased property taxes that every property owner will no doubt feel. Why this year? In Colorado properties are reassessed every odd year based on the prior two years sales. The last several years have seen huge appreciation gains throughout the front range which are now flowing through to assessed values.
What can you do? Unfortunately, the appeal deadline has already passed (June) so you have to wait until next year to appeal. I did a guide on Colorado property taxes and the appeal process: Colorado Property Tax Guide
How much are they going up? It depends on your neighborhood, county, etc.. but on average throughout the metro area the increases on average for the 7 metro counties range from 17 percent to 40% (source Denver Post)
Why will the impact be in 2018? New taxes will be billed that are due and payable in 2018, so the increases in property valuations will not be felt until next year
How will this lead to foreclosures? Property owners will be faced with yet another expense. The areas that saw the largest increases in values were lower priced areas. These are areas where owners are less likely to be able to absorb a large property tax increase. Their incomes are not coming even close to keeping up with the costs in the area. Let’s take an example of someone who bought a house 15 years ago in a lower income area of Denver. Last year the taxes might have been 2000 a year, now with the rapid appreciation of the neighborhood they increased 70% (like some of the Denver neighborhoods), this means their new tax amount is 3400/year, if they are escrowing this is 283/month vs. 166/month. This is a huge increase. Many property owners will not be able to absorb the huge “shock” of the higher payments and therefore could lose their house to foreclosure, opt to sell the house, etc…
What about the impact on renters? Property owners will no doubt “pass through” the increases in taxes to tenants which will cause rents to continue to increase
The irony of the tax increases. As taxes go up, affordability goes down. Denver county has ironically passed a number of new taxes on property owners to help pay for affordable housing. It seems counterintuitive to increase taxes for affordable housing when on one hand you are substantially decreasing the affordable housing due to the increased taxes.
Summary: Regardless of what county you live in throughout the front range, it is a given that your taxes are going up. This tax increase will affect all property owners and their tenants and drastically alter neighborhoods where many owners are unable to absorb the huge increase in cost which will lead to large “transitions” of neighborhoods throughout the metro area.
Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the state.
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