School District Funding Models

Property taxes quietly shape real estate returns more than most investors realize. A new 2024 map of median property taxes across the U.S. highlights a massive spread: from ~$900 in West Virginia and Alabama to over $9,000 in New Jersey. That’s a 10x difference in annual holding cost for similar assets. A few observations worth thinking about: ✅The Northeast dominates the high end → strong public services, but heavier carry costs ✅Lower-tax states in the South/Midwest → often more cash flow-friendly ✅High-price states (like CA, WA) still generate large tax bills even with moderate rates ✅Property taxes aren’t static; they directly impact long-term yield and exit assumptions For investors, this isn’t just a line item; it’s a strategy. In markets with high property taxes: → Rent growth needs to keep pace → Expense ratios are structurally higher → Underwriting mistakes get amplified over time In lower-tax markets: → Cash flow looks better on paper → But often comes with different demand drivers and risks At the end of the day, property taxes are one of the most predictable, but often overlooked, forces in real estate performance. If you’re underwriting deals across multiple states, this is one variable you can’t afford to ignore. Source: U.S. Census Bureau (ACS 2024 1-Year Estimates, Niccolo Conte, Christina Kostandi), Visual Capitalist #RealEstate #RealEstateInvesting #Multifamily #PropTech #CRE #Investing #HousingMarket #DataDriven #MarketResearch

Property tax doesn’t care about age, income, or ability to pay, and in the U.S., it is fundamentally regressive for seniors because it’s tied to home value, not income, and home values often rise faster than retirement income. That mismatch forces elderly homeowners into financial stress or even displacement. 1. Property taxes rise even when income falls An 82‑year‑old living on Social Security ($22k/year), maybe a small pension, maybe modest savings…cannot absorb a $12k–$15k annual tax bill. But the tax bill keeps rising because the house value keeps rising — even though the homeowner’s income does not. 2. Retirement income is fixed, but taxes aren’t Most seniors cannot “earn more” to keep up with rising taxes. They’re punished for simply aging in place. 3. Home appreciation becomes a liability In places like Arizona, Texas, Florida, California, and New Jersey, home values have skyrocketed. That means seniors pay more because their neighborhood got popular, not because they did anything. 4. It forces seniors to sell homes they want to keep This is the most heartbreaking part: People lose the homes they raised families in because the tax burden becomes unbearable. Why the U.S. uses property tax this way 1. Local governments rely heavily on property taxes: Schools, fire departments, libraries, and city services depend on property tax. Unlike other countries, the U.S. doesn’t fund these centrally. 2. Politically, property tax reform is difficult: Lowering property taxes means cutting school budgets, cutting city services, and raising other taxes. Politicians avoid that fight. 3. The system assumes homeowners are wealthy: This is outdated. Many seniors are “house rich, cash poor.” Here are the reforms experts discuss: 1. Age-based caps: Limit property tax increases after age 65 or 70. Some states do this, but inconsistently. 2. Income-based property tax: Tie taxes to ability to pay, not home value. (Common in Europe). 3. Senior exemptions: Reduce or eliminate property tax for low-income seniors. 4. Freeze taxes at retirement: Lock the tax rate the year someone retires. Property tax is the only tax that can take your home away even

One thing that doesn’t get enough attention in the Texas housing affordability debate: property taxes. The legislature has made progress, capping annual appraisal growth and expanding the homestead exemption, but the system still largely favors those who understand how to work it. And make no mistake, it is a system with rules. Those rules are just not applied evenly. Those who know when to use the income, equity, or comparison approach, how ag exemptions and rollback taxes work, and how to negotiate with appraisal districts, they have an advantage. If you have leverage or scale you have an advantage. That knowledge gap matters. Texas homeowners pay some of the highest effective property tax rates in the nation, around 1.6% of home value on average, and property taxes account for nearly half of all local government revenue. It is a huge part of the cost of homeownership in the state of Texas. Yet, the average homeowner has zero leverage. Large landowners benefit through ag exemptions. Commercial owners use valuation discounts. Estate properties often win through equitable arguments. Meanwhile, the ordinary homeowner’s value closely follows the market, year after year, with few tools to push back. Having spent hours in appraisal district offices and ARB hearings, I’ve seen how subjective the process can be, and how often well-meaning homeowners are told not to worry because their value is “capped this year,” without realizing that today’s inflated value becomes tomorrow’s baseline. This drives up all values. Knowledge shouldn’t be the barrier to fairness. If we’re serious about housing affordability in Texas, we have to talk about property taxes, not just rates, but rules.

New Paper! Low property taxes concentrate ownership among the elderly, while higher property taxes enable more young families to own homes. With Josh Coven, Abdoulaye Ndiaye, and Sebastian Golder. Background: the bulk of the housing stock is owned by 50-70 year old empty nesters aging in place with spare bedrooms, while young families with children face crowded housing despite a higher need for space. See also Redfin research: https://lnkd.in/eYR5n8fu The key insight from the paper: Property taxes act like a "forced mortgage" — upfront price is lower, capitalizing the taxes, alongside higher ongoing payments. Just like a mortgage would do. This tradeoff helps financially constrained young families overcome down payment barriers. Consistent with this logic — areas with higher property taxes have more young homeowners, fewer empty bedrooms, and more children as % of population. House prices and price-to-rent ratios are lower. We compare TX (high property tax) vs CA (low tax due to Prop 13) housing markets. Home ownership rates among the young are extremely low in California — how much of that is driven by low taxes and high prices? We build a structural lifecycle model which matches a key aspect of the data—homeownership gradients in CA are very steep, ie young people don't own while old people do. By contrast, in TX, in both data and model we see more young homeownership—but less elderly homeownership. Raising CA taxes to TX levels would increase overall homeownership by 4.6% and young household ownership by 7.4%. Higher property taxes in CA lead to 18% lower house prices. This enables more young, financially constrained families to buy homes despite higher ongoing tax costs. Our results highlight how asset taxes like property taxes can significantly impact prices and allocations, especially with financial constraints. Higher taxes can actually make homeownership more accessible to young families, while low taxes can lock such families out. Paper: https://lnkd.in/eM796tcx Substack: https://lnkd.in/edwCqNGz 

For the past decade, housing policy has been dominated by the search for “transformational” solutions to the affordability crisis. Some have helped. But too many have made headlines, absorbed public dollars, and failed to deliver at scale. Bob Simpson’s latest piece is a useful reminder of something housing practitioners understand well: affordability is built on math, not magic. Property tax abatements are among the least glamorous tools in local government, and also among the most effective. When rents are restricted, development costs have to come down or the deals don’t work. Property taxes are often one of the largest fixed operating expenses in multifamily housing. Reduce that burden, and suddenly projects pencil that otherwise wouldn’t. Homes get built. Affordability endures. What makes this article especially compelling is how clearly it connects abatements to outcomes policymakers actually care about: lower rents, reduced reliance on direct subsidy, increased investment, and economic benefits. This isn’t theoretical. Cities like San Antonio, Buffalo, and Dallas are already proving it works at scale. There’s no silver bullet for housing, but there are proven levers. We should spend less time innovating for innovation’s sake, and more time scaling the tools we already have. Worth the read. https://lnkd.in/eM7aUiGp

2026 is shaping up to be a turning point for property taxes in the U.S. Several states are no longer talking about reform. They’re talking about elimination. From North Dakota’s oil-backed plan to Florida and Georgia pushing ballot initiatives without clear replacement funding, to Texas targeting school property taxes and Indiana proposing full repeal, the message is the same: homeowners want relief. The problem is what comes next. Property taxes may be unpopular, but they are one of the most stable sources of funding for schools and local government. Replacing them means higher sales taxes, broader taxes on services, new fees, or cuts to public services. In many cases, it also means a shift toward more regressive taxation that hits renters and working families harder. “Zero property taxes” is an easy slogan. Designing a system that replaces tens of billions in reliable revenue without hollowing out education, public safety, and infrastructure is the hard part. Voters aren’t just deciding whether they want lower tax bills. They’re deciding how their communities get funded going forward. #PropertyTax #TaxPolicy #PublicFinance #StateBudgets #EducationFunding #LocalGovernment #FiscalSustainability

Property taxes are becoming a growing pressure point for homeowners — and housing counselors are on the front lines of helping families navigate it. The MortgagePoint article highlights a trend many of us are already seeing in counseling sessions: 📈 Rising single‑family property tax bills are straining household budgets, especially for first‑time buyers, seniors on fixed incomes, and families already juggling higher insurance premiums, utilities, and consumer debt. For many homeowners, the mortgage payment isn’t the issue — it’s everything around it. And when taxes rise faster than income, even stable households can find themselves in a precarious position. This is exactly where HUD‑approved housing counseling makes a difference. Counselors are helping consumers: • Understand how property tax increases affect escrow and monthly payments • Prepare for adjustments before they hit the budget • Build savings buffers to absorb rising housing‑related costs • Navigate appeals processes or local tax‑relief programs • Evaluate whether refinancing, loss‑mitigation options, or budgeting changes can restore stability • Identify early warning signs before delinquency occurs The article underscores a reality our field knows well: Housing affordability isn’t just about the mortgage - it’s about the total cost of staying housed. As property taxes rise nationwide, housing counselors are uniquely positioned to help homeowners stay ahead of these pressures, avoid unnecessary hardship, and preserve long‑term homeownership. This is another reminder of why our work matters — and why early, trusted, consumer‑focused guidance is essential to sustainable homeownership. #NHRC #HUDCertifiedProud #HousingCounseling #Housingforall #SustainableHomeownership #HousingStability #FinancialWellness

𝗧𝗮𝘅 𝗥𝗲𝗮𝘀𝘀𝗲𝘀𝘀𝗺𝗲𝗻𝘁 𝗮𝘁 𝗥𝗲𝘃𝗲𝗿𝘀𝗶𝗼𝗻 𝗳𝗼𝗿 𝗖𝗥𝗘 𝗣𝗿𝗼𝗽𝗲𝗿𝘁𝗶𝗲𝘀   A tax reassessment occurs when a taxing authority updates a property’s assessed value, typically after a change in ownership, to reflect current market value. This reassessed value becomes the basis for future property tax bills. In California, Proposition 13 limits annual increases in assessed value to a maximum of 2% per year, regardless of how much market value grows. As a result, long-held properties often carry tax bases that are well below current market value. That’s fine for modeling current operations, but it can create issues at exit. When a property is sold, it changes hands. In many cases, that sale typically triggers a reassessment, meaning the buyer inherits a new tax basis rather than the seller’s historical one. This matters directly for reversion (exit) value. In a financial model, reversion value is usually calculated by applying a direct cap rate to forward NOI. If property taxes are carried forward based on in-place assessments instead of market value, NOI is overstated and so is value. This same logic shows up on the debt side. When lenders underwrite loans, they evaluate the asset as if they may need to take ownership in a downside scenario. Appraisals are based on market value, and taxes are often underwritten as if the property were reassessed, even in refinance scenarios. This reduces lender risk regardless of whether taxes are immediately reset. 𝗜𝗹𝗹𝘂𝘀𝘁𝗿𝗮𝘁𝗶𝗼𝗻 Assume two identical income statements for a 175-unit apartment complex acquired years ago and now worth significantly more. The only difference between the two statements is property taxes. One reflects in-place taxes of $639,311, while the other reflects reassessed taxes of $1,033,200. That $393,889 difference flows directly through to NOI, resulting in a 7.8% difference in value using a 5.50% exit cap rate. Under typical loan terms (5.25% interest rate, 30-year amortization, 1.25x DSCR), loan proceeds supported by in-place taxes would be approximately $4.8 million higher than when underwriting reassessed taxes. Reversion assumptions drive a meaningful portion of total return in most models. If taxes aren’t reassessed at exit, NOI is overstated, value is overstated, and risk is understated. If a deal only works because in-place taxes are carried forward at reversion, that’s a signal worth paying attention to. My site is where I share how I think about commercial real estate capital. You can subscribe there for occasional updates. More here: https://lnkd.in/gTxXM7uu

Underestimating the future property tax reassessment at the time of purchase can significantly reduce your overall return. For that reason, you should carefully scrutinize any tax estimate based on an assessed value that is lower than the purchase price. And so how do you do this? It’s quite simple. Pick up the phone and call your local tax assessment office that handles the jurisdiction where the property is located and ask how they handle reassessments upon sale transactions. A few specific questions you need to be asking are: - Is it a percentage of the purchase price? - How is goodwill handled? - If there are park owned homes, how much value can you assign to those? What value is assigned to the land, etc.? Understanding this will allow you to create a much more accurate proforma and not be slapped with an unfortunate surprise of a massive tax increase a year or two after purchase.

What public finance experts actually think about property taxes (ABFM Expert Survey, Fall 2025) Property taxes are having a political moment, and not in a good way. But when you ask public finance experts to evaluate local revenue options on the merits, a clear pattern shows up: 1) Property taxes are still viewed as the backbone of local government finance. Across experts, the property tax is generally seen as the most practical and reliable way to fund local services — especially compared to local income or sales taxes, which are more volatile and easier to avoid. 2) “Regressive” is… complicated. Experts don’t agree that property tax is inherently regressive. A big reason: a meaningful share of the burden is capitalized (into property values) and a substantial portion is paid by non-residential property owners. But they emphasize outcomes depend heavily on administration: assessment accuracy, appeal dynamics, exemptions/abatements, and relief design. 3) Fairness is where design matters most. Many experts view property tax as a reasonable “benefit tax” for local services (schools, safety, infrastructure) because those services show up in neighborhood quality and property values. But they also flag that caps, phase-ins, and acquisition-based systems can create big inequities over time. 4) States can’t just abolish it without consequences. Experts strongly warn that eliminating the property tax would impair local governments’ ability to provide public services unless states fully take over funding responsibilities — and even then, replacements would likely be less stable. 5) Transparency isn’t the main issue, salience is. A number of experts argue property taxes are actually among the most visible taxes. The real issue is how reassessments and rate-setting can create “fiscal illusion” (people feel whiplash even when rates fall but values rise). Bottom line: Experts broadly support property tax as a core tool but they’re equally clear that administration and policy design determine whether it feels fair, whether burdens spike, and whether reforms help or backfire. If we want property tax reform that actually works, we probably need to talk less about “property tax: good or bad” and more about: ✅ assessment quality ✅ relief targeting (circuit breakers vs broad exemptions) ✅ transparency in reassessment years ✅ how state aid interacts with local school funding Link to the full paper here: https://lnkd.in/eTD4sxZ4 #propertytax #iaao #assessment