In 2022, $339.8 billion in property taxes were levied on single-family homes in the U.S., a 3.6% increase from the $328 billion levied in 2021, according to an Attom Data Solutions analysis of 87 million U.S. single-family homes. This increase was more than double the 1.6% growth seen in 2021, although it was markedly less than the 5.4% increase in 2020.
In addition, the average tax on a U.S. single-family home in 2022 went up 3% to $3,901, compared to a more modest increase of 1.8% in 2021. Still, the nationwide effective property tax rate was only 0.83%, down from 0.86% in 2021 and the lowest rate since at least 2016.
The effective tax rate, or the percentage of a property’s value paid in taxes, declined in 2022 even as total taxes increased, which is due to the continued rise in home values. Last year, U.S. home values increased faster than taxes, and despite the housing market slowdown, the average estimated single-family home value rose 7.9%. This growth easily exceeded the average tax increase, resulting in a small dip in effective tax rates.
Market forces paint a tough picture for homeownership opportunities moving forward, if current trends continue. Although home prices have started to decline, they have yet to recede significantly in many markets. Meanwhile, higher mortgage rates, persistent consumer price inflation and other economic factors continue to form strong headwinds to affordability. It seems likely that residential property tax trends will continue their upward path, considering the needs of local governments and school systems faced with rising inflation and declining tax revenues tied to a drop in commercial real estate values.
Of course, these national trends can look vastly different through a local lens, which will greatly influence homeownership affordability in specific parts of the country. It’s interesting to note that the states with the highest effective property tax rates are not necessarily the same as the states with the highest average property taxes, although there is some overlap. Notably, New Jersey leads both categories.
The states with the highest effective property tax rates in 2022 were New Jersey, Illinois, Connecticut, Vermont and Nebraska. The states with the highest average property taxes last year were New Jersey, Connecticut, Massachusetts, New Hampshire and New York. The average tax of $9,527 on a single-family home in New Jersey was more than 10 times higher than the $928 figure in West Virginia, which had the country’s lowest average property tax. At the other end of the spectrum, low effective tax rates and low average property taxes are found in many of the Southern states. Surprisingly, however, Hawaii had the lowest effective tax rate in the U.S. in 2022 at 0.3%, followed by Alabama, Arizona, Colorado and Tennessee.
Drilling down past the state level, average property taxes in many major metro areas saw larger increases than the national average. In fact, 65% of the 223 metro areas analyzed in the report saw taxes rise faster than the U.S. as a whole in 2022. Most of these metros were in the South, where taxes rose 5.8% on average, and in the West, which saw an overall increase of 5.5%.
Some large metro areas with a population of at least 1 million had significant increases in their average property taxes from 2021 to 2022. In Pittsburgh, taxes increased year over year by a whopping 59.6%. It was followed by Rochester, New York (up 23.2%); Honolulu (up 15.3%); Salt Lake City (up 14.3%); and Miami (up 12.6%).
Although property taxes vary widely from state to state (and sometimes from city to city), the national trend is one that speaks to rising expenses that hamper affordability, creating financial concerns for existing homeowners and potential homebuyers alike. These numbers bear watching as economic and market shifts influence the housing industry. ●