Could Eliminating Property Taxes Ignite the Housing Market?

GROW WITH LIBERTAS & EXP REALTY

Real estate agents spend a lot of time talking about mortgage rates.

That makes sense. A change in rates can determine whether a buyer qualifies, whether a seller receives an offer and whether a transaction closes.

But mortgage rates are only one part of the affordability equation.

Property taxes are becoming impossible to ignore.

Across the country, homeowners are pushing back against tax bills that continue to rise even when their incomes do not. Property-tax relief is now being debated by state legislatures, local governments and voters.

For real estate agents, this is much more than a political argument.

Property taxes directly affect:

The housing market may not have to wait for the Federal Reserve to lower interest rates.

A major reduction in property taxes could create its own affordability boom.

In 2025, approximately $396.8 billion in property taxes were levied on more than 89.6 million single-family homes in the United States.

The average bill was $4,427 per home, or approximately $369 per month. That was a 3% increase from the previous year.

What would an additional $369 per month mean to your family?

Would you spend it at local restaurants and businesses?

Would you pay down credit cards?

Would you build an emergency fund?

Would you save for your children’s education?

Would you invest it?

Would you apply it to your mortgage and own your home years earlier?

A homeowner who invested $369 per month for 20 years and earned a hypothetical average return of 7% would accumulate approximately $192,000.

After 30 years, the account would grow to approximately $450,000.

Returns are never guaranteed, of course. The example simply demonstrates the opportunity cost.

Money paid in property taxes cannot also be saved, invested or used to eliminate debt.

Consider the mortgage alternative.

A homeowner with a $350,000, 30-year mortgage at 6.5% who applied an additional $369 per month to principal would pay off the loan in approximately 20½ years instead of 30.

The homeowner would become mortgage-free roughly nine and a half years earlier and save approximately $163,000 in interest.

That is a meaningful change in one family’s financial life.

Now multiply those decisions across tens of millions of American households.

There is an important distinction to make.

Eliminating a tax does not make the expenses currently funded by that tax disappear.

Property-tax revenue pays for schools, police departments, fire protection, roads, municipal employees, pension contributions and other local services.

That spending is already part of the economy.

The real question is:

Who should decide how the money is used?

When the government collects it, elected officials and public agencies allocate it.

When homeowners keep it, millions of individual families decide whether to spend, save, invest or reduce debt.

If property taxes were eliminated and replaced dollar-for-dollar with higher income taxes, sales taxes, assessments, utility charges and government fees, homeowners would receive little meaningful relief.

The money would simply be collected through a different door.

But if property-tax reductions were accompanied by spending discipline and greater government efficiency, hundreds of billions of dollars could remain in the private economy.

That money would not sit still.

It would flow through local businesses, home-improvement projects, automobile purchases, investment accounts, mortgage balances and retirement savings.

Governments must collect revenue somewhere.

But not all taxes affect personal choice and property ownership in the same way.

A sales tax is generally triggered by a transaction.

You decide whether to buy the new television, furniture, appliance, automobile or boat. You can postpone the purchase, choose something less expensive or decide not to buy it at all.

Depending on state law and the type of purchase, sales or use tax may still apply to used or private-party transactions. But consumers generally retain substantial control over whether the taxable transaction occurs.

Property taxes work differently.

The tax is imposed year after year simply because you continue to own the property.

It does not matter whether your income increased.

It does not matter whether you retired.

It does not matter whether you lost your job.

It does not matter whether you have owned the home for three years or 50 years.

It does not even matter whether the mortgage has been paid in full.

The bill still arrives.

The homeowner cannot simply decide not to participate. The choices are to pay the tax, sell the property or eventually face a tax lien and possible foreclosure.

Calling sales taxes entirely “voluntary” would be an oversimplification. People still have to purchase necessities.

But taxes tied to consumption generally give the taxpayer more control than taxes tied to continued ownership.

A homeowner may spend 30 years paying principal and interest to a bank. Once the mortgage is satisfied, most people understandably believe the home belongs to them.

Property taxes make that ownership conditional.

The homeowner must continue paying the government indefinitely for the right to remain in the property.

A buyer may tour a $500,000 house, but the buyer does not experience that house as a price.

The buyer experiences it as a payment.

Mortgage qualification generally includes:

Fannie Mae includes real estate taxes when calculating a borrower’s monthly housing expense.

At a hypothetical 6.5% mortgage rate, the average $369 monthly property-tax expense is approximately equal to the principal-and-interest payment on $58,000 of additional 30-year mortgage debt.

This does not mean every buyer would automatically qualify for another $58,000. Income, credit, down payment, insurance expenses and other debts still matter.

But the direction is clear.

Lower property taxes reduce the monthly payment. Lower payments allow more buyers to qualify.

Dallas provides a powerful real-world example.

Texas is often associated with property-tax rates approaching 3%. That can be true in parts of the Dallas–Fort Worth region where additional utility districts, improvement districts and other special taxing entities are involved.

For a typical property within the City of Dallas and Dallas Independent School District, the principal 2025 taxing authorities included:

The combined rate is approximately 2.2267% before exemptions or additional special-district charges.

On a $1 million property with no exemptions, that would equal approximately:

And that is before homeowners insurance, HOA dues, repairs, maintenance and utilities.

In a Dallas-area location where the total rate reaches 3%, the tax bill on a $1 million home would be:

That is not a one-time closing cost.

It is due every year for as long as the homeowner owns the property.

A cash buyer with no mortgage could still be required to pay $1,856 to $2,500 every month in property taxes.

Put that into mortgage terms.

At a hypothetical 6.5% rate:

The Dallas homeowner may effectively be carrying the monthly payment associated with hundreds of thousands of dollars in additional mortgage debt.

The difference is that the property-tax payment never reduces a loan balance.

It builds no equity.

It is never paid off.

The advertised tax rate does not have to increase for a homeowner’s bill to rise.

If the taxable value of a $1 million Dallas property increased by 5% while the combined rate remained unchanged, the annual tax bill would increase by approximately $1,113.

At a 10% increase in taxable value, the bill would rise by approximately $2,227 per year.

Texas limits annual increases in the appraised value of a qualifying residence homestead to 10%, excluding new improvements. But that is a limitation on appraised value—not a promise that the tax bill will remain unchanged.

This is one of the most important conversations an agent can have with a buyer.

The seller’s existing property-tax bill may reflect:

The buyer should not assume the seller’s current tax bill will become the buyer’s tax bill.

Agents need to estimate the expense based on the likely taxable value after the sale.

Otherwise, what appeared to be an affordable payment at closing may become a painful surprise later.

Probably.

Buyers evaluate the total cost of owning a property. When a major recurring expense falls, buyers can afford to direct more money toward the purchase price.

Federal Housing Finance Agency research into Philadelphia’s 10-year property-tax abatement found that the value of the tax benefit was initially capitalized almost completely into home prices. Buyers were willing to pay more for properties with lower future property-tax obligations.

That means eliminating property taxes would not necessarily make the underlying homes permanently cheaper.

Some of the monthly savings would likely be converted into higher prices as buyers competed for available properties.

Existing homeowners could benefit twice:

First-time buyers might experience a more complicated result. Their monthly qualification could improve, but higher prices could require larger down payments.

Property-tax relief could improve monthly affordability without making the asset itself less expensive.

Property taxes are imposed locally, so actual bills vary widely within each state.

The best broad comparison is the effective property-tax rate—the amount paid as a percentage of the home’s value.

Using 2024 Census data, the Tax Foundation’s 2026 comparison identifies the following states as having the highest effective rates on owner-occupied homes:

On a theoretical $1 million taxable value, those statewide effective rates would represent annual property taxes ranging from approximately $13,200 in Wisconsin to $18,800 in New Jersey and Illinois.

These are statewide averages, not estimates for a specific house.

Dallas demonstrates why the distinction matters.

Texas has a statewide effective rate of approximately 1.40%, while a typical property within the City of Dallas and Dallas ISD can face a combined published rate of approximately 2.23% before exemptions.

A homeowner does not pay a statewide average.

The homeowner pays the combined demands of the taxing authorities attached to that particular address.

Property-tax revenue has been remarkably dependable for local governments.

Census Bureau data published by the Federal Reserve Bank of St. Louis show that rolling four-quarter state and local property-tax collections increased from approximately $515 billion at the end of 2015 to nearly $834 billion at the end of 2025.

That represents an increase of approximately 61.9% in nominal dollars over ten years. By the first quarter of 2026, the total had reached approximately $843 billion.

“Nominal” matters. Those figures are not adjusted for inflation, and local governments have faced higher wages, healthcare expenses, construction costs and operating expenses.

But the increase is still enormous.

Property-tax revenue can rise even when officials do not increase the published tax rate.

When assessed values increase, the government may collect substantially more money while politicians continue to say:

“We did not raise the tax rate.”

Technically, that may be true.

The homeowner’s larger bill is also true.

New York City’s adopted budget increased from approximately $78.5 billion in fiscal year 2016 to $115.9 billion in fiscal year 2026.

That is an increase of nearly 48% in nominal dollars over ten years.

Budget growth alone does not prove waste.

Cities face legitimate increases in employee compensation, infrastructure costs, healthcare, public safety, housing programs and pension contributions.

Federal and state funding can also increase a city’s total budget without coming directly from local property owners.

But spending growth on this scale should invite serious scrutiny.

Did public safety improve in proportion to the additional spending?

Are roads, schools and public facilities noticeably better?

Did permitting become faster?

Are government services easier to access?

Were outdated programs eliminated?

Did administrative head counts grow faster than the services residents actually use?

Those are not anti-government questions.

They are the questions any responsible board of directors would ask an organization whose spending had increased by tens of billions of dollars.

There is no credible national estimate showing exactly how much local-government spending is waste, fraud or abuse.

But there are documented examples showing how weak oversight can expose enormous amounts of public money.

A New York City comptroller investigation found that the Department of Education awarded more than 500 contracts worth approximately $2.7 billion without full competition or required safeguards.

That does not mean every dollar was stolen or wasted.

It demonstrates why rapidly growing government revenue must be accompanied by rigorous oversight.

Private businesses cannot assume customers will automatically pay them more every year.

They have to earn revenue, control expenses and eliminate products or departments that no longer perform.

Government operates under different incentives.

Programs are easier to begin than to end.

Temporary spending has a habit of becoming permanent.

Departments develop constituencies.

Employee head counts expand.

Pension promises accumulate.

Debt service grows.

Every program can make a case that it is essential.

As long as property assessments and tax receipts continue rising, there is less pressure to make difficult choices.

Meaningful property-tax relief would force cities and counties to ask:

That review should not require a financial crisis.

The claim needs to be stated precisely.

There is no single national law that automatically raises every homeowner’s property taxes whenever public pension investments underperform.

But in certain jurisdictions, the connection between property taxes and pension funding is explicit.

Illinois provides one of the clearest examples.

State law requires covered municipalities to levy a tax on taxable property sufficient—along with employee contributions and other available revenue—to meet annual police pension funding requirements.

Those requirements include the plan’s normal cost and an amount intended to bring the pension fund to 90% of its actuarial liabilities by 2040.

The law states that the pension levy is imposed in addition to taxes levied for general municipal purposes.

Illinois law contains a similar structure for covered municipal firefighter pension funds.

In those communities, property owners are not only paying for current police and fire services.

Part of the tax burden is supporting retirement obligations accumulated over many years.

When actuarially required pension contributions rise, the pressure can reach the property-tax bill.

Washington law also contains a dedicated property-tax mechanism for certain legacy firefighter pension obligations.

Qualifying municipalities are directed to levy 22.5 cents per $1,000 of assessed value for the fund unless an actuarial report determines that all or part of the levy is unnecessary.

The law provides for an additional levy under specified circumstances.

That is not an indirect relationship.

It is a property-tax funding mechanism written into state law.

The accurate conclusion is:

A homeowner may assume a rising bill is paying for better services today when part of the increase is actually funding promises made years or decades earlier.

This may be the most troubling part of the property-tax system.

A homeowner can make mortgage payments for 30 years.

The loan can be satisfied.

The lender’s lien can be released.

The property can be owned free and clear.

The homeowner can still lose the house for failing to pay property taxes.

Older homeowners can be particularly vulnerable.

While a mortgage is active, the loan servicer often collects taxes monthly through an escrow account and pays the taxing authority.

When the mortgage is paid off, that system disappears.

The owner becomes responsible for receiving the bill, budgeting for it and paying the government directly.

A missed notice, illness, cognitive decline, death of a spouse or lack of cash can begin a process that eventually threatens a fully paid-off home.

These owners may be house-rich and cash-poor.

They may possess hundreds of thousands of dollars in equity while living on Social Security, a pension or limited savings.

Their income may barely change while assessments, insurance and property taxes continue rising.

The honest answer is that no one knows—and that may be the most disturbing fact of all.

There is no reliable national database tracking how many Americans lose their homes through property-tax foreclosure each year.

Tax foreclosures are administered by thousands of cities, counties, courts and local taxing authorities, all operating under different laws and reporting systems.

New America’s research found that most tax-foreclosure data exists only at the city or county level and that no comprehensive national database exists. The organization also notes that older homeowners who have paid off their mortgages may be especially vulnerable when they cannot keep pace with rising property taxes.

The United States tracks mortgage delinquencies.

It tracks mortgage foreclosures.

It tracks home prices.

It tracks mortgage rates.

It tracks housing starts.

Yet it cannot say with confidence how many people lose mortgage-free homes because they were unable to pay a local tax bill.

In 2023, the Supreme Court ruled in Tyler v. Hennepin County that a government may not take a property to satisfy a tax debt and simply keep value beyond the amount owed.

That decision protects the owner’s remaining equity. It does not eliminate the underlying tax foreclosure or guarantee that the owner can remain in the home.

Protecting surplus equity is not the same as protecting possession.

Agents should stop treating property taxes as a minor line item at the bottom of a closing estimate.

The tax bill affects qualification, purchasing power, resale value and the owner’s ability to remain in the property.

Show the complete monthly housing expense—not merely principal and interest.

Explain that the seller’s current tax bill may not reflect what the buyer will owe after the sale.

Research the taxing authorities attached to the specific address.

Do not rely solely on countywide or statewide averages.

Determine whether proposed tax relief applies to:

A proposal that lowers taxes for one category by shifting the burden to another could materially affect rents, cap rates and investor demand.

Do not provide legal or tax advice.

But do remind owners to investigate homestead, senior, veteran and disability exemptions and to speak with the appropriate government office or qualified adviser.

For a retired homeowner struggling with a tax bill, that conversation may be more valuable than another automated home-anniversary email.

Property-tax relief could become one of the most consequential housing issues of the decade.

It could lower monthly housing expenses.

It could increase buyer purchasing power.

It could bring sidelined buyers back into the market.

It could increase home values.

It could allow families to save, invest, spend and pay off their mortgages faster.

It could prevent older homeowners from losing mortgage-free homes because they cannot keep pace with ever-rising tax bills.

It could also force cities and counties to confront a question that has been avoided during years of rising assessments and expanding tax receipts:

If taxpayers have been sending dramatically more money every year, why hasn’t government become dramatically more efficient?

Real estate agents are accustomed to waiting for the Federal Reserve to rescue housing affordability with lower interest rates.

Perhaps the next major housing boom will begin somewhere else.

Perhaps it will begin when homeowners are allowed to keep more of the money they already earn.

And perhaps it will begin with one simple question:

— Tim & Julie Harris

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