In just a week, homeowners across the Denver metro area will be staring at numbers that may come as a shock: Their property values may have jumped by up to 45% — or even higher for some areas.
“We do ask property owners to take a good look at the notices they receive,” said Denver Assessor Keith Erffmeyer, urging homeowners to let their local assessor’s offices know if they dispute the value they receive.
Driven by a costly real-estate market, home values — as calculated for property tax purposes — have spiked since the last time homeowners received notices of value two years ago. Since then, residential properties in the Denver metro area typically saw value increases between 35% and 45%, a group of assessors from across the Front Range announced April 26.
For owners selling their homes these days, the bump in home prices has been good news. But it also means owners are on the hook for higher property tax bills, Erffmeyer noted.
Public officials are openly hoping homeowners will get relief from the state legislature, where lawmakers are expected to take action to lower property tax bills this year.
It’s a fraught equation, though, because local governments depend on property tax revenue, and too much adjustment could threaten cuts to their services.
Property taxes partly fund county governments, but they also fund school districts, fire and library districts, and other local entities.
Toby Damisch, who heads Douglas County’s property valuation office, emphasized the urgent nature of the situation for homeowners and affordability.
“If the state lawmakers don’t act immediately on this, then it will be a crisis, in my opinion,” Damisch, the Douglas County assessor, told reporters.
Not an isolated problem
Across Colorado, property values have risen significantly, Damisch said. In notably affluent Douglas County, residential properties saw increases between 30% and 60%, with a median of 47%.
Other metro-area counties have seen high spikes as well:
• In Denver, the median increase in single-family home property values is 33%, Erffmeyer said.
• In Jefferson County, median single-family residential values increased by 37%, the county said in a news release.
• Arapahoe County’s assessor, PK Kaiser, announced the county will see almost a 42% increase in residential values.
• Broomfield saw a median value increase for single-family residential of 41%, according to Broomfield County’s assessor.
How does that all stack up with property value jumps in recent years?
Erffmeyer recalls talking about median increases that were “largely in the 20s” in Denver in 2015, 2017 and 2019.
“Douglas County, we had 30% increases in the 1997 reappraisal as well as the 1999 appraisal. That felt monumental at the time,” Damisch said. “What we’re looking at this year is that’s at the low end."
Apartment renters may see effects too
While property tax discussions often focus on homeowners, the spike in values could also affect renters in apartments — sometimes called “multifamily” buildings — though it’s unclear by how much.
Asked whether apartment landlords will raise rent because of increases in property tax bills, Damisch said they may try, “but they can only do what the market allows.”
“And taxes is just one of their cost streams,” Damisch said, adding that landlords have seen increased labor and insurance costs as well.
Erffmeyer noted: “We’ve seen some historic increases in multifamily in the past that haven’t been met with immediate rent spikes.”
The median total property value change for apartment buildings is 20% in Jefferson County, according to a news release.
In Douglas County, the median increase in multifamily property values is 25%. “Multifamily” includes fourplexes and above in Douglas’ data, Damisch said.
In an expensive real-estate market, it seems like new property developments pop up constantly around metro Denver.
A common concern from existing residents is that new developments will cause their property values to drop. But market forces keeping property values high can also elicit fears of high property tax bills.
Asked about the tension between those two concerns, Damisch acknowledged it’s a difficult question.
“Growth has always been, in Douglas County, one of the hottest topics. We’ve had thousands of people moving in for a few decades,” Damisch said. “Once they get here — myself included — they don’t like the growth.”
Erffmeyer pointed to the shortage of housing in general around the state.
“I don’t think you could disconnect what we’re talking about today from that particular fact,” Erffmeyer said. “That’s one of many, many things that contribute to property (values).”
State lawmakers may step in
It’s the job of county assessors’ offices to establish accurate values of homes and other properties to determine how much property owners will owe government entities in taxes — a process meant to ensure that the amount of taxes people pay is fair and equitable.
(The assessor doesn’t set the tax rate but determines the value of the property that the tax rate then gets applied to. Local government entities like counties and school districts set the tax rates. Property tax rates are officially called “mill levies.”)
The law requires the assessors to value properties every two years. The property valuation homeowners will soon receive is based on June 2022 data, near the recent peak in the real-estate market.
So even though home prices have declined since then, property values reflect last year’s exceptional highs.
Also at play is a number called the “assessment rate,” another factor that helps determine how much in property taxes a person owes. The state legislature sets the assessment rate.
JoAnn Groff, Colorado property tax administrator, said she “can pretty well guarantee” that the property tax information homeowners receive next week won’t be accurate.
“It’s because your legislature isn’t immune to what’s going on right now,” Groff said. “There’ve been lots of discussions … about providing some additional property value adjustment.”
“I truly expect to see some adjustments and some relief in 2023,” she added.
She also advised the public “to watch every one of your taxing jurisdictions that’s going to have conversations about setting their mill levy.”
Colorado below other states in property taxes
Despite the public concerns over property taxes, Groff noted that “we still have one of the lowest obligations of property taxes of any state.”
Nationally, Colorado has relatively low residential property taxes, according to an analysis by the conservative Tax Foundation. Colorado ranked 47th in property taxes paid as a percentage of owner-occupied housing value in 2020, according to the foundation.
And while businesses pay more, their taxes still appear to be lower than the national average, according to the Colorado Sun. Colorado had the 17th best “State Business Tax Climate” for 2020, according to the Tax Foundation. Colorado had the 14th best “property tax rank” for businesses in 2020, according to the foundation.