Report exposes vast disparities in property tax burdens across major metros
A new report by Altus Group revealed that Chicago and New York City have the highest effective property tax rates for commercial real estate among 10 major US cities, more than doubling the average rate.
The inaugural US Real Property Tax Benchmark Report, released by Altus Group Limited, provided a comparative analysis of real property tax rates in these cities.
The study found that Chicago led with an effective property tax rate of 5.37%, followed closely by New York City at 4.79%. These rates exceeded the 10-city average, which ranges from 2.36% to 2.39%.
The report standardizes comparisons using an effective property tax rate, calculated by dividing the total tax bill by the assessor's determination of fair market value. The rates for other cities include:
- Dallas: 2.29%
- Houston: 2.15%
- Miami: 2.06%
- Washington DC: 1.65 – 1.89%
- Atlanta: 1.63%
- Nashville: 1.30%
- Los Angeles: 1.20%
- San Francisco: 1.18%
The study also compared property tax rates with sale prices, revealing disparities between tax assessments and market values.
The office sector is paying the highest taxes relative to current values, while industrial and multifamily sectors are paying the lowest.
"In most regions, we find that assessors are about 18 months behind on market trends, whereas our clients are 18 months ahead," Sandi Prendergast, director of tax research at Altus Group, said in the report. "We work closely with our clients to bridge that gap and look at the reality as of the date of valuation to make sure that our clients' properties are fairly assessed."
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The report suggested that despite value declines in 2023, assessments in some sectors are likely to increase, as has already occurred in Dallas in 2024. This disconnect between tax assessments and market trends could provide grounds for challenging assessments through the appeal process.
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