It’s no secret home prices in this region — as elsewhere across the nation — have risen dramatically in the past 18 months. A home worth $160,000 then might fetch $250,000 now, and many are being scooped up almost as soon as they hit the market.
The reasons are varied, though the lure of a more rural setting for those caught in congested urban areas during the pandemic, added to the ease of working remotely, are surely among the dynamics. Realtors have also pointed to a dire lack of inventory, meaning not enough homes are available to give buyers the choices they’d need to even the leverage.
Whatever the cause, the result is that communities’ valuations — the combined value of properties — have risen as well. At least, residential values have.
In Keene, residential property owners got what sounds on the surface like good news last week, when City Assessor Dan Langille reported to the City Council that the city’s tax rate — among the highest in the state — is expected to drop after the upcoming five-year revaluation.
Municipal tax bills include four parts — covering expenses for the city government, school district and county government, plus the statewide property tax used to pay the state’s obligation toward public education. All of those costs are combined, and the state Department of Revenue Administration sets the rate by dividing the city’s total valuation by that tax burden.
Under New Hampshire law, cities and towns are required to update their valuations at least once every five years. Although some communities have historically flouted this requirement to a degree, Keene actually keeps up with market conditions pretty well. Still, the current home-buying boom has officials wondering exactly how much values have been driven up.
Langille and those assessing the values are certain they’ll be up, which means the tax rate will likely go down. That would seem good news for those who frequently hear or read about Keene’s high tax rate, including in these pages.
But a lower tax rate in itself isn’t necessarily good news — nor bad. Because of New Hampshire’s tax system, a lower rate often doesn’t lead to paying less in taxes, nor do higher property values always mean a higher tax bill.
Think of Keene’s — or any city or town’s — taxes like a see-saw. The rate is one seat, and property values are the other. Absent other factors, as one rises, the other drops correspondingly. The fulcrum in the middle is how much the city must raise in taxes as a whole to meet its obligations. That middle bar may change year to year — usually rising as total spending increases — but the seats on either end will raise or lower in balance with one another.
But this doesn’t occur in a vacuum. For one thing, there are both residential and commercial properties being taxed in the city. And the value of homes may be rising quickly, but on the commercial end, values fluctuate according to use as well as the property value of the building and land. So if, as Councilor Phil Jones noted, commercial properties sit vacant, their value drops. And that must be made up on the residential side. Conversely, one reason city leaders are always trying to draw more business to Keene is that the higher the value of those commercial properties, the lower the burden on homeowners.
There’s also variance in non-tax revenues the city receives, both for services and from outside sources, such as state and federal funds. Those can also rise or fall, changing the total amount to be raised through taxes. And in Keene, a high percentage of tax-exempt state and municipal property, and nonprofit organizations that don’t pay taxes (though some make payments in lieu of taxes for city services) further burdens residential owners.
We’d also add what longtime homeowners know: Having the value of your property go up is a mixed blessing. If you plan to sell it, a higher value is desirable. If not, it may well mean paying more in taxes.
The bottom line is that every property is treated individually, but the tax rate, overall tax burden and citywide valuation are collective numbers. A drop in the tax rate may lower your taxes if that drop citywide more than offsets any rise in your particular property’s value. Or it could mean a tax hike if your property’s value shot up by more than the citywide rate drops. Or they may remain relatively stable.
Keeping the city’s assessments aligned with market values is a good idea. It’s fair to all property owners and allows homeowners to more or less keep track of their property’s worth. But whether a full revaluation is good or bad news for individual property owners is a relative thing.