Topic
Taxes
Property taxes and housing costs: how taxes enter operating expenses, how assessments respond to new construction, and what abatements actually change.
Property tax is usually the largest single operating expense of an apartment building, and unlike most costs it is set by a public body rather than a market. A new building is typically assessed near its cost or value, so the same construction and financing dollars that determine rent also determine the tax bill that rent has to cover.
Governments also use taxes as a lever. Abatements, payments in lieu of taxes and tax increment financing reduce or redirect a project’s tax burden, often in exchange for affordability commitments or as a way to make a project feasible at all. Articles here explain how tax enters the pro forma, what a given millage or assessment change does to rent, and how to evaluate an abatement honestly from both the public’s and the project’s side.
Two features make property tax unusual among housing costs. It is circular: a building assessed on its value is taxed on the rent it collects, so a tax increase raises the rent the building needs, which raises the assessment. And it is the cost most visibly exchanged for something. A community that abates taxes is buying affordability, or construction, or a tax base it did not have; whether the price was fair is a question that can be answered with numbers rather than adjectives, and that is what we try to do here.
- How much of an apartment’s rent goes to property tax?
- What does a tax abatement actually change for a tenant?
- Why does a new building often pay more tax than an older one next door?
Nothing has been published under this topic yet. The explanation above is the starting point; the analysis that follows from it is being written.
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