Recently, conversations around the need for a property tax relief program in Ohio’s cities have become more urgent.  GOPC has scanned different ways communities can lessen the burden on rapidly rising property values on long-time residents.  GOPC is currently researching programs, or components of programs, which could be applicable in Ohio.

The following policies are presented as tactics to alleviate cost burden for low- and moderate-income homeowners.

1.       Longtime Owner Occupants Program

The City of Philadelphia’s LOOP program impacts property owners who see a severe rise in property value (and subsequently a severe rise in property taxes) over the course of one year, and make up to 150% of the Area Median Income (AMI). Drastic increases in property value in the city were caused in part by a citywide re-assessment of property value based on an Actual Value Initiative (AVI) in 2013. Pew Trust found that the AVI would shift the tax burden onto residential property values away from commercial properties. This is reflected in the Tax and Revenue Anticipation Notes 2017-2018 (section on Real Property Taxes Assessment and Collection beginning on page A-24), which does not indicate shortfalls occurring in property tax collection as a result of LOOP.  

A study by the Federal Reserve Bank of Philadelphia tracked the rates of tax delinquency, homeowner mobility, and gentrification before and after the AVI shift in 2013-2014. While they found that in Philly’s neighborhoods, elderly and disadvantaged homeowners did not experience displacement, they found that gentrification increases the risk of delinquency on homeowner’s tax bill by an average of 4.2 percentage points. From 2016 to 2017, Philadelphia re-assessments increased property values by 80% on a single block, while increasing the value of one home by 400%, over the course of one year. Researchers credit the lack of displacement among older and disadvantaged homeowners in gentrifying areas “to the programs that sheltered them from rising taxes,” which includes the homestead exemption program, LOOP, and the city’s tax abatement policy.

 2.       Property Tax-Circuit Breakers

Property Tax-Circuit Breakers are targeted programs to reduce property taxes, called a “circuit breaker” because they protect taxpayers from a property tax “overload” similar to an electric circuit breaker. Taxpayers earning below a certain income level are given some amount of tax relief when their property taxes exceed a certain percentage of their income. Eligibility and benefits, including calculations for benefit amounts, vary between states

Most recently, fourteen states and Washington DC offer property tax circuit breaker programs (ITEP ’17). Some states extend eligibility to cover renters paying more than a certain percentage of rent on property taxes, under the assumption that landlords will pass on a share of property tax onto renters

3.       Anti-Displacement Tax Fund Program

An Anti-Displacement Tax Fund Program is coordinated by the Westside Future Fund, a nonprofit in the west side of Atlanta, serving the English Avenue, Vine City, Ashview Heights, and the Atlanta University Center neighborhoods. The Fund amounts to roughly $5 million and is funded through philanthropic donations. The fund pays for property tax increases for homeowners of the designated neighborhoods beginning the year of application approval, without requiring that participants pay back any funds received. The program is designed to last 20 years, beginning in 2018, after which the program will be reevaluated.

To be eligible, participants must own and live in the property as a primary residence prior to March 2017. Applicants must live within the designated neighborhood boundaries and must make less than 100% of the AMI for their respected household size to qualify. Applicants must currently be receiving a homestead exemption through the City of Atlanta/Fulton County to be eligible for the program.

 4.       Philadelphia Realty Transfer Tax

In 2015, the Philadelphia Coalition for Affordable Communities advocated for an anti-speculation bill that would add an additional 1.5% fee to the city’s 3%, and state 1% Realty Transfer Tax (RTT), for properties that sell more than once in 24 months; the additional tax is intended to discourage the “flipping” of properties and encourage development without displacement. The additional funds would boost the city’s Housing Trust Fund, which invests in the production and preservation of affordable housing. A report by the Philadelphia Coalition for Affordable Communities (PCAC) estimates that the 1.5% increase would generate an additional $12 million a year.

The “flip tax” did not make it into city legislation, however the City of Philadelphia has increased its Realty Transfer Tax by 0.278% since 2015, and additionally changed the RTT by imposing the tax on the ‘actual consideration paid’ instead of the computed value of the real estate owned by an acquired real estate company, and expanding the application of the RTT on real estate companies to the extent there is a 75% or more change in ownership within a six year period.

Ohio counties currently levy $1 per $1,000 on real estate transfer, with the maximum allowed being $4 per $1,000 (54 of 88 counties collect the maximum); all revenue from the tax is deposited in the county general fund, see more here.

 5.       NY Community Restoration Fund program

Through a $7.6 million special fund, New York City has been able to purchase delinquent mortgages from the FHA to reduce foreclosures and stabilize neighborhoods. Counselors look at a family’s income and outstanding mortgage amounts to determine how much money can be forgiven, and what new mortgage payments could feasibly look like. For more information, see coverage on CityLab, the NYC Development Programs page, and  HousingWire.