Downshifting state costs to property tax is not a solution
Housing accounts for more than 16 percent of our state’s economy, making it a key driver in New Hampshire’s economic rebound. But as our governor and legislators carry out the unenviable task of trying to balance our state books, they must not place additional roadblocks to homeownership by downshifting further financial burdens onto municipalities in order to balance the state budget. Our state and local governments tax homeowners more than almost any state. Currently, new-home buyers get hit with the second-highest state real estate transfer tax in the country, while our existing homeowners are burdened with the second-highest median property taxes – just slightly behind that of New Jersey.
In fact, the nonpartisan Tax Foundation found that, whereas the average American homeowner pays about 3 percent of his or her income in property taxes, the average New Hampshire homeowner pays roughly 7 percent.A recent study commissioned by the New Hampshire Association of Realtors and conducted by two University of New Hampshire Whittemore School of Business professors shows that the downshifting of every $10 million from the state to local communities could result in a tax increase of 6 cents per thousand of assessed value.For example, $200 million in cost downshifting could result in the average homeowner paying an additional $320 in taxes. In some communities, homeowners could see a significantly higher tax increase.Just as important, rising property taxes decrease the value of a home as they squeeze out equity. The same $200 million downshift to the local property tax would decrease the value of an average home in New Hampshire by about $6,000.To be clear, cities and towns are going to have to tighten their proverbial belts and find ways to provide needed services for less. But we must all keep in mind that the quality of a community’s services, especially its schools, has a significant impact on housing values. If we cut school budgets to the point where quality is impacted, home values will dip and homeowner equity will be lost.If the New Hampshire housing market is to flourish, any state revenue increases or spending cuts must be chosen carefully to ensure we remain attractive for corporate investors, startup entrepreneurs, tourists and retirees – the main drivers of housing.Downshifting state costs onto municipalities will not solve the problem. At best it is simply passing the buck, and at worst it will impact our economic recovery by damaging our housing market.
Tom Riley, 2011 president of the New Hampshire Association of Realtors, is president of Riley Enterprises, Bedford.