Here’s a piece of legislation that I sincerely hope to see passed. The governor, Tim Kaine, has proposed a homestead exemption, which will allow a certain amount to be exempted from real estate taxes. The text of the announcement:
The Governor’s homeowner tax relief plan calls for a state constitutional amendment to allow local governments to exempt as much as 20 percent of a home’s value from real estate taxes. The amendment’s total financial reduction on property tax bills for families cannot be calculated until local governments decide on the amount of the exemption, and who will be eligible for it. The legislation will be sponsored by Senator Mary Margaret Whipple and Delegate Bob Brink.
“This homestead exemption is a significant way to address the frequently dramatic rise in property tax bills we’ve seen in recent years,” Governor Kaine said. “We should give local governments this important option to reduce homeowner’s taxes in a smart, strategic, and financially responsible way.”
This is something that I proposed a few years ago, after having spent some time on the Norfolk Real Estate Board of Review for Real Estate Assessments. I asked our city council to have the state look at it and I asked our local delegation to propose it as well. It is long overdue and will allow the localities to essentially have a different rate of taxation for residential real estate, which has increased dramatically in the last few years, and commercial real estate, which has not seen such increases. Delegate Kenny Alexander (D-89) proposed a two-tiered real estate rate last year, but the bill never got out of committee.
Kudos to Delegate Brink and Senator Whipple for sponsoring this legislation.
Also included in the news release:
- Income tax relief, as discussed here, with the legislation being sponsored by Senator Walter Stosch and Delegate Ken Melvin
- Making it clear that the tax-on-tax discussed here will not apply. This legislation is sponsored by Delegate Bob Purkey and Senator John Watkins.
- Clarify the taxation of idle tools and machinery, with legislation sponsored by Senator Frank Wagner and Delegate Chris Saxman.
VIVIAN J. PAIGE | All Politics is Local 
I don’t think this plan has any meaningful teeth. I prefer a better plan that would force a CAP on the net tax hike on residential property such that each assessment cannot not exceed 5%, or the cost of living index and a factor to accomodate population growth (which ever is lower) in the city/town taxing our homes.
In Virginia Beach this would not only be more fair to all homeowners, it would yeild far greater tax relief than knocking of only 20% of the assessed value.
My modest 3 BDR 1 bath home’s assessed value has increased over 100% in the past 3 years. I have lived in the same house for 12 years.
I paid under $125,000 – it is now assessed at over $450,000 – my salary does not keep pace with the tax hikes – and I am a top performer in my firm
No teeth? Based on your assessment, you would not be paying taxes on $90K. That’s pretty significant.
I disagree with a cap on the rate of increase. Ask those folks out in California how well Prop 13 is working for them. As long as the localities are forced to rely on the real estate tax as a major, if not primary, source of revenue (because they are prohibited from raising money other ways), then such a cap would hinder the localities’ ability to do such things as increasing teacher salaries.
A lot of the problem with assessments is due to the way that they are done. The law requires that assessments be at full FMV, but that is almost impossible to achieve in a period of rising prices, such as what we have experienced over the last few years. (I’ll bet you wouldn’t sell your house for $450K, BTW.)
And, then you have the properties that are grossly underassessed (based on subsequent sale prices) and the real estate taxes are never collected on these. (There have been a number of articles in the paper about this.) About the only way I would even consider a cap on assessments is if there was an immediate reassessment to the sales price at the time the property changed hands.But there are problems with that approach as well, and the whole idea of being equitable goes out of the window.
Bottom line is that there is no easy solution to handling the rising real estate prices. This proposal is a step in the right direction.
Seems to me that, if the state is going to look at this seriously, it would consider a rent tax. Houses would be assessed based on the rents for similar properties, which is much easier to do. (Just look in the For Rent rag in the grocery store.)
IRT: “(I’ll bet you wouldn’t sell your house for $450K, BTW.)”
Vivian, you can ask Brian Kirwin about this – in the year that our home has been on the market – no one has made us a written offered of $450K for it – thus, the truth is that the assessed value the city set is actually higher than the market will pay.
Yet I am taxed at a value that the property is not really worth.
To add insult to injury – I pay 6.6 cents per $100.00 of assessed value HIGHER than any other residential neighborhood in Virginia Beach. It is a “sand tax” that no other Virginia Beach neighborhood or business has to pay.
Sandbridge is a public beach.
As to the $90K of “value” the 20% would defer – my assessment went up over $100K just last year – and $100K the year before that . . .
Reid – you need to get the city to lower your assessment. The first step is to contact the Real Estate assessor. If you don’t get satisfaction from him, then appeal the assessment to the Real Estate Board of Review. The law is quite clear: property is to be assessed at FMV, not in excess of FMV and it sounds like yours is.
I’m familiar with the sand tax. (I’ve got a number of friends that live there, including one of my best friends. Sandbridge used to be my favorite hang out spot, but with the sewers, the character has changed dramatically.) But that is a local deal, not related to this homestead exemption at all.
With a fair assessment, the homestead exemption would be beneficial.
Vivian — I was under the impression that the local governments set the real estate tax rates. Can’t they just lower the rates?
Yes, they could. But it creates a problem. Commercial real estate has been appreciating at a much lower rate than residential. The tax rate applies to both commercial & residential. The rate reductions, while still resulting in increased taxes for residential property, has, in many cases, resulted in lower taxes for commercial real estate. That’s why the localities have been reluctant to cut the rate but so far. What they can’t do, under current law, is have separate rates for residential and commercial. That would solve the problem, but the legislature is unwilling to allow localities to do this.
There is another problem with simply cutting the rate and that is what are the localities to do when the housing boom ends? Raising the real estate tax rate is very difficult. Cutting spending at the local level is more complicated than it appears.
I was just on the Norfolk website. The rates ARE different for residential and commercial property:
The residential rate is $1.27 per $100.00 of the assessed value.
The business district tax rate is $1.45 per $100.00 of the assessed value.
(http://www.norfolk.gov/Treasurer/real_estate_tax.asp#2)
Nope. that is a single special taxing district downtown. Jack – remember that I served on the Real Estate Board here for four years. I know what I’m talking about here.
Did Norfolk need a special exemption from the state to do that?
Yes, but note that it is geographic. Just like the sand tax down in Sandbridge that Reid references above. As I understand those special taxing districts, they have to have geographic boundaries and the money set aside for a specific purpose (for example, the sand tax in Sandbridge is for sand replenishment and the downtown district in Norfolk is for improvements there).
Got it. Most interesting. Thank you.