The quest for affordability sometimes comes with unexpected costs. Over the last five years, as Idaho became one of the most demanded real estate areas, its property value growth led the nation. Unfortunately, for Idaho taxpayers there is no limit to the growth of property taxes on assessed value.
Old and new residents alike are facing higher than expected property taxes, in the state where affordability was once a huge attraction.
In the last five years, the average Idaho home value increased by 16.3% with a spike of 34.13% in 2021. A combination of new residents increasing demand and a low supply of houses drove home value upwards. Unfortunately for Idaho residents, the only cap on property taxes is with budget increases.
Despite many taxing districts decreasing property tax rates during this time frame, averaging from 1.129% in 2020 to 1.043% in 2021 (urban areas), residential property owners still saw an overall increase. Last year (in 2022), Idaho property owners experienced a 43.7% increase in the value of their assessed property totaling $332.1 billion. In 2021, there had been a 20.2% increase over 2020. These rapid increases have not been seen before in the state of Idaho.
Idaho is not the only state in the mountain region that has seen an increase in home values. Over the last five years, Idaho, Montana, Utah, and Washington, were within the top ten states for home value growth. Wyoming ranked 43rd with only 6.79% growth.
Even with property value increases, Idaho had the second lowest property tax as a percentage of income in the mountain states at 76.4% of the national average for fiscal year 2020. Nevada was the lowest percentage of income and is able to subsidize lower property tax rates with other tax sources (i.e., casinos). More recent data is still unavailable.
Idaho and Utah are similar in their per capita property tax and Washington is only slightly higher. Wyoming is higher than the national average but much of this can be attributed to the state's high assessment of mineral production. The effective tax rate on owner-occupied homes ranks in the lowest of ten states.
Montana, without a sales tax, relies heavily on property taxes at a state and local level to fund education and other municipal services.
Utah, with similar tax rates and property value escalations as Idaho, does not have the same constituent demands for property tax relief.
What is the difference?
Utah state code has property tax relief that accounts for market changes. By exempting 45% of the market value of the primary residential property, homeowners are protected from sudden run-ups in market value. Secondary homes are taxed at 100 percent.
In contrast, Idaho, recently removed similar protection. From 2006 to 2016, Idaho residents were able to exempt 50% of the market value of their house, but it was capped at the Federal Housing Price Index. Legislators tightened the relief in 2016 by capping the exemption at $100,000. It was later increased to $125,000 in 2020. This cap has quickly diverged from the HPI and Idaho homeowners are suffering the consequences.
(Picture Credit: Photo by Towfiqu barbhuiya on Unsplash)