Housing Q&A: How do new buildings come on the property tax rolls?
Housing Q&A: How do new buildings come on the property tax rolls?
As property tax statements arrive in Oregonians' mailboxes, homeowners are trying to decipher their bills. This is one of the more commonly misunderstood aspects of Oregon's unusual property tax system.
Send questions you have about housing or property taxes to reporter Elliot Njus at enjus@oregonian.com.
Q: How do newly constructed homes come on the property tax rolls in Oregon?
A: Taxable values in the state are set at 1995 market values, minus 10 percent, plus 3 percent a year. This is a result of a series of voter-approved ballot initiatives in the 1990s.
Under that formula, a house worth $100,000 in 1995 might today have an "assessed value" of nearly $200,000, even if its "real market value" has climbed to $300,000.
But a newly built house wasn't around in 1995, and it wouldn't be fair for the new house to be taxed at its market value when other homes are taxed at a fraction of theirs.
So county assessors take the average assessed value for houses for the entire county and divide it by the average real market value. That's called the changed property ratio. If the house described earlier was perfectly average for the county, the ratio would be .667.
Say a new house is built with a real market value of $500,000. The county assessor would multiply that amount by the changed property ratio (.667 in our example), to get an initial assessed value. In this case, that's $333,500.
Keep in mind, this is derived from a countywide average. The difference between assessed values and market values for the homes right next door might be completely different, and so neighbors with similar home values might have tax bills that don't match at all.
For the most part, new homes are going up in desirable areas where property values have climbed, so the tax bills for the new homes are often disproportionately high compared to neighbors. But that's not always the case.
"Measure 50's changed property ratio was intended to give new property a similar benefit but it may not be exact due to a variety of situations, including the year a house was built or if a value was appealed," said Tami Little, the Clackamas County assessor. "It's really complicated, but this measure has shaped our tax system into what we have today."
Regardless, now that the home has an assessed value, it works just like any other property from then on out. The assessed value will increase by a steady 3 percent a year most of the time. Tax bills will accordingly increase 3 percent a year unless levy rates increase or decrease.
The process works the same way for other property types, like apartments or commercial properties. The only thing that's different is the ratio; there's a different ratio calculated for each type of property.