Real Estate News

Are property taxes squeezing out Mass. homeowners?

It’s the downside of rising home values, particularly for senior citizens.

By Christopher Gavin

July 3, 2024

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For years now, the real estate market’s quick moving, ever-upward trajectory has presented a worrying (at best) prospect for potential buyers.

But even for those who have long owned their single-family homes, skyrocketing property valuations can be a double-edged sword.

Nationally, home prices have jumped about 50 percent over the past five years, per S&P Dow Jones Indices.

And in corners of the United States, homeowners are welcoming the asset growth, but they could do without the hefty tax assessments that come with it: For some, that sudden pinch has left them in fear of losing their properties, as the Associated Press reported in June.

Here in Massachusetts, the median sales price of a single-family home in Greater Boston soared to a record-high $950,500 in May, according to a report the Greater Boston Association of Realtors released on June 18.

Statewide, the average single-family tax bill clocked in at $7,400 for fiscal 2024 — roughly a 19 percent increase since 2019, when bills averaged $5,993, data compiled by the state’s Division of Local Services show. (The total is about 3 percent higher than the jump recorded in the previous five-year period, between 2014 and 2019.)

“We have a lot of residents, older residents, who have been here since the dawn of time that are getting squeezed out from their taxes,” said Kathleen Costello, director of the Massachusetts Association of Assessing Officers and the former tax assessor for Mattapoisett, where she resides.

The pinch also has the attention of lawmakers on Beacon Hill.

“A lot of seniors who may have purchased a home decades ago, never expecting to see the value that it [has] today, are really struggling to pay the increase in their local property taxes,” Lieutenant Governor Kim Driscoll told the Globe.

Proposition 2 ½

Massachusetts law limits how much property taxes can go up. Under the 1980 ballot statute known as Proposition 2½, cities and towns cannot raise tax revenue more than 2.5 percent yearly without a majority override vote.

Yet, that mechanism does not necessarily affect the rate taxpayers pay, Costello said: “The tax rate goes where the tax rate needs to go.”

“What I see and have seen in my community is that, yes, the [property] values are coming up, [and] yes, the tax rate is coming down, but everything is more expensive,” she said.

And so, even with lower rates, taxpayers can still be paying more year after year.

And cities and towns need those dollars these days.

Utilities, construction, health care, and collective bargaining agreements, for example, have grown more expensive, said Adam Chapdelaine, executive director of the Massachusetts Municipal Association, an organization that assists public officials across the Commonwealth.

He pointed to the higher number of override votes cities and towns held this past spring, more than in previous years, as a sign of the times.

The decision to hold a vote is not one taken lightly, Chapdelaine said. “Every mayor I know, every town manager I know grapples with wanting to provide an adequate level of services while making sure they’re not putting an undue burden on the residents via taxation.”

Moving out?

So are homeowners who are facing higher taxes actually moving out?

“As far as people getting priced out, moving further from Boston, moving out of the area entirely because of costs? Yes,” said Anthony Lamacchia, founder, CEO, and broker at Lamacchia Cos., a real estate firm with a foothold in Massachusetts, New Hampshire, Rhode Island, and Florida.

But choosing to move — or being forced to — over property taxes alone? Not quite, he said.

Rather, folks are feeling the financial squeeze from a whole set of factors.

“Everything is too expensive,” Lamacchia said, “and people with adjustable-rate mortgages … They, in particular, are more nervous.”

A study by Mark Williams, a researcher and professor in Boston University’s finance department, released in May indicated that the number of residents fleeing Massachusetts each year had jumped a dramatic 1,100 percent since 2013 — to 39,000-plus people annually.

By age, the 26-to-34 demographic makes up the largest cohort leaving the state by volume, at 31 percent, the study suggested. Those between the ages of 55 and 64 make up the third-largest category (and the most by adjusted gross income) at 16 percent, while retirees — ages 65 and older — account for only 9 percent.

“The rapid increase in Massachusetts out-migration is proof that the state is losing its competitive advantage to states that offer lower taxes,” Williams wrote in an email. “As out-migration grows, the state GDP will also be negatively impacted.” Out-migration costs the Commonwealth $4.3 billion in adjusted gross income and $213.7 million in tax revenue in 2020-21, according to his report.

The reasons they are leaving vary, but among the top are housing costs, income taxes, and health care expenses, the research suggested.

Property taxes are another.

“States who better balanced property and income tax rates gained more residents exiting Massachusetts,” Williams wrote.

As of 2021, Florida was the most popular out-migration destination for former Bay Staters, followed by New Hampshire, Maine, North Carolina, Texas, and Rhode Island, the study indicated. Across 10 categories, from expenses to education to weather, Florida scored the highest competitive advantage against Massachusetts. Some of the Commonwealth’s closest neighbors — New Hampshire, Maine, and Rhode Island — all scored better, too.

Of folks moving within Massachusetts, Lamacchia has seen more people head west. His company opened an office in Springfield earlier this year to meet the demand.

“Just like I saw 10 years ago with Worcester, I see that with Springfield,” he said.

According to Realtor.com, the median home sale price in Springfield was about $290,000, as of late June. In Boston, it was $765,000.

The need for resources

The net out-migration from Massachusetts is a trend Chapdelaine characterized as “sort of an existential threat to the Commonwealth.”

With fewer residents, local leaders are worried about finding people to fill crucial public service positions, from police officers and firefighters to librarians and teachers, he said. “This very day, we have operational concerns about how cities and towns will recruit the next generation of the workforce to do local government work.”

Rising property taxes also have a real impact on income-restricted residents, including seniors.

While Driscoll noted that those taxes fund important services, from schools to public safety, she said, “Folks can be sort of house rich and cash poor.”

“You’re at the point in your life where you have the least amount of income and, you know, property tax increases that are hard to keep up with,” said Driscoll, a former longtime mayor of Salem.

Driscoll and Governor Maura Healey are trying to chip away at that problem under the Municipal Empowerment Act, a bill their administration filed earlier this year — a series of reforms aimed at helping cities and towns generate needed resources, attract strong job candidates, and streamline municipal operations.

The bill also includes a proposal to allow cities and towns to offer qualifying seniors larger property tax exemptions. (Seniors could qualify based on income and assets, similar to the Senior Circuit Breaker Tax Credit.)

The measure and others centered on affordability are part of the administration’s push to make the state one that “can keep people in their homes, in place — allow them to grow old with dignity and respect,” Driscoll said.

Lawmakers in the House and Senate had yet to take up the bill as of late June.

“We definitely are strongly pushing for this bill,” Driscoll said.

Christopher Gavin can be reached at [email protected].