Home construction in Willow Bend in Thornton

New houses under construction in the Willow Bend subdivision in Thornton, Colo. The Willow Bend Metropolitan District board controls homeowners’ property tax assessments to pay off subdivision debt. Employees of the homebuilder, the Lennar Corporation, occupy the majority of the seats on the board. The board composition has made circumstances difficult for the only homeowner on the board, Dwayne Bergeron. Photo by Liam Adams

Coloradans are facing massive property tax increases in the coming years due to a combination of the state's surging real estate market, the tax system's biennial assessment calendar, and the looming expiration of measures adopted to ease the shock of tax hikes, according to a study released Friday by business coalition Colorado Concern. 

"You look at these numbers, and you see that we are in the process of pricing ourselves out of our own state," said Mike Kopp, president and CEO of Colorado Concern and a former Republican state senator from Golden. "And that has implications for families, for younger workers, for seniors on fixed income, people in gentrifying neighborhoods. And it has implications for small businesses across the board."

The report, prepared by Anderson Analytics, said property owners in Colorado will get hit with 20% property tax increases on average over the next four years if the state doesn't come up with a solution. 

Kopp said that solution will likely include a ballot measure, though he added that discussions with legislators and key stakeholders are ongoing.

"We have to change some of the features of the status quo, or people simply are not going to be able to afford to live here," he said.

Under the existing system, statewide property tax revenue — not counting oil and gas and related revenue — is projected to nearly double over the stretch from 2021 to 2025 from $7.3 billion to $13.9 billion, the report found.

Factoring in population growth and the distribution of property tax burden, that translates to a property tax increase of more than 20% for the average property owner, the study said.

Over the same period, the statewide assessed value of residential property is projected to jump 38.5% — from $71 billion to $98.3 billion. Total assessed value of non-residential property is expected to climb by 15.3% from 2021 to 2025, the study found, from $60.0 billion to $69.3 billion. (Assessed values, determined biennially in odd-numbered years, are a fraction of a property's market value and can differ depending on the kind of property being assessed and on other factors.)

"Because of the timing of the biennial property tax assessments, residential homeowners and renters have yet to fully face the substantial increase in property values during the bulk of the pandemic," the report said. "As those market developments are factored into valuations, homeowners and renters will be faced with significantly greater tax burdens as values increase by double-digit percentages over just a few years."

Kopp said he was surprised to find that property taxes could soon be climbing so fast. 

"I thought maybe population and property taxes rose at roughly the same rate," he said. "They don't. Property taxes are rapidly outpacing population growth."

Unless things change, he said, home prices — already overheated by demand, supply chain challenges and a strained labor market — will become even less affordable.

"Over the next four years you're going to see a 30% increase in already superheated and tremendously unaffordable housing market," he said. "Property tax is not the whole of the matter, but it's certainly an aspect of the matter, and we wanted to dip our toe in the water and really understand this."

The market value of the average single-family home is expected to rise by 29.9% from 2021 to 2025, from $465,741 to $605,068, the study found. The projected hike in market value for condominiums and multi-family residential housing is projected to climb even faster over the same period, by 31.9% for condos and 34.3% for apartment buildings.

The study suggests that recent attempts to fix the state's property tax system won't prevent the dramatic tax increases property owners will soon face. A 2020 ballot measure approved by voters to repeal the Gallagher Amendment — Colorado Concern was among its backers — and a bill passed last year by the legislature helped protect state property owners for a while, Kopp said.

He noted that SB 21-293 temporarily reduced assessed rates for certain types of property, including residential, for two years, but after its provisions expire next year, taxpayers will see an even greater increase in their bills.

A little-utilized provision of the legislation also allows homeowners to defer property taxes that climb by more than 4% from the previous year by, in effect, borrowing the money from the state and paying the debt — with interest — when they sell their home, Kopp said. 

Kopp said the program could help some taxpayers but stressed that he doesn't believe it's a permanent solution to what could be an approaching affordability crisis.

"In acute situations, if it helps people stay at home, that's great," he said. "But the question would be, does everybody in the state that is facing a dire economic condition want to borrow with interest on their tax burden?"

Added Kopp: "We're not faulting the policy, but it's reactive to the structural problem that we're articulating here on the study."

Kopp declined to speculate on the solution the organization will be introducing in coming weeks but said the group believes it's important to start the discussion with sound data in hand.

The study's conclusion spells out next steps: "In the coming weeks Colorado Concern and partners will work to advance a solution that ensures both that vital services are funded and that taxpayers are given some relief. Modernizing the state’s property tax laws is the first step in ensuring the long-term growth and competitiveness of the state."

"There are no single silver bullets," Kopp said. "If the state legislature could come up with one thing that would lower home prices in the state in a way that values and honors our free market system, I'm sure they would have done it by now and everybody would stand up and cheer. It's going to be multiple steps in this journey."

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