September 30, 2014

Legislative property tax proposal could have a big impact on rental units

The property tax reform deal that has emerged at the statehouse calls for a reduction in taxes on apartments and condos, by classifying those rental units as residential rather than commercial property. Senate Democratic Leader Mike Gronstal says current law makes no sense.

“There was never a logic to treating people that could afford to buy a home better than people that could not afford that and had to rent their dwelling,” Gronstal says. Critics say those who own apartments are engaged in a for-profit enterprise and the property should be taxed like a business.

Even if the legislature takes the step of reducing property taxes on apartments and condos, Gronstal concedes there’s no guarantee the savings will be passed along to renters. “Nobody ever has any direct assurances,” Gronstal says. “But we trust that the marketplace, over time, works in that direction.”

The change would effectively cut the property taxes on apartments in half, as residential property is taxed at less than half its assessed value, while commercial property is taxed at 100 percent.