Make housing more affordable…
By making homes less expensive…
By increasing housing supply…
By increasing incentive to build…
By making certain homes less expensive to own or more profitable to rent…
By eliminating property taxes on the value of residential improvements.
This paper proposes to completely eliminate property taxes on the value of residential improvements,
while maintaining property tax revenue levels by correspondingly increasing property tax levies on land and non-residential improvements. This would substantially shift the structure of the housing market, gradually resulting in more affordable housing.
Using public data for Whatcom county, Washington, the author simulated the expected tax effects for all properties in the county, as well as the expected changes in property appraised values.
Current total property assessment: $800k
$400k land
$400k improvements
Current Total tax
Levy rate: $10 per $1000 assessed value
Assessed value: $800,000
Tax: $8000
After reform, tax only the land
Levies on land are increased
Levy rate increased: $19 per $1000 assessed value
Assessed value: $400,000
Tax: $7600
5% tax reduction
Current total property assessment: $800k
$1,600,000 land
$3,200,000 improvements
Current Total tax
Levy rate: $7.80 per $1000 assessed value (Bellingham 2025)
Assessed value: $4,800,000
Tax: $37,440
After reform, tax only the land
Levies on land are increased
Levy rate: $16.00 per $1000 assessed value
Assessed value: $1,600,000
Tax: $25,574
32% tax reduction
Land is 9% of total assessment
80% reduced tax
12% increase in value assessment and post-tax income.
Some of the key effects are:
For condo owners: lower taxes, higher appraisals
For apartment landlords: increased profit
Single-family home owners: Most see small tax decrease
Undeveloped land owners: tax rates nearly double, appraisals decline
Renters: no immediate change
Developers and entrepreneurs see… Opportunity!
In the initial low-vacancy market,
Condo developers can make more profit on new developments.
Developers of large rental apartment buildings will expect high profits.
Ordinary home owners can build home additions such as “mother-in-law” additions without incurring additional tax.
The reform leaves building costs mostly unchanged, though possibly heated by a building boom and temporary shortage of builders.
The initial market advantage for developers and landlords would diminish as housing stock is built, vacancy rates increase, and prices and rents moderate.
Reality check: increased housing availability actually does reduce prices: