State Legislature Says Property Tax Cap Wasn’t For Investment Properties
A bipartisan bill introduced this legislative session aims to collect more taxes from owners of properties used for AirBnB, and as second or third homes here.
New Mexico caps the estimated land value increase at 3% each year. This is a policy to prevent homeowners from being forced out of their homes by high property taxes, which are based on the value of their homes.
The 20-year cap means longtime homeowners haven’t seen sudden, huge increases in their property taxes if they live in a neighborhood that’s suddenly popular, like parts of Albuquerque or Santa Fe. .
But critics say it’s also a giveaway to homeowners who can pay the property taxes, and who often drive this neighborhood shift. And it imposes an unfair share of the tax on low-income homeowners, said Rep. Matthew McQueen (D-Santa Fe), the bill’s sponsor.
Residences that are used for short-term rentals like AirBnB — which can increase property values and displace residents — shouldn’t benefit from the tax, McQueen said. The same goes for wealthy foreigners, like those from Texas or California, who buy their second or third home here, he said.
“To me, it’s about fairness,” he said, and if people can afford that second home in a gated community in Santa Fe, they don’t need that cap. by 3%.
“I mean, that’s not what it was intended for,” McQueen said. “It was intended to protect people struggling to stay in their homes – not to buy investment properties.”
The bill would increase the cap on assessments from 3% to 10% on “residential property that is not occupied as a principal residence,” starting in 2024.
McQueen has introduced versions of this bill in recent years, although the 2022 version is slightly different. Last year it was passed by the House of Representatives as part of a series of tax changes, although it did not pass the Senate.
Earlier versions would have increased the cap on properties not occupied by the owner, which would include rental properties. But McQueen said housing advocates and others have fought the provision, saying landlords would simply pass any property tax increases onto tenants, many of whom are already struggling to pay rent in a rental market. boiling here.
About a third of all residences in the state are non-owner occupied, according to a Legislative Finance Committee assessment of McQueen’s 2020 bill. According to the analysis, there were 943,208 residential properties in the state in 2018, and 637,609 of them were owner-occupied.
The analysis also concluded that the effect of the bill on local tax revenues would vary significantly from state to state, which has many cities and counties where market values increase by less than 3%, overall. way. The effects of the bill would be “very moderate” overall on local government revenues, according to the report.
A 2021 report on a similar version of the bill found the changes could generate $8 million for local governments when they take effect.
This year, McQueen removed language that would have made his bill applicable to rental properties, and he found a Republican co-sponsor — Jason Harper, R-Rio Rancho. Harper did not respond to a request for comment.
McQueen said he hoped the bill would have a better chance this year, although he acknowledged the 2022 session was full. Governor Michelle Lujan Grisham included a housing reform bill in her appeal, but did not list housing as one of her top priorities.
This year’s bill has yet to be assessed as to how much tax revenue it would generate.
The housing bill touted by advocates this year gives tenants more time to pay rent once they receive an eviction notice, among other changes, and has the support of tenant advocates and the public. ‘New Mexico Apartment Association, which advocates for landlords and landlords.
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