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**What’s Really Behind High (or Low) Property Tax Rates?**
Not all property taxes are created equal. Effective property tax rates—defined as property taxes as a percentage of market value—are influenced by much more than just the headline homestead tax rate. According to the latest annual 50-State Property Tax Comparison Study by the Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence, a combination of factors such as heavy reliance on property taxes, low home values, and high local government spending often drive high effective tax rates.
The study analyzed the 2024 effective tax rates in 75 of the nation’s largest cities and 50 rural municipalities (one per state) across a range of property types including homestead, commercial, industrial, and apartment properties. The data spotlights four major factors that influence the variation in property tax rates across jurisdictions: reliance on property taxes, local property values, the extent of government spending, and how property types are treated in local tax systems.
“Even though this year’s report shows that the average effective tax rate on a median-valued home in each state’s largest city fell by over 5% compared to 2023, about 20 of these 53 cities experienced an increase in effective tax rates,” said Bethany Paquin, senior research analyst at the Lincoln Institute of Land Policy. “Differences in state tax structures, property classifications, and levels of property tax relief contribute significantly to the disparity in tax burdens across the country.”
For example, Detroit has the highest homestead effective property tax rate in the country, largely due to the city’s low home values. A median-valued home in Detroit is subject to an effective tax rate of 3.02%. In contrast, Honolulu boasts the lowest effective rate in the nation—just 0.30%—thanks to a combination of high property values, limited local government spending, and tax classifications that benefit homeowners.
Hawaii’s centralized school funding system—where the state, rather than local governments, funds K–12 education—further contributes to lower property tax burdens in cities like Honolulu. This contrast between Detroit and Honolulu illustrates how a city’s tax base, demand for public services, and the underlying state-local tax relationship shape its property tax profile.
Another significant driver of tax disparities is the use of assessment limits, which cap how quickly property assessments can increase for taxation purposes. While intended to offer tax relief, these policies often shift the burden onto new homeowners—especially in fast-growing markets. In cities such as Tampa, Los Angeles, and Miami, someone purchasing a home today may pay twice as much in property taxes as a long-term neighbor living in an identical property.
In many states, commercial, industrial, and apartment properties bear higher effective tax rates than owner-occupied homes, due to classification systems favoring homeowners. Charleston, South Carolina, provides an extreme example: due to tax classifications and an exemption for homeowners from school property taxes, commercial and apartment buildings are taxed at nearly six times the rate of owner-occupied homes. This gap raises concerns about the broader impact on renters and small businesses.
“Although effective tax rates are the best way to compare levels of taxation across jurisdictions, whether a rate is high or low doesn’t tell the whole story,” said Bob DeBoer, research director at the Minnesota Center for Fiscal Excellence. “This report highlights the wide variation in the design of state property tax systems and reminds us that these design choices can lead to significant differences in tax burdens between property types.”
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