Despite the recent uptick in real estate prices locally and nationwide, an empty nester looking to downsize into a one- or two-bedroom condominium can still find a nice pick of options in the Baltimore area in the neighborhood of $200,000 or so. But anyone making a choice between Baltimore and the neighboring suburbs would have to consider more than just mortgages and closing costs. A condo in Towson with an assessed value of $200,000 would come with an annual local property tax bill of $2,200. In Anne Arundel County, it can be as low as $1,868. In Baltimore City, however, it’s $4,496. That is more than twice the cost of any of its neighbors.
For some people, other factors may loom much larger in the choice of where to live, from the convenience and amenities made possible by city living to the lower violent crime rates of the suburbs, but Baltimore’s high property tax rate can be a barrier. And it’s not just about empty nesters. Businesses making a choice to expand or relocate worry about their employee housing cost; families seeking a larger home and even singles buying a starter property can easily be deterred by the added cost of property taxes in the city. That’s why some mayors have made reducing Baltimore’s highest-in-the-state property taxes a priority, with former Mayor Stephanie Rawlings-Blake advocating for a 20-cent drop.
This month, the Baltimore City Council gave final approval to a $4.3 billion spending plan for the 2022 fiscal year. It drew much public criticism for its hike in police spending and a 25-cent phone line fee to pay for upgraded 911 technology. But less attention was paid to the choice of Mayor Brandon Scott and the City Council to keep the city’s property tax rate exactly where it is at $2.248 per $100 of assessed value. Granted, this might not have been the year to reduce the rate given that other sources of city revenue, such as parking fees and hotel taxes, are still diminished by the COVID-19 pandemic. Yet there seems to be no long-term plan for the tax rate, even as tax bills rise as the hot real estate market translates into higher assessments.
That would be a mistake. Even city leaders who aren’t cowed by Baltimore’s exorbitant property taxes must recognize that it has the effect of depressing real estate values. They may not be shedding tears for the wealthy owners of million-dollar condos overlooking Harbor East or six-bedroom, six-bathroom mansions in Guilford, but they ought to show greater concern for working-class families in $100,000 row homes. For many of them, the equity they build in their house is the single greatest investment of their lives. And they have to make a calculation: Is it wise to own a home whose value is kept down by high taxes, or should we move to a location where that is not the case?
And here’s the best part for those who worry about the other side of the budget ledger, the rising cost of city services and how best to pay for them. In theory, reductions in the property tax rate will cause a corresponding increase in property values. The net effect is that the city can still receive the same tax revenues, it just requires a faith in the marketplace. Keep down the tax rate and see values rise to compensate. This doesn’t happen instantly, in part because of the cap on annual assessment increases, but the likelihood of rising prices is high. It’s happened elsewhere, including San Francisco and Boston.
Meanwhile, the political risk would seem small. Mayor Rawlings-Blake’s quest for lower taxes never hurt her popularity. Quite the contrary. One of the common arguments against lowering the tax is that Baltimore can’t afford it, at least partly because so many of its biggest property owners are nonprofit organizations exempt from property taxes. As a candidate for mayor last year, Mr. Scott was open to a property tax reduction but only after he “modernized” city government making it more efficient and effective, fixing longstanding problems like the dysfunctional water billing system. Will it be mended sufficiently one year from now to commit to lowering the tax rate in the 2023 budget? As much as the mayor would prefer to talk about government reform and helping neglected neighborhoods, he ought to be willing to fix this “broken” system, too.
The Baltimore Sun editorial board — made up of Opinion Editor Tricia Bishop, Deputy Editor Andrea K. McDaniels and writer Peter Jensen — offers opinions and analysis on news and issues relevant to readers. It is separate from the newsroom.