What does the boom in the housing market mean for local and state governments?

Since the pandemic, increased demand for homes has caused home inventories to drop drastically and, in turn, listing prices have increased significantly. This trend has continued through the first four months of 2021, driven by pandemic-fueled desires from people for a new home, coupled with still-low interest rates. The continued rise in property values ​​can be a lifeline for local and state governments, which previously struggled with a decline in other sources of revenue, such as sales tax and transitional occupancy tax, related to local tourism.

Property tax revenue is generally one of the largest sources of revenue for all local and state governments, and it is a source of revenue that is directly tied to the value of property in a given jurisdiction. The recent rapid increase in property values ​​can translate directly and inevitably into increased property tax revenue for all local and state governments – and more importantly, this unique source of revenue has not been compromised during the covid-19 pandemic.

The diagram below shows the highest sources of revenue for the city of Fremont, California, with property tax being the largest contributor to the general fund, and this image is representative of many other cities in the United States, large sources of income being the same: