It's property tax assessment letter season. And, this year, many homeowners across the state were surprised to see a spike in their property values — again. Median home values in Hennepin and Ramsey counties have ticked up every year since 2012, when home values reached their lowest point since the financial crisis four years earlier.
The median home value in Minneapolis is a record-setting $249,000 (and $294,000 in suburban Hennepin County). This is the second year that median home values have topped the previous high water mark set in 2007 of $214,000 ($270,000 in Hennepin County).
But in St. Paul, it's a bit of a different story: Median home values in St. Paul and Ramsey County as a whole have yet to fully recover from the financial meltdown 10 years ago. The median value of a single-family home in St. Paul is $184,000 (it's $236,900 in suburban Ramsey County). In 2007, median home value in St. Paul was $198,400 ($247,800 in the suburbs).
Across the state, Sibley, Watonwan and Anoka counties saw the biggest rise in home values from 2016 to 2017 (statewide data for 2018 assessment values are not yet available). But not all counties in the state saw growth: six counties — Chippewa, Pipestone, Cottonwood, Hubbard, Lincoln and Roseau — saw the value of single-family homes decline.
Why is my house worth more money?
First: Congratulations! You and many other homeowners across Minnesota have seen the market value of your home increase from last year.
Assessors estimate the market value of your house by looking at the sale prices of homes similar to yours in your area. They also look at building permits filed for your home to account for renovations, additions or other things that would increase its value. This year, the standout factor driving up home values in Hennepin and Ramsey counties is the rock-bottom vacancy rates. There just aren't a lot of homes for sale — and that drives up prices.
"What's really driving our market today is the lack of inventory," said Patrick Todd, the city assessor for Minneapolis. "There [are] so few properties on the market today. I'm seeing oftentimes [a] property listing on a Friday and selling by Sunday."
This is great news if you're looking to sell. If you're not, you might be wondering if this is a good thing or a bad thing: Doesn't this mean your taxes are going to go up?
But are my taxes going to go up?
Unlike income taxes, which rise as your income rises, property taxes aren't directly related to the market value of your property.
Here's how it works: A bunch of different public services — police, roads, schools, sewers and more — are funded by property taxes. Each year, the government entities that are responsible for those things — cities, counties, school boards, watershed districts and dozens more — come up with a budget for how much those services are going to cost.
How much you have to pay for all those services corresponds with what portion of the city, county, school district, watershed area, etc., you own. Think of your community as a big pie: The size of your slice determines how much pie you have to pay for. Sometimes your slice gets bigger, but so does the entire pie, so the proportion of the pie you're responsible for stays the same. You can see this happening across the state: Property values are going up pretty much everywhere. It's only when the size of your slice grows faster than anyone else's that the amount of the entire pie you have to pay for goes up.
Homeowners in areas where values are rising the fastest are more likely to see their taxes increase, but that depends on lots of other factors, such as how much money is budgeted for the year and if there are any special levies.
There are also discounts given if you live on your property — it's called a homestead credit — plus discounts for veterans, people who've had severe damage to their homes, and others. All those factors affect how much of the pie you're responsible for.
Homeowners in St. Paul, for instance, are in an especially unusual situation with the elimination of some fees for nonprofits like churches and schools, but that's a whole other story.
Can you explain that again, with more detail and in a TED Talk-like video format?
Absolutely. See Hennepin County's explainer video about how property taxes work. The county produced the video back in 2013, when some residents were seeing their property values go down, but their taxes go up. This year, many Twin Cities homeowners are seeing their property values go way up, but may not necessarily see their taxes rise along with them — but that won't be determined until the fall, when the budgets are made.
The city of Minneapolis has put together a nice video, too.
Where are values rising the fastest?
In St. Paul, residential property values are rising the fastest in these neighborhoods: Thomas-Dale (also known as Frogtown), Payne-Phalen and Dayton's Bluff. In Ramsey County suburbs, property values in St. Anthony, New Brighton and Spring Lake Park have been rising particularly fast, relative to their neighbors.
In Minneapolis, the standout areas are the North Loop, Phillips West and Northeast Minneapolis neighborhoods.
Statewide, home values have risen fastest in Sibley (up 11.2 percent), Watonwan (up 10.8 percent) and Anoka (up 9.3 percent) from 2016 to 2017. This year's data is not yet available.
Hubbard (down 1.2 percent), Lincoln (down 1.7 percent) and Roseau (down 2.4 percent) counties saw the largest decreases in home values. Carver County took the prize for highest median home value in 2017 at $280,400, while Kittson County recorded the lowest median home value of Minnesota's 87 counties at $46,200. To be clear: Median home values reflect the value right in the middle of all home values for the county in any given year.
Single-family home values: Hennepin and Ramsey counties
Median values of single-family homes rose about the same in St. Paul and its surrounding suburbs. In Hennepin County, single-family home values rose a little faster in Minneapolis than in the suburbs. | Source: Assessor's offices in Hennepin County, Ramsey County and the city of Minneapolis.
Who does the assessment?
The state requires each county to collect assessment data and ensure that every property is physically inspected at least once every five years.
Many counties, including Ramsey, take responsibility for all property assessments. Other counties, like Hennepin, get the data from cities that choose to do their own assessments, like Minneapolis.
Can I dispute my assessment?
You most certainly can. But the deadline to challenge your assessment is fast approaching. After it passes, you'd need to go to tax court if you would like to challenge the assessed value of your house.
Disputing the value of your property starts with a phone call, usually to your county assessor's office. But some cities like Minneapolis do their own assessments. If they determine that they need to evaluate your property in person, they'll send someone out at no charge.
The county assessors for Ramsey and Hennepin expect to reassess several hundred properties each. It's a lot of work — but considering they each send out more than a hundred thousand property valuations every year, not overwhelming.
Be aware, though: It's possible that assessors might come out to re-evaluate your property and realize that they had undervalued your property if they discover, say, a finished basement they didn't know about before.
Where does all my tax money go?
Many local government entities rely on property taxes. There are 70 in Hennepin County alone!
Your valuation letter from the county should specify which specific entities will be receiving a chunk of your property taxes. The biggest ones are typically your county, city, school district and watershed area. Other entities that draw on property taxes might include museums, railroad authorities and mosquito control districts. Yes: Even the Metropolitan Mosquito Control District uses your property value to determine how much you pay for mosquito control.
I heard about a property tax refund
You heard right!
Probably one of the most enjoyable things about paying property taxes can be getting that money returned. Both renters and property owners may be eligible for a property tax refund. This is a separate process from paying your property taxes. More info from the state Department of Revenue.