Rising Real Estate Market Not Lifting Property Tax Revenues: Report

Even with the uptick in real estate market, municipalities are concerned that they are yet to lift the property tax revenues of many U.S. cities, according to a report released on Thursday.

The National League of Cities surveyed local economy conditions and found that residential property vacancies and values are "still a problem" for more than half of U.S. cities, according to the report released today.

Officials in 65 percent of the cities consider commercial property vacancies a problem, and those in 57 percent say commercial property values are still a concern.

"Although generally positive, the slow rebound in the real estate market is a compounded problem for local governments because of the lag between economic cycles and local property tax collections," said Christiana McFarland, director of the league's research department, who conducted the study. "This lag can last 18 months to two years -- meaning that real estate market improvements take time to register in local budgets."

"We anticipate continued decline in 2013 property taxes as collections continue to catch up with market conditions," she added.

Other key findings from the survey:

  • Tepid improvement in housing starts, commercial and residential property values, business activity and health of the retail sector;
  • Persistent lack of growth in incomes and employment;
  • Workforce skills not keeping pace with employer demand, as well as basic needs of the most vulnerable populations not being met; and
  • Decrease in the number and scope of investment projects if a federal limitation is placed on the tax-exemption of municipal bonds.
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