Bullish residential property values in vast swaths of Minneapolis are a boon for tax collectors and realtors' commissions. But they're also putting a hurt on some longtime residents, who fear that it's only a matter of time before their annual property tax bill forces them to move away from the City of Lakes.
Retired educators Emily and Robert Knight downsized from their Linden Hills crib to a more modest home in the Fulton neighborhood 11 years ago.
Planning for retirement was the main reason the Knights sold their old house located at 39th and York. Also playing a role was the spread's $6,000 yearly property tax bill.
They bought a 1,200-square-foot Tudor on Drew Aveune South. The two-bed, two-bath house had a much more palatable tax levy totaling $3,000.
In the initial years post-move, the Knights upgraded the place, knocking down walls and enlarging the master suite. They haven't done any major upgrades of late.
Today, their property tax approaches $6,000. This year's assessment, which is more than 6 percent higher than that of 2014, is just the latest hit that's forcing the fixed-income couple to think hard about whether they can afford to stay.
"Our property taxes are going up at a rate greater than our income," says Emily. "If you look at our house, there's been no major improvements in the past eight years. The tax bill has continued to go up purely because of property values."
The assessed value of Knight's home now stands at nearly $400,000.
When the couple bought the property in 2004, the land's market value was half of what it is today.
"Moving out of Minneapolis has become a very realistic possibility for us," Emily says. "We think 'What if?' in two, in five years. If we moved out, we'd likely have more space and cheaper taxes, but we love living in the city and we want to stay. It would be a trade-off. At this point we don't know if staying will be an option."
The math behind their quandary seems simple enough. Rising values mean higher taxes. A look inside the numbers, however, doesn't yield straightforward answers.
According to the Hennepin County Resident & Real Estate Services office, the median value for residential property in Minneapolis currently stands at $181,000. That's actually a $3,500 drop from about the time the Knights purchased their Fulton home.
Property taxes actually work backward, county administrative manager Ken Rowe explains. It starts with the amount of cash levy that city lawmakers say is needed to run the city. This "levy" is spread out among the various revenue streams, which includes commercial and residential property taxes.
Rowe says residential property taxes have carried the weight in recent years as the city's housing market has emerged as one of the country's most robust. This bullish seller's atmosphere, especially in the neighborhoods stretching from Lake Nokomis and wrapping around all the way north of the I-394 corridor, has resulted in homeowners getting whacked by steadily rising property taxes.
Whatever the explanation, it means little to the Knights, who are left with a stubborn conundrum.
"We would like to live in a townhouse in the city," says Emily. "Not the really fancy ones like you see going up, but one somewhere in the $250,000 to $400,000 range. The problem again is affordability. You can't find them. But that's a whole different discussion."
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