Vol. II No. 10 5/15/2021
Should the Town of Stockbridge Adopt the Residential Tax Exemption?
by Jed Baumwell
Massachusetts offers a local option residential exemption that allows municipalities to apply a uniform exemption to property assessments of owner-occupied properties. The exemption does not reduce total tax revenue, and thus shifts property taxes from lower valued properties to higher valued properties that are not owner occupied. Given the increasing trend away from owner occupancy in Stockbridge, and the escalation of property values, this exemption might be a tool to help Stockbridge residents remain in their homes.
Sixteen towns and municipalities within the State have adopted this exemption. A number of them are located on Cape Cod where fulltime residents have faced similar taxation challenges as Stockbridge due to increasing numbers of seasonal residents and short-term rentals, driving up the assessments of all properties in town. Demographic indicators pertaining to income and to housing values in Stockbridge suggest median annual income of fulltime households to be below $50,000 (half above and half below), and median assessments for these houses to be close to $300,000. While the current tax rate remains relatively low at below $10/1,000, the increases in house assessments effectively raises taxes. The next few years will likely see a significant assessment raise.
Overall, house values in Town have an average assessment which may exceed $600,000. This precise amount would need to be certified by the Assessor. Under the Residential Tax Exemption, up to 35% of that number could be exempted. Therefore, with the exemption, those with lower home values could see a significant reduction in their tax bill in spite of an increase in the tax rate. The lower the assessed value, the greater the exemption's impact (as a percentage of the home's value). Higher valued owner-occupied houses would likely see a modest reduction in taxes. All seasonal, vacant, and rental houses would see an increase in their tax bill.
This is largely a progressive tax, meaning lower valued properties (and often lower income homeowners) would receive the most benefit. It is recommended that the Assessor's office, under direction of the Assessment Board, model the impacts of the Exemption at different reduction amounts. This, in turn, would enable the Select Board (with public input) to set the tax rate. While this is just one tool among other exemptions, it can provide significant support to those struggling with housing stress.
Naumkeag tulip festival. Photo: Carole Owens