A child dances during a tour inside the Roundhouse on Dec. 8. (Photo by Austin Fisher / Source NM)
A bill that would require second homes and short-term rentals to pay more of the property tax burden was tabled by a Senate committee on Tuesday.
The Senate’s Tax, Business and Transportation Committee stalled the measure following skepticism about several aspects of the bill, which some lawmakers said did not go far enough in addressing inequities in the state’s property tax system.
Co-sponsor Rep. Jason Harper (R-Rio Rancho) said the bill would have meant a “couple of steps forward,” but acknowledged he thought more needed to be done, in making property taxes fairer here. He said he’d try to introduce a version of the measure during the 60-day session in 2023. Assuming the legislation is not resurrected in the next 48 hours, this is at least the third time such a proposal failed in the Roundhouse in the last three years.
New Mexico caps the increase on assessed property value at 3% each year. It’s a policy meant to prevent owners from being driven out of their homes by high property taxes, which are based on the value of their houses.
The 20-year-old cap was imposed amid sharply rising property values in urban areas in Santa Fe. It meant that longtime homeowners have not seen sudden, huge increases in their property taxes if they live in a neighborhood that is suddenly popular, like in parts of Albuquerque or Santa Fe.
When a property is sold under current law, taxes are reset based on the market value, meaning that some new property owners face much steeper property taxes. It is also often the case that two homes in the same neighborhood pay very different tax bills if one has been owner-occupied for longer.
Critics also say the cap is a giveaway to property owners who can afford the property taxes, and that’s part of what’s driving neighborhood change. And it burdens low-income property owners with an unfair share of the tax levy, said Rep. Matthew McQueen (D-Galisteo), the bill’s sponsor.
Residences that are used for short-term rentals like AirBnB — which can drive up property values and displace residents — shouldn’t get the benefit of the tax, McQueen said. Neither should wealthy out-of-staters, like those from Texas or California, who buy their second or third home here, he said.
The measure would have increased the cap on assessments from 3% to 10% on “a residential property that is not occupied as a principal place of residence” beginning in 2024.
Subsequent amendments to the bill specified that a “principal place of residence” includes where someone lives or where tenants in rental properties live. It does not include a dwelling rented in less-than-30-day increments, according to the bill.
The New Mexico Realtors Association opposed the bill, according to a lobbyist who testified Tuesday.
“The New Mexico realtors believe that this is not a meaningful correction, and we stand in opposition to the bill,” lobbyist Brent Moore said.
A lobbyist for the N.M. Association of Counties, which represents assessors who determine the taxable value of properties, said the association supported the bill but was concerned whether it would add additional burdens on assessors’ offices.
About one-third of all residences in the state are not occupied by the owner, according to a Legislative Finance Committee evaluation of a 2020 version of the bill. There were 943,208 residential properties in the state in 2018, according to the analysis, and 637,609 of them were owner-occupied.
The analysis also concluded that the bill’s effect on local tax revenues would vary widely across the state, which has many towns and counties where market values are increasing less than 3%, anyway. The bill’s effects would overall be “very moderate” on local governments’ revenues, according to the report.
Harper said the bill would result in a slight decrease in the property tax bill in areas with a lot of second homes and AirBnBs, and he encouraged lawmakers to consider a broader approach to reducing property tax inequities, especially one that doesn’t change policies across the state when trying to affect one particular area.
“I really think this is a cautionary tale. What was pushed through as a fix to a small part of our state 20 years later has turned into a complete nightmare for the entire state,” Harper said. “So we need to be very careful that we don’t legislate single problems with statewide solutions.”
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