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Clarence Fanto: Did your real estate tax bills spike? Some towns are considering a discount plan

Richmond town hall

The town of Richmond is just one Berkshires community that will debate adding a residential tax exemption, which is aimed at helping homeowners who are permanent legal residents stay in their modest properties.

First of two parts.

LENOX — Many homeowners are suffering shock as they open their property tax bills reflecting a combination of rising city and town budgets and higher valuation for their houses. In part, the price surge can be blamed on the supersonic real estate market in the Berkshires during COVID-19.

Especially for older people living on fixed incomes in moderately priced homes, the latest real estate tax increases represent an ongoing threat to their ability to afford living here, what with prices for everything else soaring just as quickly.

The property tax increases reported in recent weeks range from just over 2 percent for the average-priced home in Lenox and Lanesborough, 3.6 percent in Great Barrington, 5 percent in Pittsfield and Lee to a head-scratching 10.4 percent in Richmond.

In North Adams, where the city assesses the typical residential property at $167,574, the average tax bill for a homeowner is up by about $214.

Since 1979, the state has offered a discount called a residential tax exemption aimed at helping homeowners who are permanent legal residents stay in their modest properties.

But only 16 cities and towns out of 351 statewide have signed on. The plan requires a Select Board or City Council vote annually, after a public hearing. No community in Berkshire County or elsewhere in Western Massachusetts is in the group of 16.

The list runs the gamut from Boston, Brookline, Cambridge, Chelsea, Waltham and Watertown, to resort communities such as Barnstable, Provincetown and Truro on Cape Cod, as well as Nantucket Island and Tisbury on Martha’s Vineyard.

Here are some commonly debated questions about the residential exemption, which is, or will be under discussion in Great Barrington, Lenox, Richmond and Stockbridge, among others.

Q: Since the idea seems appealing at first glance, what’s the downside?

A: While it benefits owners of lower-valued homes in cities or towns sought after by homebuyers who pay exorbitant prices, it shifts the tax burden to owners of second homes and of more expensive properties, as well as rental properties not occupied by the owner such as apartment buildings and vacant land. Skeptics assert that it’s discriminatory and unfair. Adoption of the residential exemption does not affect the total amount of taxes — known as the tax levy — that communities must raise to fund their operations.

Q: How does the residential exemption work?

A: Towns can adopt it by excluding anywhere from 10 percent to 35 percent of the assessed value for homes, but only for legal residents living there at least 183 days a year. If a town chooses a $100,000 exemption, for example, that amount of value would be deducted from the assessed value of each owner-occupied home before taxes are computed for the property. So, if a house is assessed at $400,000, the owner’s tax bill would be computed as if it were worth $300,000.

Since that $100,000 deduction is a much larger share of a smaller home’s value, the owner of larger, more expensive houses would pay more. Supporters contend that it’s fair in order to keep a town affordable since, presumably, the owners of larger properties would be able to afford higher taxes.

At least, that’s the argument. It’s open to challenge since some long-time residents bought those houses long ago when they were in their earnings prime and home prices were more reasonable. But now their retirement income is much more modest.

Q: What types of communities typically adopt the residential exemption?

A: According to the state Department of Revenue, large cities or towns with many non owner-occupied properties like apartment buildings, as well as resort towns with many seasonal residents. In Tisbury and Truro, for example, town officials state that the purpose of the residential exemption is to reduce property taxes for year‐round residents, particularly those with modest homes such as first-time homebuyers and senior citizens.

• In Richmond, where the idea is expected to be debated after budget season this year, Finance Committee Chairman Robert Gniadek has pointed out that “we have a significant percentage of second-home owners driving the price of real estate up. In my opinion, in order to make Richmond affordable for residents so they're not being priced out of the market by people moving in to be residents, we ought to consider [a residential tax exemption]."

• In Stockbridge, where the Select Board voted 2-1 not to consider the residential exemption for this year, there are 1,695 residential parcels, including vacant land and multifamily homes. Of that total, 1,253 are single-family homes and condos. The average residential parcel value is $521,000. About 600 homes and condos owned by year-round legal residents in Stockbridge would have been eligible for the residential exemption, Principal Assessor Michael Blay has said. Those owners could have excluded $104,000 of their property value from tax bills.

Next Saturday: A deeper dive into the pluses and minuses of residential tax exemptions.

Clarence Fanto can be reached at cfanto@yahoo.com. The opinions expressed by columnists do not necessarily reflect the views of The Berkshire Eagle.

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