14 Affordable Housing Markets That Are Actually Tax Traps
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Affordability is often the number one priority when hunting for a dream home. People often flock to attractive price tag housing markets thinking they’ve struck gold. But here’s the catch: Steep taxes, though, are the hidden cost of some of these otherwise budget friendly areas. It’s like getting a car at a discount, and then discovering the maintenance fees are through the roof. These tax surprises can sour a sweet deal in no time.
While it’s easy to fall in love with a low mortgage, property taxes, transfer taxes, and other hidden fees are also in the mix. We’ll pull back the curtain on 14 affordable housing markets that are a potential jackpot, but will take your money faster than you can say ‘tax season’.
South Carolina’s Coastal Gems
Going south to South Carolina, you will find affordable homes on the charming coastal areas, but you will have to buy flood insurance. Flood insurance premiums in high risk areas average $700 to $1,000 per year, and that adds up. You want those breathtaking ocean views. It’s not so breathtaking when you’re paying that extra bill.
Nevada’s Hidden Costs
On the surface, Nevada is tax friendly — no state income tax, but its property taxes can be deceiving. Homeowners, however, are usually burdened with the extra costs local governments impose for infrastructure and services. It’s like the burger and fries thing, where the ketchup is an extra.
Tennessee’s Small Town Temptations
Tennessee’s small towns can feel like a step back in time, but at prices that match. The state’s sales tax, the highest in the country at 7%, affects nearly every aspect of living, however. Those tax costs add up fast and quietly: from buying appliances to building supplies.
Texas Hill Country
Texas doesn’t have a state income tax, but that doesn’t mean you should be fooled. Areas like Texas Hill Country have sky high property taxes. Homeowners typically see the tax savings they imagined disappear quickly, with rates averaging 1.80%. Imagine that you think you’re saving on dessert, but you’re being charged for the whipped cream.
New York’s Hudson Valley
Rolling hills and quaint towns make Hudson Valley a popular place to live just outside the hustle and bustle of New York City, with affordably priced homes. But its property tax rates can be a bitter pill. This region has many counties with tax rates over 2% with further school and local taxes tacked on. Yes, it’s beautiful, but it’s also a bit of a financial ambush.
Rust Belt Cities of Pennsylvania
Erie and Scranton are among Pennsylvania’s small cities that lure first time buyers with affordable housing options. The hidden twist? Transfer taxes. Pennsylvania has a 1 percent statewide transfer tax, but local governments can pile on, resulting in a tax rate that’s sometimes double that. That’s a lot of money you’re going to owe the moment you close the deal.
Connecticut’s Suburban Oasis
Another state where the sticker price of homes can be deceiving is Connecticut. Low home prices might make towns like Bridgeport and New Haven pop, but their property taxes rank among the highest in the country. Connecticut homeowners pay a high tax for their home annually, and those ‘affordable’ homes are less affordable than they might appear, according to a report from the Tax Foundation.
Upstate New York
The tax reality is a gut punch, and escaping city prices requires moving to upstate New York. Parts of Upstate New York pay nearly three times the national average in property taxes according to a report from the Empire Center. Then throw in high utility costs, and that affordable dream house surprisingly starts looking more like a money pit.
Missouri’s Rural Retreats
While you have heard that Missouri is known for its friendly rural communities, you may not be aware that Missouri is equally notorious for its secret property tax burdens. While tax rates aren’t the highest in the country, they frequently reassess property values, causing rates to suddenly soar. It’s as if you walked into a diner and the price of coffee changes each time you visit.
California’s Central Valley
While California’s Central Valley may be the exception to an otherwise expensive state, high costs especially are caused by special tax districts known as Mello-Roos districts. These costs, for infrastructure and for schools, are often levied on top of thousands of dollars per year and can take many homebuyers by surprise.
Michigan’s Detroit Suburbs
While some Detroit suburbs have budget friendly homes, like Warren and Dearborn, Michigan has a quirky tax system. When the market heats up, assessed value of a home can skyrocket, and homeowners are taxed on that. In other words, taxes may seem low at first but jump up quickly.
Florida’s Hidden HOA Taxes
Florida is often thought of as a place where people can live cheaply, but some communities have mandatory homeowners’ association (HOA) fees that operate as stealth taxes. These fees can run hundreds or even thousands per year, an extra financial burden that was not part of what seemed like such a great deal.
New Jersey Suburbs
Affordable housing is just a stone’s throw from New York and Philadelphia in New Jersey. But that’s one of the highest property tax rates in the country. CNBC reports that New Jersey homeowners pay an average of $8,797 annually in property taxes — more than double the national average. If you are lucky, the savings you make on the home purchase price may be offset by this tax burden for many.
Illinois’ Small Towns
Small towns with picturesque homes that don’t bankrupt you upfront are something Illinois does well. But Illinois nevertheless has some of the steepest property taxes in the country. Illinois’ property tax rates average 2.27%, second only to New Jersey, according to a study by ATTOM Data Solutions. The home prices are tempting, but you’ll pay big tax bills year after year.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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