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Colorado Property Tax Primer

Introduction

Rising property taxes are part of a larger housing challenge in Colorado. Colorado continues to grapple with an acute housing shortage, resulting in sky-high home prices and an alarming affordability crisis for owners and renters. In January, Common Sense Institute calculated the number of hours that one would have to work while earning the average hourly wage in each year from 2013 to 2023 to cover the monthly mortgage payments. In the Denver metro area, the increase was 172%, from 42 to 114.

For decades, the calculation of residential property taxes in Colorado was dictated by a voter-approved formula known as the Gallagher Amendment. The interaction between that formula, disparate growth in home prices, and TABOR led the state legislature to refer a measure to Colorado voters to repeal the Gallagher Amendment in 2020. Voters ultimately voted to approve the repeal of the Gallagher Amendment without a long-term replacement.

While nobody could have predicted the events that transpired in 2020, leading to a sudden surge in home values, repealing the Gallagher Amendment without a replacement always risked uncontrolled increases in property taxes. This year’s tax bills following the latest re-assessment period reveal how costly this policy change—and the lack of substantive taxpayer protections—is for homeowners. Estimates from the Colorado Legislative Council staff indicate residential property assessed value increased over 27% in 2023. Data compiled by CSI from just three counties shows actual property taxes increased an average of 36% in Douglas County and by over 18% in both Boulder and Arapahoe counties, surpassing inflation and wage growth.

 

Key Findings

  • Property taxes are a primary driver of Colorado homeowners’ cost of living increase this year.
    • Property taxes alone account for 17% of the increase in household expenses this year.
    • Property taxes combined with other housing expenses accounted for 66% of the increase in average homeowner expenses.
    • Through 2023, the number of hours of work at the average weekly wage to afford the median-priced home increased 2.7 times since 2013, increasing from 42 to 114 hours.
  • The property tax burden on middle-income Coloradans is growing at a staggering pace.
    • Homeowners face an estimated 32% to 54% cumulative increase in their property tax bill between 2024 and 2026 for a $500,000 home.
  • In 2021, 63% of Coloradans lived in a county where the property tax to income ratio was above the national average.
  • Denver County has a higher property tax-to-income ratio than 63% of all U.S. counties.

 

Where Did Colorado Property Taxes Stand Before 2024?

Many Coloradans pay higher than average taxes, even adjusted for income. Despite effective tax rates being lower than average, the rapid increase in home values in Colorado over the past decade has made an impact.

Colorado has the 27th lowest median property tax payment in the nation. Statewide, the median property tax payment as a percent of median income ranks as the 20th lowest.

However, the 12 Colorado counties that are home to 63% of the state’s population rank above the U.S. average for median tax as a percentage of median household income.

Denver had the second lowest effective property tax rate among the largest cities in every state in 2021, yet it had the 20th lowest payment, increasing four spots over the prior four years.[i] Denver County has a higher property tax-to-income ratio than 63% of all U.S. counties.

Maintaining steady and competitive property tax payments is critical for the state’s competitiveness in attracting and retaining a growing workforce.

Figure 1

 

How Will Colorado Property Taxes Compare Going Forward Without a Meaningful Growth Limit?

 

The Gallagher Amendment’s repeal precipitated Colorado’s property tax situation.

Before its repeal, the Gallagher Amendment forced down residential property tax rates over time, keeping the growth in property tax bills below the growth in home values. This provided more predictability and stability for taxpayers. However, it made revenue less predictable and stable for local jurisdictions.

The Gallagher Amendment was one of several types of property tax limiting measures in use across the U.S. According to research by the Tax Foundation, all but three states have limiting factors governing annual property tax increases.[ii] There are three categories: assessment, rate, and levy.

Assessment limits typically restrict the increase in the assessed value of individual properties. Rate limits restrict changes in property tax millage, either at the level of individual taxing authority or in aggregate. Levy limits or revenue limits restrict the amount of revenue increases for individual authorities or groupings of taxing authorities.

The repeal of the Gallagher Amendment left Coloradans without a meaningful tax limitation structure. Coloradans now likely face some of the fastest-growing property taxes anywhere. Despite some mill levies coming down to offset assessed value growth, most homeowners saw significant property tax increases that outpaced inflation.

Over the next two years, the statewide assessment rate is set to increase from 6.7% to 7.15%. The temporary $55,000 exemption applied in 2023 will end at the same time. Under current law, Colorado homeowners will face large property tax increases even if their assessed values stay flat. The owner of a $500,000 home in 2022 that saw their value increase 40% in 2023, then just 7% in 2025, will see a 54% increase in their property tax bills over a three-year period.

The owner of a different $500,000 home in 2022 that saw their value increase 20% in 2023, then 7% in 2025, will see a 32% increase in their property taxes over a three-year period.

Figure 2

 Growth in Property Tax Under Current Law
2022 2023 2024 2025
Home Price - Scenario 1 $500,000 $700,000 $700,000 $749,000
Home Price - Scenario 2 $500,000 $600,000 $600,000 $642,000
Assessment Rate 0.0695 0.067 0.07061 0.0715
Exemption $55,000
Mill Levy 0.085 0.085 0.085 0.085
Property Tax - Scenario 1 $2,954 $3,673 $4,201 $4,552
Property Tax - Scenario 2 $2,954 $3,104 $3,601 $3,902
Property Tax Increase - Scenario 1 $720 $528 $351
Property Tax Increase - Scenario 2 $150 $497 $301
Property Tax Increase % - Scenario 1 24.4% 14.4% 8.3%
Property Tax Increase % - Scenario 2 5.1% 16.0% 8.3%

 

Impact of Property Taxes on Affordability Over Recent History

Housing affordability has declined significantly under the recent growth in home prices and mortgage interest rates. CSI housing affordability reports have shown just how much the cost of purchasing a home in Colorado has outpaced incomes. A current homebuyer earning the average hourly weekly wage would need to commit 114 hours of their work each month towards purchasing the median-priced home today – 2.7 more than a decade ago.[iii]

With the removal of the Gallagher Amendment, the growth in property taxes this year will meaningfully affect affordability. Property taxes will account for 17% of the average homeowner’s increase in expenditures this year. While household expenditures have increased by over $3,700 in the last year, the average property tax increased by nearly $650.

Figure 3

Voters and elected officials expected something to replace the longstanding formula governing property taxes leading up to the Gallagher Amendment’s repeal. It has yet to come, leaving no long-term fix that can provide stability and predictability to both taxpayers and local governments.Nearly every state property tax system has meaningful tax growth limitations that provide greater certainty and avoid the recurring need for last-minute property tax relief legislation. Though Colorado has promulgated annual policy changes that offer temporary and limited relief, Colorado homeowners still face large increases in taxes under current law. These increases will likely further lower Colorado’s relative property tax competitiveness and strain overall affordability.

 

Appendix

Colorado Property Tax Rankings
County Median Tax Payment, 2021 Median Household Income, 2021 Median Tax Rank Median Tax Rank Percentile Median Tax as % of Median Household Income Median Tax as % of Median Household Income Rank (out of 3221 counties) Median Tax as % of Median Household Income Rank percentile
Dolores County $470 $62,500 200 6.21% 0.75% 55 1.71%
Prowers County $445 $44,984 176 5.46% 0.99% 129 4.00%
Otero County $473 $45,826 204 6.33% 1.03% 148 4.59%
Crowley County $394 $37,870 133 4.13% 1.04% 155 4.81%
Jackson County $480 $44,667 215 6.67% 1.07% 173 5.37%
Bent County $443 $40,972 174 5.40% 1.08% 177 5.50%
Lincoln County $527 $46,894 263 8.17% 1.12% 197 6.12%
Las Animas County $509 $45,118 237 7.36% 1.13% 200 6.21%
Gilpin County $1,121 $96,784 1234 38.31% 1.16% 217 6.74%
Cheyenne County $803 $69,063 734 22.79% 1.16% 225 6.99%
San Juan County $791 $63,333 715 22.20% 1.25% 290 9.00%
Costilla County $440 $35,000 169 5.25% 1.26% 294 9.13%
Baca County $522 $39,891 256 7.95% 1.31% 349 10.84%
Sedgwick County $584 $44,405 342 10.62% 1.32% 355 11.02%
Rio Blanco County $781 $58,239 693 21.52% 1.34% 370 11.49%
Huerfano County $654 $45,724 463 14.37% 1.43% 451 14.00%
Kiowa County $679 $45,476 506 15.71% 1.49% 502 15.59%
Saguache County $726 $48,413 575 17.85% 1.50% 509 15.80%
Montezuma County $906 $58,335 896 27.82% 1.55% 569 17.67%
Fremont County $844 $53,411 787 24.43% 1.58% 600 18.63%
Conejos County $610 $38,536 378 11.74% 1.58% 604 18.75%
Rio Grande County $805 $50,287 737 22.88% 1.60% 630 19.56%
Moffat County $956 $58,583 973 30.21% 1.63% 670 20.80%
Delta County $848 $51,803 798 24.77% 1.64% 673 20.89%
Washington County $893 $54,141 871 27.04% 1.65% 693 21.52%
Yuma County $931 $56,327 937 29.09% 1.65% 698 21.67%
La Plata County $1,250 $75,089 1439 44.68% 1.66% 714 22.17%
San Miguel County $1,208 $70,965 1357 42.13% 1.70% 761 23.63%
Logan County $916 $50,998 915 28.41% 1.80% 864 26.82%
Park County $1,401 $77,775 1694 52.59% 1.80% 867 26.92%
Kit Carson County $958 $52,917 979 30.39% 1.81% 878 27.26%
Montrose County $1,036 $57,225 1094 33.96% 1.81% 879 27.29%
Custer County $1,095 $59,877 1196 37.13% 1.83% 895 27.79%
Mesa County $1,139 $62,127 1271 39.46% 1.83% 904 28.07%
El Paso County $1,449 $75,909 1785 55.42% 1.91% 996 30.92%
Teller County $1,318 $68,677 1545 47.97% 1.92% 1008 31.29%
Lake County $1,420 $73,099 1729 53.68% 1.94% 1034 32.10%
Morgan County $1,238 $62,914 1410 43.78% 1.97% 1066 33.10%
Alamosa County $918 $46,217 918 28.50% 1.99% 1085 33.69%
Archuleta County $1,252 $62,907 1442 44.77% 1.99% 1091 33.87%
Grand County $1,381 $69,353 1662 51.60% 1.99% 1094 33.96%
Phillips County $1,051 $50,951 1124 34.90% 2.06% 1173 36.42%
Pueblo County $1,134 $53,430 1264 39.24% 2.12% 1235 38.34%
Elbert County $2,481 $114,904 2683 83.30% 2.16% 1275 39.58%
Chaffee County $1,331 $61,216 1569 48.71% 2.17% 1294 40.17%
Weld County $1,784 $80,843 2203 68.39% 2.21% 1331 41.32%
Garfield County $1,759 $77,212 2169 67.34% 2.28% 1418 44.02%
Ouray County $1,552 $67,228 1915 59.45% 2.31% 1466 45.51%
Summit County $2,174 $93,505 2511 77.96% 2.33% 1482 46.01%
Gunnison County $1,484 $63,341 1829 56.78% 2.34% 1507 46.79%
Routt County $1,974 $83,725 2386 74.08% 2.36% 1520 47.19%
Clear Creek County $1,803 $76,313 2220 68.92% 2.36% 1528 47.44%
Mineral County $1,384 $55,556 1666 51.72% 2.49% 1666 51.72%
Douglas County $3,187 $127,443 2921 90.69% 2.50% 1678 52.10%
Jefferson County $2,490 $93,933 2690 83.51% 2.65% 1835 56.97%
Hinsdale County $1,228 $45,714 1389 43.12% 2.69% 1866 57.93%
Arapahoe County $2,378 $84,947 2625 81.50% 2.80% 1980 61.47%
Larimer County $2,281 $80,664 2575 79.94% 2.83% 2008 62.34%
Denver County $2,234 $78,177 2548 79.11% 2.86% 2040 63.33%
Eagle County $2,657 $91,338 2761 85.72% 2.91% 2098 65.14%
Adams County $2,292 $78,304 2580 80.10% 2.93% 2114 65.63%
Broomfield County $3,179 $107,570 2919 90.62% 2.96% 2137 66.35%
Boulder County $3,164 $92,466 2917 90.56% 3.42% 2472 76.75%
Pitkin County $3,400 $92,708 2967 92.11% 3.67% 2624 81.47%

 

[i] https://www.lincolninst.edu/publications/other/50-state-property-tax-comparison-study-2021

[ii] https://taxfoundation.org/research/all/state/property-taxes-guide/

[iii] https://commonsenseinstituteco.org/colorado-housing-affordability-report/

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