What to Do When You Can't Pay Your Property Taxes
Guidance for older Americans on fixed incomes struggling with escalating property tax bills
Whether the hot housing market is cooling — as some real estate analysts have speculated — or not, millions of homeowners have already been burned by the property tax spikes that accompanied their skyrocketing home values. What should you do if you can no longer afford your property taxes?
Nationwide, the property tax bill for a single-family home rose 4.4% in 2020, according to ATTOM Data Solutions. And realAppeal, which helps people appeal property tax bills, forecasts property taxes will increase about 6.5%, on average, in 2021.
These tax hikes hit financially vulnerable homeowners the hardest, including older Americans living on fixed incomes.
These tax hikes hit financially vulnerable homeowners the hardest, including older Americans living on fixed incomes, according to Michael Billnitzer, executive director of the Cleveland-based Benjamin Rose Institute on Aging's ESOP subsidiary. ESOP (Empowering and Strengthening Ohio's People) provides housing and financial counseling to aging adults.
The Property Tax Vise for Some Older Adults
Although monthly Social Security payments are set to increase by 5.9% in January — the biggest jump in four decades — that's not enough to help budget-strapped older adults satisfy soaring property taxes demands.
"Here in Cuyahoga County, property taxes have gone up, on average, sixteen percent," Billnitzer said. "Older adults, many already struggling to make ends meet as it was, are now facing these kinds of steep tax increases and finding it much harder to afford aging in their home."
Billnitzer worries that bloated property tax bills could send millions of older homeowners into foreclosure or into the hands of unscrupulous scammers and predatory lenders.
Antoinette Smith, ESOP's counseling director, shares some tips on how to avoid these unsavory outcomes:
Do: Get (the Right) Help
The first step, Smith said, is to contact a U.S. Housing and Urban Development (HUD)-approved counseling agency where you or your loved one lives. HUD provides a map of approved agencies on its housing counseling page or you can call the agency's interactive voice system at 800-569-4287 to locate a nearby office.
"HUD-approved agencies are required to have individually HUD-certified counselors," Smith said. She advised steering clear of mortgage counselors not approved by HUD because they "won't have the same level of credentials" and "might have motives that are dubious at best."
There is often no charge to work with a HUD-approved counselor who will assess the situation and determine if the homeowner qualifies for property tax relief. Such homestead exemptions are available in many states, but vary widely. Smith said various property-tax relief proposals are being considered at the local and state level across the country.
Currently, in Ohio, disabled, low-income older residents can qualify for a $25,000 homestead exemption. That means if the home is worth $100,000, the owner would be taxed as if it was worth $75,000.
All homeowners in Florida, by contrast, are eligible for a homestead exemption of up to $50,000, but those 65 and over who meet certain income limits can claim an additional $50,000.
A HUD-approved counselor also will know about any new or emerging programs aimed at property tax relief. And the counselor can help clients see if they qualify to apply for other home-related savings, such as financial assistance on energy bills.
Don't: Ignore the Bill
Opening a large property tax bill tends to elicit a "flight" response in low- and moderate-income older adults lacking the resources to pay it, according to Smith. Ignoring the problem, however, will make it worse.
When homeowners don't pay their property taxes, the local taxing authority will begin charging interest, late fees or both on the unpaid sum, making the bill even higher. The local government could also put a lien on the home and eventually force a sale.
"Of course, we don't want it to get that far," Smith explained. "Before the bill is due, we want older adults or their caregivers to contact a HUD housing counseling agency and get in contact with a counselor who can help them understand what this bill means and the actions you need to take next."
Do: Get On a Payment Plan
Smith said people on a fixed income often struggle to pay large, lump-sum quarterly or biannual bills. But many taxing agencies provide programs in which homeowners, especially those experiencing financial hardship, can qualify for an installment arrangement and pay their property taxes off over time.
Cuyahoga County, Ohio, for example, has an "EasyPay" plan in which upcoming payments are automatically deducted each month from a checking or savings account. Paying $291 a month, Smith contends, is "a lot easier to digest" than paying half ($1,750) or even one-quarter ($875) of a $3,500 tax bill all at once.
Don't: Get Trapped by Predatory Lenders
Predatory lending is one of the biggest dangers for older adults who find themselves in a financial pinch. Smith said she is alarmed by recent data suggesting the use of payday loans by Americans aged 62 and older has tripled in the past five years, with annual percentage rates as high as 372%.
Scammers don't want to miss this golden opportunity to take advantage of tax-distressed older homeowners.
"We've had some situations where seniors had two, three or even four payday loans out at a time trying to pay their taxes and that's eating up all of their income," said Smith. "They're not able then to meet any of their other basic needs because they're in this vicious payday loan cycle."
Reverse mortgages can also be fraught with pitfalls, too.
They are among the costliest mortgage loan products and because interest is added to the loan each month — and homeowners are not making payments — the balance on reverse mortgages grows over time. If a borrower dies, sells their home or moves out, the loan immediately becomes due.
Smith recommends talking to a housing counselor before taking out a reverse mortgage and avoiding payday loans altogether.
Do: Be Alert to Scams
Scammers don't want to miss this golden opportunity to take advantage of tax-distressed older homeowners and might promise easy money or higher Social Security payments.
Fend off the threat by brushing up on your fraud avoidance skills and making sure your loved one knows how to stay out of a scammer's crosshairs, including:
- Never providing financial or personal information to anyone you don’t know and don’t trust.
- Not clicking links in emails from sources you don’t know.
- Refraining from making immediate financial decisions.
"The key is to be proactive. Don't wait for someone to come to you with a solution," Billnitzer said. "You can take the scam and fraud out of play when you take the initiative to contact a HUD-approved counselor and come up with a plan."