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Denver Apartments Face Double-Digit Tax Hikes

by Alex Martinez, Denver, November 2016

 

Metro Denver's booming multifamily market is setting records with rising rents, soaring sales, decreasing vacancies, and greater absorption.

 

These trends are expected to produce much higher property tax assessments for many properties that could lead to tax increases of 25% or more with next year's reappraisal.

 

Frenzied Market

 

Many aspects of Denver's apartment market appear just shy of frenzied, according to Apartment Insights. The report on apartment properties with 50+ units in Metropolitan Denver notes that during the third quarter of 2016:

 

  • Average rents reached a new high of $1,359 per unit or $1.57 per square foot.

  • Total sales volume is approaching $4.3 billion, already beating last year's total of
    $4.2 billion.

  • Overall vacancies fell to 4.98%.

  • Metro-wide absorption hit the second highest annual rate reported in the 12 years of
    the survey.

Assessors will base their 2017 reappraisal primarily on market data from January 1, 2015 to June 30, 2016. The market indicators for this period will help establish next year's multifamily property values.

 

What to Expect

 

Once the Colorado County Assessor establishes the market value of apartments, an assessment ratio of 7.96% is applied for this property classification. Tax rates are then set by various jurisdictions including the city, county, school district, and governing boards of special districts based on the amount of tax revenue needed and allowed under law to provide services for the following year. The actual value, assessment ratio, and tax rate are used to calculate property taxes due.

 

Considering last year's average apartment valuation of $156,949 per unit had an estimated tax of $1,030, the following can be anticipated:

 

 

Unit Value

$207,000

 

Ratio

7.96%

 

Assessed Value

$16,477

 

Avg. Levy - Denver

82.324

 

Rate

0.082324

 

Per Unit Tax Estimate

$1,356

 

% Increase

31%

 

Due Diligence

 

Multifamily property owners have no control over the ups and downs experienced by the market as a whole. They also have no control over tax rates. What they can control is ensuring that their property assessment is correct and fair.

 

General market trends do not apply to all multifamily properties across-the-board. Each complex has its own individual strengths and challenges.

 

If you disagree with your property's actual value, the assessment should be contested. Notices will be mailed May 1, 2017 and there is a short time to file an appeal on or before June 1. Advance preparation and due diligence is paramount to managing and minimizing your property tax expense.