Michael Guest

For years, the conventional wisdom of real estate held that fixed-rate mortgages offered a predictable shield against housing inflation. However, property taxes — alongside spiking homeowners insurance premiums — are entirely variable. Their rapid escalation is disrupting the financial stability of long-term homeowners and recent buyers alike. For many people, this rising expense is turning into a steady, permanent drain on retirement income and long-term financial security.

The climbing property tax threat from local government spending is quietly making housing unaffordable, even for residents who have completely paid off their mortgages. This financial threat is further exacerbated when retirees purchase homes at higher costs. These high transactions rapidly inflate local property taxes when the property is purchased well above its pre-sale assessed value.

To understand this quiet threat, we must look at the structural vulnerabilities built into our local municipal assessment systems. In neighboring Newport News, a systemic bias within the real estate assessment process effectively shifts the municipal tax burden from wealthy property owners to middle- and lower-income residents. When looking at market listing prices versus municipal tax assessments, homes valued below $400,000 are often assessed close to full market value. Meanwhile, luxury properties listed above $800,000 frequently receive assessments hundreds of thousands of dollars below their asking prices. Because a flat real estate tax rate is applied to these uneven valuations, lower-wealth homeowners pay taxes on the full utility of their properties while affluent homeowners are quietly undertaxed.

The issue deepens when analyzing Virginia’s “Isolated City” burden. Statewide, the average effective property tax rate sits at about 0.74%. However, independent cities in Virginia, such as Norfolk, face a disproportionately high tax burden due to a unique government structure. Norfolk lacks a shared county tax base and must fund vital municipal services entirely on a narrower geographic footprint.

With a $1.23 tax rate per $100 of assessed value for fiscal year 2025 — well above the state average — Norfolk residents pay significantly more than neighboring counties. For instance, James City County boasts a much lower $0.83 tax rate. On a home assessed at $450,000, that mathematical variance means a homeowner pays $5,535 a year in Norfolk compared to just $3,735 in James City County. That is a penalizing difference of $1,800 every single year for a household to absorb.

Adding insult to injury, local homeowners are trapped in an “assessment trap.” When the Norfolk City Council cut the municipal tax rate by 2 cents in 2024 (dropping it from 1.25% to 1.23%), the $1,650 tax savings a resident should have received on an $825,000 baseline home value was entirely wiped out. Because the home’s assessed valuation aggressively climbed by $98,900 over those same two years, the actual out-of-pocket tax bill increased by $1,259.80.

Ultimately, property taxes are exposing a severe structural vulnerability in American homeownership. True housing affordability requires more than just low mortgage interest rates. It demands predictable, sustainable local tax policies that prevent the homes of everyday citizens from becoming liabilities they can no longer afford.

Homeowners must pay closer attention to local tax policy. If a city or county’s rate exceeds the state average by a meaningful margin, residents are entitled to a clear explanation of why that burden is necessary and what local government officials are actively doing to control it. Property taxes may be less visible than other rising costs, but it is time to seriously reconsider whether the current model is serving local residents fairly.

Michael D. Riha of Norfolk is a retired U.S. Air Force lieutenant colonel and defense expert with 40 years of military and project management service.