By Constance Rigney, December 23, 2024
If you’re a homeowner in Portland, Oregon, or prospective buyer, you’ve probably noticed that property taxes can vary significantly depending on the neighborhood. Let’s take a look at why this happens and how Oregon’s unique tax system, local funding mechanisms, and neighborhood-specific factors contribute to the disparity.
Oregon’s Tax Laws: Measure 5 and Measure 50
Portland’s property tax system is shaped by two key pieces of legislation: Measure 5 (1990) and Measure 50 (1997). These measures fundamentally changed how property taxes are calculated and capped in Oregon:
- Measure 5 limits property taxes to $15 per $1,000 of real market value (RMV) for most properties, split between education and general government services. For example, if a home has an RMV of $300,000, Measure 5 ensures the maximum property tax cannot exceed $4,500 annually, divided between schools and other public services.
- Measure 50 introduced the concept of “maximum assessed value” (MAV), which grows by no more than 3% per year unless there are significant property improvements. This detached assessed values from market trends, creating disparities between similar properties.
As Jayati Ramakrishnan explains, in her 2021 Oregonian article, “Because property taxes aren’t directly tied to market values, virtually identical numbers could apply to many different homes that sit in the same taxing districts — from a $700,000 house on North Williams Avenue to a $432,000 home in the Southeast Portland neighborhood of Lents…[They] have the same assessed value, so they pay essentially the same tax bill despite wildly different market values.
Today’s assessed values are based on a property’s market value in the mid-1990s, initially reduced by 10% but then increasing 3% each year. Neighborhoods with low real market values then continue to reap the benefits today, and vice versa.” (Read Ramakrishnan’s full article here https://www.oregonlive.com/data/2021/11/why-your-portland-property-taxes-climbed-this-much-you-voted-for-it.html)
We can also find homes in Portland that have different assessed values—and thus different tax bills—even if their market values are nearly identical.
Neighborhood-Specific Factors
Local Bonds and Levies
Portland residents frequently vote on local measures to fund schools, parks, libraries, and infrastructure. While these voter-approved bonds and levies are crucial for community improvements, they’re applied at the local level, leading to varying tax rates depending on neighborhood boundaries and overlapping jurisdictions (such as school or special districts).
Urban Renewal Districts
Portland’s urban renewal areas (URAs), like the Pearl District or Gateway, reinvest taxes generated from increased property values back into the area for development projects. While this often enhances local amenities, it can also shift the tax burden to other parts of the city.
You can read more about Portland’s URAs and taxes here: https://prosperportland.us/what-we-do/urban-renewal/
Real Market Value vs. Maximum Assessed Value
One major driver of tax variation is the gap between RMV and MAV:
- Real Market Value (RMV): The estimated amount your property would sell for on January 1 of the assessment year.
- Maximum Assessed Value (MAV): Established in 1997, it’s based on the 1995-96 assessed value minus 10%, with a maximum annual increase of 3%.
- Assessed Value (AV): The value used to calculate your property taxes. It’s the lesser of RMV or MAV.
For long-time homeowners, MAV is often significantly lower than RMV, leading to lower taxes. Conversely, recent buyers’ MAVs are usually closer to RMVs, resulting in higher taxes.
Exceptions to the 3% Cap
The Multnomah County Taxation Office explains that certain scenarios—known as exception events—can lead to tax increases beyond the 3% cap:
- Adding a new structure, like a garage or accessory dwelling unit.
- Major renovations or remodels.
- Subdividing or partitioning property into multiple lots.
Additionally, voter-approved measures often contribute to significant tax increases. For example, funding for parks, affordable housing, or police pensions can push property taxes higher than the 3% annual limit.
Tips for Navigating Portland’s Property Taxes
- Understand Your Tax Bill: Your property tax bill lists both RMV and MAV, along with the tax rate and additional levies. Reviewing it can clarify why your taxes differ from your neighbor’s.
- Research Neighborhood Trends: If you’re buying a home, look into MAV trends in the area. Rapidly appreciating neighborhoods may have higher tax burdens for new buyers.
- Participate in Local Elections: Many tax variations stem from voter-approved measures. Staying informed and voting gives you a say in how tax dollars are allocated.
Portland’s property tax system is a mix of state laws, neighborhood dynamics, and local funding initiatives. Understanding these factors empowers homeowners and buyers to make informed decisions, and understand how these variations can impact their budgets and long-term financial planning when choosing a neighborhood.
Constance Rigney
Broker | OR & WA
She/Her
What I love about the field of real estate is that essentially, it’s about dreams and possibilities. It’s about finding a space that can support the life you are envisioning and crafting.
Whether purchasing your first home, dialing in your next investment property, or selling your home, my goal as your agent is to be your ally and advocate, to work diligently and creatively to help you through the process. What distinguishes me from other REALTORS®? My style in both real estate, and the rest of life, is down to earth and humorous; my spirit warm and enthusiastic. Being flexible, thorough, ethical, and a topnotch communicator are the cornerstones of my business. I am a dedicated worker and won’t stop until I get the job done! I grew up on the East Coast, but my sense of adventure brought me to Oregon, where I found a richness of community, and a great love for the wondrous natural environment of the Northwest. I spent ten years in this city as a practitioner of Acupuncture and Chinese herbal medicine, all the while learning about Portland’s neighborhoods, and hidden gems, through the stories of the fascinating people that call this lovely city home. Joyfully part of a dream team, I’m currently partnered with Matt Guy, wonderful human and long time real estate whiz. We work expeditiously to successfully help our clients turn their vision into reality. In my free time you might find me living the VW Van life with my dreamy husband, Scott, and firecracker daughter Roslyn; soaking up the beauty of the Pacific Northwest, supporting local non-profits, or celebrating Portland’s local music scene.- T: 503-860-4293
- constance@livingroomre.com
