|
Getting your Trinity Audio player ready...
|
In Palo Alto, where the median home price now exceeds $3 million, property taxes have become a major cost of homeownership. The city ranks highest in the nation for median property taxes paid, according to a new analysis by Construction Coverage.
Palo Alto residents pay a median of $23,007 a year in property taxes, far above the national median of $3,211. Yet the city’s effective property tax rate — the share of a home’s value paid in taxes — is 0.657%, below the national average of 0.888%. The gap highlights how high home values can drive large tax bills even in areas with relatively low tax rates.
Several other Peninsula cities also rank among the nation’s highest property tax bills. San Mateo ranks sixth, with a median annual tax bill of $13,705, followed by Mountain View at No. 8 with $13,310. Redwood City ranks 14th, with a median annual tax bill of $12,329., according to the report, which analyzed tax data from 651 cities across the nation.
The high property taxes on the Peninsula reflect a broader trend: Nationwide, property taxes have become the fastest-growing source of state and local revenue. From 2022 to 2024, collections rose by more than $96 billion, outpacing gains in sales and corporate income taxes and offsetting declines in individual income tax revenue, the report found.
Nationwide trends
While bidding wars and inventory shortages have mostly eased, affordability remains a persistent challenge. Home prices are still near record highs, and property taxes continue to rise because assessments often lag behind actual home values. As local governments catch up with the dramatic appreciation of the early 2020s, many homeowners face higher bills regardless of whether they carry a mortgage or own their homes outright, the report states.
Some states cap how much a home’s assessed value can grow each year, keeping property taxes from increasing unexpectedly. As of 2025, 18 states, including California, limit how much a property’s assessed value can rise each year.
California’s property tax system helps explain why high-cost areas like the Peninsula face some of the largest tax bills, even with relatively low rates. Proposition 13, approved in 1978, caps the base property tax rate at 1% of a home’s assessed value and limits annual assessment increases to 2% unless a property is sold or significantly improved. While the law protects longtime homeowners from sudden spikes, it also creates disparities between longtime residents and new buyers in expensive markets such as Palo Alto, according to the report.
While lower assessed values shield longtime residents from spikes, they also make selling or moving costly, keeping many effectively “locked in,” the report concludes.
The data used in this analysis by Construction Coverage is from the U.S. Census Bureau’s 2024 American Community Survey. To determine the locations with the highest property taxes, researchers calculated the effective property tax rate for owner-occupied homes by dividing the aggregate annual real estate taxes paid by the aggregate value of housing units. In the event of a tie, the location with the greater median property taxes paid for owner-occupied homes was ranked higher..
Thank goodness for Proposition 13 – at least we have that. We still have five figure property taxes, but it could be even worse! No, we aren’t the long term elderly owners who supposedly have a bargain, but rather approx 20 year homeowners in Palo Alto. School,bonds, etc…..
Mountain View City Council is exploring how to raise your property tax bill more….with a big juicy bond!
Why should a young home buying family have to pay more in property taxes than their next door neighbor who have been there for a long time? Not too long ago, I ran some numbers for my neighborhood with taxes collected and valuation. It turns out if everybody paid property taxes according to Zillow valuation, we could lower the tax rate by over half – and still collect the same tax revenue as with the current system.