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States have moved to reduce property taxes on owner-occupied homes, with some considering broader exemptions or repeal, according to economist David Schleicher’s 2026 analysis. The changes could lower homeowners’ tax bills but shift costs to businesses, other taxes or state budgets—and, by reducing the cost of owning a home, push home values higher. The size and local effects of these changes remain uncertain.
States are cutting property taxes on owner-occupied homes, and some are considering much broader exemptions or repeal, according to a September 2026 analysis by legal scholar David Schleicher. The changes could ease bills for homeowners, but may shift the cost of schools and other local services to businesses, other taxes or state funding—and could raise home values by making ownership less expensive.
Schleicher’s paper, “The Great American Property Tax Freak Out,” was posted online at SSRN on September 1, 2026. A September 28 post by Conversable Economist highlighted its analysis of state reforms over the preceding three years. The post says several states substantially changed property tax systems to give large benefits to owner-occupied homes, with the burden moving toward commercial property, other local taxes and state funding.
The report names Florida, Ohio, North Dakota and Texas as states where officials have considered going further: exempting owner-occupied housing from property taxes or ending property taxation altogether. The source does not say that those proposals have all been enacted. It also does not provide a state-by-state accounting of the reforms, their rates or the revenue they would replace.
Schleicher argues that rising home values—particularly in suburbs after the COVID period—have contributed to political pressure to reduce property taxes. Since a property tax bill can rise with assessed value even when a homeowner’s income has not, owners may face a higher payment without having received cash from selling their home. The report says reforms have often increased rates on commercial property owners, whose property values have declined in the same period, though local outcomes vary.
Who Pays for Local Services
Property taxes are a major locally raised revenue source in the United States and, broadly, the main source of funding for local schools. Local governments have also traditionally used them to help pay for services such as police. If states limit local property taxes, communities may need to cut services, raise other taxes or rely more heavily on state funding. The source notes that voters seeking lower bills may not connect tax limits with the possibility of reduced local services.
The distribution of any tax cut matters. Homeowners could keep more of their income, while commercial property owners—including owners of rental apartment buildings—might face higher bills under some reforms. Alternatively, local governments could turn to sales or income taxes, or state governments could increase funding. Those choices can spread costs differently among homeowners, renters, businesses and people who do not own property. The report describes these as possible shifts, not a single outcome shared by every state.
There is also a potential effect on housing prices. Schleicher’s analysis says that lower ownership costs can increase a home’s market value: buyers may be willing to pay more for a property when its expected tax burden is lower. If that happens, existing owners could benefit from both reduced tax bills and higher asset values, while prospective buyers may face higher purchase prices. The effect is a risk identified in the paper, not a measured forecast for a particular market.
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Why Rising Values Fuel Tax Pressure
Property taxes are tied to the value of property, making them different from taxes based only on current income. When a home appreciates, its owner may become wealthier on paper but may not have more cash available to meet a larger tax bill. The source highlights older homeowners as a politically influential group: many have accumulated home equity but have lower current incomes than during their working years.
The political dispute described in the report follows a period of substantial housing appreciation, especially in suburbs after the COVID pandemic. That creates a tension for owners: a higher home value can increase household wealth, but it may also increase the tax assessed on the property. The September 28 post frames this as a conflict between wanting an asset to appreciate and wanting the tax attached to that asset to fall.
Schleicher also identifies trade-offs beyond the immediate bill. His analysis says reforms may increase state authority over local governments and make local revenue less stable, while reducing the risk of tax foreclosure during recessions. It also points to stricter zoning controls alongside more homebuilding where construction is permitted. These are the paper’s projected consequences; their extent depends on the design of each state’s laws and local conditions.
“In the last three years, a number of states have substantially reformed their property tax systems, providing huge tax benefits to owner-occupied homes.”
— David Schleicher, in “The Great American Property Tax Freak Out,” as quoted by Conversable Economist
The Local Effects Are Not Settled
The source describes a range of state approaches but does not list every enacted law, identify precise tax changes or estimate their effects on household bills. It also does not establish whether the proposals in Florida, Ohio, North Dakota and Texas have advanced or been adopted. Those details would be needed to assess the current status and scale of any change in each state.
It remains unclear how much lost local revenue would be replaced by commercial property taxes, sales or income taxes, or state transfers—and whether that replacement would keep funding for schools, police and other services steady. The report notes wide variation in local public finance, so a general national pattern cannot determine what a particular community will experience.
The possible increase in home values is also not quantified in the supplied material. The outcome would depend on local supply, demand, tax policy and other costs of ownership. The source presents higher housing costs as a likely consequence of lower ownership costs, but does not provide a forecast showing the size or timing of the change.
Track State Laws and Local Budgets
The next developments to watch are whether states enact proposals to exempt owner-occupied homes or repeal property taxes, and what revenue sources they specify to replace the money. Local budget decisions will show whether schools, police and other services maintain funding, face cuts or become more dependent on state support.
For homeowners and prospective buyers, the practical effects will turn on the details: eligibility rules, assessment methods, replacement taxes and local housing conditions. The source report does not provide a single bill estimate or a timetable for changes. Until states and local governments publish those details, the trade-off between lower property taxes and higher housing costs remains a policy concern rather than a settled result.
Key Questions
Have the states named in the report abolished property taxes on homes?
The source says Florida, Ohio, North Dakota and Texas have considered exempting owner-occupied housing or ending property taxes. It does not say all four have enacted those proposals.
How could a property tax cut raise home values?
If taxes fall, the ongoing cost of owning a home may also fall. Buyers could then be willing to pay more for the property. The source presents this as a potential market effect, not a quantified prediction.
Who might pay more if homeowners receive tax cuts?
Depending on the reform, costs could shift to commercial property owners, other local taxes such as sales or income taxes, or state budgets. The split differs by policy and location.
Could property tax limits affect schools and police?
Yes. Property taxes are a major source of local revenue and broadly the main funding source for local schools; many communities also use them to support police. The source says the effect on services depends on how lost revenue is replaced.
Source: hn
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