Oregon’s property tax system is influencing the housing market, making homes with lower taxes sell for up to $45,000 more than their counterparts, according to a study released Wednesday by the Northwest Economic Research Center.

“Our research clearly indicates that property owners with arbitrarily low property taxes receive a boost in property values,” NERC Director Dr. Tom Potiowsky said in a statement. “Oregon’s property tax system creates a hidden subsidy for these property owners and shifts the burden of local services on to others.”

The study is the first to look at how Measure 50 has affected Oregon’s housing market. The law, which voters approved in 1995, limits property tax increases to 3 percent per year regardless of how much the market value of a home increased.

The League of Oregon Cities commissioned the study as part of its ongoing efforts to modify or change Oregon’s property tax system.

The NERC compared sale prices of comparable single-family homes in Multnomah County for the past four years and found that average homes (valued around $314,000) in the Boise, Humboldt and Woodlawn neighborhoods sold for $6,200 to $30,000 more than comparable homes because those neighborhoods are taxed on less than 45 percent of real market value.

In contrast, homes in the Powellhurst-Gilbert and Lents neighborhoods were worth $3,100 to $15,000 less because those properties are taxed at about 75 percent of their market value.

“Because these inequities are concentrated in areas where residential values have increased rapidly relative to (assessed value), the property tax system creates a hidden subsidy for these property owners,” the report states. “Some of burden of funding government and school services is transferred away from these homeowners. This results in revenue shortfalls, or creates the need for property owners in areas with a smaller increase in real market value to disproportionally fill in the gap.”

While the study focused on the Portland area, the report stated that “it is reasonable to expect these dynamics to be present in other parts of Oregon.”

But Salem Association of Realtors Executive Officer Jim Lewis said it isn’t something he’s seen or heard about.

“That might be true for isolated homes or areas or neighborhoods to substantiate the theory, but in general I would say that theory is not correct,” Lewis said.

Measure 50 was sold to Oregonians as a way to ensure people with low or fixed incomes could keep their homes when their neighborhood gentrified, according to the league.

“Instead our system is just as likely to be giving a tax break to a lawyer buying a home in North Portland and offering no relief to a low-income senior in East Portland,” Fick said.

He thinks the study will give the league’s position more weight. That’s important to the league because Gov. John Kitzhaber is working to gather interest groups together for a conversation on comprehensive tax reform in 2015.

“It’s one of the legs of our state’s revenue system. Schools get a third of their revenue from the property tax system,” Fick said. “It seems like we’re leaving a lot of money on the table by having a system that’s broken.”

astaver@StatesmanJournal.com