Wednesday, October 24, 2012

Property Taxes for the ADU

Many people have inquired about how the ADU effected my county property tax. Up till now, I had no idea how the addition would impact it. Even the county's appraiser who inspected the ADU last spring couldn't give me any sense about the impacts of the ADU on my overall taxes.

I finally have an answer: It is raising my taxes a lot! In my case, it's raising my property taxes by $2,422.32. Said another way, it's more than doubling my property taxes (a 2.5X increase to be exact).

Whereas before, the total value of my property's structures (just the main house) previously were $177K; now, with the ADU added to the property, the county is assessing my property's two structures (the main house and the ADU) at $320K. I assume of course that the vast majority of that $142K increase in the county's structural valuation is attributable to the addition of the new ADU.

This doesn't reconcile with what a private appraiser found as the worth of the property with the ADU addition. In fact, this county valuation is over 50% higher than what the appraisal said.

This property tax anecdote should be considered with a grain of salt, as each property has unique attributes and history that would effect how an addition would increase the tax burden. With ADUs being relatively rare, this story can serve as one reliable data point. However, there are many factors than play into property taxes, so I won't speculate as to how this data point compares with other properties that have ADUs.

And, it's important to note that this relatively huge new property tax burden does not hold a candle to the very tangible financial benefits provided monthly or annually by having the ADU.

If ADU Financing is of interest to you, I encourage you to attend the Build Small, Live Large Summit this Friday, October, 26th. I'll be speaking on a panel entitled Financing the Accessory Dwelling Unit.


  1. I just thought I'd point out that the gigantic jump in your property taxes is not due to the city overvaluing your ADU, its because of Bill Sizemore and measure 50. You see, measure 50 made it so that the appraised value of your property cannot change by more than 3% per year, up, or down, and has been this way since 1994.

    This has locked in some properties in really, really low tax burdens, because they were in less desirable neighborhoods at the time, or they hadnt had a re-appraisal for up to six years, or even better, both. (I've seen some nice houses in the Sabin neighborhood with 650$ a year property taxes. 300,000$ houses.

    *however*, whenever there is major construction to a house, like a remodel or an ADU, your grandfathered in market values gets added to your new increase in value you get stuck with a massive tax increase.

    Considering that you spent 96K building the ADU, it seems pretty fair that they only tacked on 107K onto your assessed value.

    But all those infill houses you're seeing everywhere? I have a friend who bought one. 450K. And her taxes are 9500$ a year. Because its a new house.

    So, to put it another way, if you build a 100k ADU, you will likely get hit with an additional 2500 or so in taxes, regardless of the existing property.

  2. Yes, you've stated the equation well.

    I think your conjecture that all 100K ADUs will get a similar tax increase is an interesting idea. Since most ADUs cost around this amount (give or take 20k), it should be possible to test your hypothesis.

    One point to note is that the contributory value for the ADU was $142K to my ADU, not $107K (see the differential in the 'structure' category).

    This vastly bloated contributory value is what I am contest about the county's initial assessment. Whether a more fair assessment of the ADU's contributory value lowers my tax burden is still to be determined. I'll follow up soon with a post about the results of my appeal

  3. Kol mentioned the city appraised his ADU based on 1000 sqft instead of 799 and they brought down his taxes to about $3k. He might add to that. But thought that might help someone out. I took his class this weekend, and I highly recommend it.

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