Last week, I got a random query about using private grants to offset rising property tax bills for long-term residents. A response, outlining some fairly simple, low-cost ways to structure a targeted property tax relief program:

Private grants typically wouldn’t be of sufficient size to address a need as large as property tax relief over the long term — even if only $20,000 is disbursed this year, within a decade (assuming ever-higher valuations), half a million dollars will have been spent.

I can think of two ways in which such a program could be structured, though. Locally, Cook County is willing to “defer” (with interest) property taxes until a property’s sale, by placing a lien against the property in the amount of the unpaid taxes (provided the property owner meets certain requirements: over 65, low income, etc.). The lien is written such that it can’t be used to, say, force a tax sale, but “lien” sounds sufficiently scary enough that few people are willing to try it. The program also doesn’t do anything to hold down valuations after the sale.

Private money could be used to place second mortgages against the properties in question: the second mortgage would generate cash up front to pay the tax bill, grants would pay the interest (and administrative costs — it would be cheaper if the taxing body were administering), and the principal would be repaid in a balloon payment upon sale of the property. Again, some long-time homeowners may object to the idea of having debt on their paid-off houses, even if it doesn’t materially affect them.

The other, more durable, way to go would be to use the grant to set up a land trust. Since the land is rising in value and thus causing the property taxes to rise, the private grant could fund a nonprofit to purchase the land out from under the houses. (The homeowners would still own the structures, which, I assume, are depreciating with age.) The nonprofit would hopefully qualify for a partial or full exemption from property taxes. If a TDR program exists, excess development rights could be sold to an adjacent parcel, simultaneously funding the program and reducing the market (and thus taxable) value of the property.

Like the lien system, this would involve the property owner losing some degree of control over their property. However, my own feeling is that property ownership comes with pros and cons; one of those cons is responsibility for things like taxes.