Why It’s Dangerous to Buy a New Home

The Denver Post published an incredibly lengthy story on Sunday on CO Metro Districts that every one of you should read. A metro district is a quasi-governmental metro district that provides the money needed for the infrastructure in a new community, finances this money, charges and collects taxes from the future homeowners to pay for the public infrastructure.

 

According to Bruce Rau, Oakwood Homes' president of land acquisition said, "Almost every home that is sold in the metro Denver area that's new construction falls within a metro district." Why? Since the passage of Tabor it has become impossible for a local city or county to ask current voters to pay a tax increase to fund a new development or community. Instead the "rallying cry" has been "growth should pay for itself."

 

According to the Denver Post there are nearly 1,800 metro districts in our state without oversight from voters, without restrictions on conflicts of interest, and without checks and balances. In fact, Colorado law allows developers to elect themselves to serve on a district's board of directors and then the board votes to approve millions of dollars in public financing to repay the developers for their infrastructure costs upfront. But, this financing is paid by future homeowners by way of higher tax bills for decades to come.

 

Loveland Mayor Jackie Marsh said, "It's un-American really. The metro district, when it's formed, now has the authority to tax people who don't even live there yet, to borrow money that other people have to pa back. And it's only a couple of people making that decision." Still, "local officials see metro districts as the only way to meet the needs of a growing community."

 

In the past developers charged higher prices for their homes to repay them for the infrastructure costs. Now, the future homeowners repay them in-essence over a decade or 2 or 3 by way of higher taxes. This keeps home prices lower; but monthly payments rise due to higher taxes.

 

The Denver Post highlighted a couple who lost their new home to foreclosure because of the property tax increases that they were unprepared for. They could afford the property taxes in the monthly payment in the beginning; but as the property taxes soared to over $500 a month they no longer could afford their home.

 

This is why I am not a BIG FAN of new homes and why I have a discussion about how high the property taxes are on a new home with every homebuyer who is looking for a newer home, say built in the last 10 years. Our clients do NOT UNDERSTAND how high property taxes are on a newer home or brand-new home. You or I need to have this discussion with them. And if you won't do this I WILL DO IT FOR YOU.

 

Next week will contain part 2 to this story. To read this story for yourself, please click the link below- 

https://www.denverpost.com/2019/12/05/metro-districts-debt-highlands-ranch-meadows/