Property Tax Deferral: Can a Public/Private Partnership Help Provide Lifetime Income?

Abstract

Many retirees will not have enough money from conventional retirement programs to maintain their standard of living once they stop working. To help support themselves, they will need to tap their home equity, the major asset for most middle-income older households. Yet tapping home equity is difficult: most people are reluctant to downsize and, even when they do, they rarely reduce their housing expenses. Reverse mortgages are an option, but most households are put off by the enormity of the decision, the complexity of the product, and the high up-front costs. A statewide property tax deferral program overcomes the hurdles to accessing home equity. Property tax deferral does not provide access to as much home equity as a reverse mortgage, but the offsetting advantage is that some of the house value after the repayment of the loan and interest will be available for a bequest. At the household level, the proposed program is revenue-neutral: all taxes owed by a participating household are paid back, with interest sufficient to cover borrowing costs and administrative expenses. But because loans are made well in advance of repayments, the sponsor of the plan must cover start-up costs. In Massachusetts, if the state government simply borrowed money to cover the annual outlays, the state's ratio of debt-to-GSP would rise from 14.0 percent to 15.1 percent. The alternative is to involve the private sector. This decision would raise the costs to homeowners, but nevertheless it may be necessary to get a broad-based program up and running.

Aging in Place: The Role of Public-Private Partnerships

“…Innovative financial models are needed to support new models of aging in place (see Munnell et al 2021). Most older adults today prefer to age in place, and this is unlikely to change in the future.…”

“…New funding models are needed to provide financially viable aging-in-place models (see Munnell et al 2021). Public-private partnerships can help by allowing private sector companies to collaborate with the public sector.…”

Administrative management in the collection of property tax in the municipality of Condorcanqui, Peru

“…With respect to the direct and indirect tax dimension, it is referred that the entity must know and analyze the tax capacity of each taxpayer, since this allows it to adequately carry out the property tax burden, but for this, it is of vital importance to know the economic capacity of each of its citizens (Villafuerte et al , 2021). Likewise, it must be kept informed of all regulatory changes on property taxation, and especially what indicators are used to calculate this tax (Munnell et al 2020).…”