Allaire Conte - Realtor.com - Mar. 6 2025
Property tax bills have climbed as home prices surged across the country—but some homeowners in Montana could soon be one step closer to tax relief.
This week, Gov. Greg Gianforte’s House Bill 231 is off to the Senate. The proposed law would reduce residential property taxes by increasing taxes on second homes.
The bill is now before the Senate Taxation Committee, where lawmakers may propose amendments before it moves forward. Here's how the bill could change Montana real estate.
What is in Montana's Bill 231?
Montana's proposed law would lower property taxes for primary residences and long-term rental properties while increasing taxes on second homes and other high-value properties.
“The proposal is projected to directly reduce property taxes for more than 215,000 primary residences and more than 32,000 small businesses, as well as provide indirect relief to over 130,000 renters,” Kaitlin Price, deputy director of communications for Gianforte, said in an email.
It’s the product of a bipartisan task force Gianforte launched in January 2024 to reform the property tax system and restrain property tax growth.
How property taxes affect home affordability
While fixed-rate mortgages largely shield homeowners from the strain of inflation, property taxes and home insurance—both of which are included in a homeowner’s monthly mortgage payment—remain variable costs that can increase over time.
Since 2019, property tax bills across the country have climbed an average of 27%, according to research from CoreLogic. These increases add significant financial pressure on homeowners, particularly because property taxes are regressive: They don’t take into account a homeowner's income or ability to pay.
For example, a homeowner earning $50,000 a year would owe the same property tax on a $400,000 home as someone earning $200,000 annually. By ignoring income as a factor in property taxes, lower-income homeowners bear a greater financial burden relative to their earnings.
While higher taxes might not always force someone to sell, they can strain household budgets and make it harder to keep up with other housing costs.
What do Montana property taxes pay for?
Residential property owners pay for almost half of all property tax revenue in the state, according to the Montana Budget & Policy Center, providing vital funding for public services like schools, roads, and other infrastructure.
With such a critical source of revenue at stake, Montana’s new approach shifts more of the tax burden to second-home owners. This echelon of residents is seen as having a greater ability to shoulder the additional costs, funding key programs without breaking household budgets.
Montana's second-house boom
Montana is tapping a deep well by targeting second-property owners.
Like many picturesque locations away from the hustle and bustle of city life, Montana saw a considerable bump in nonprimary-residence sales during the COVID-19 pandemic. As much as 20% of all home sales in Montana in 2021 were for second homes, according to Realtor.com® calculations of Optimal Blue mortgage data.
As of 2024, the share of second-home sales is nearing pre-pandemic levels, but the elevated levels of nonprimary-residence sales from 2019 to 2022 have created a healthy stock of currently owned second homes.
Property tax burdens across the country
Montana’s tax shift isn’t happening in a vacuum. Bill 231 still needs to clear the Senate and get Gianforte's signature before becoming law, but it might already be catching the eye of lawmakers outside the state. Property tax burdens vary widely across the country, and many states are in search of a solution.
Rather than compare tax rates, it’s best to examine the effective property tax burden as a share of the home value. This figure is closer to what homeowners will pay, rather than a tax rate, which can vary significantly.
States with the lowest property tax burden
Hawaii: 0.27%
Alabama: 0.34%
Delaware: 0.4%
Idaho: 0.41%
South Carolina: 0.42%
Tennessee: 0.42%
Arizona: 0.43%
Arkansas: 0.44%
West Virginia: 0.46%
Nevada: 0.47%States with the highest property tax burden
Texas: 1.81%
Illinois: 1.75%
New Jersey: 1.72%
Connecticut: 1.55%
New York: 1.49%
Pennsylvania: 1.4%
Vermont: 1.38%
New Hampshire: 1.37%
Nebraska: 1.34%
Iowa: 1.26%Second homes under scrutiny
It's unclear what effect a higher property tax rate would have on the second-home market. While Vermont passed a similar law, it went into effect only at the end of 2024, and the impact it will have on real estate and tourism remains to be seen.
Globally, it's not uncommon for nonprimary residences to be subject to unique tax rates: France and Canada have implemented such taxes to curb housing shortages and generate revenue for local services. But these pied-à-terre taxes have had less support stateside.
Still, if signed into law, Montana's bill could usher in a new era and radically change the second-home market.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.