As valuation professionals working daily in the New Mexico market, we see the barriers choking our housing inventory. While interest rates capture headlines, a local barrier is keeping homeowners trapped and shutting first-time buyers out: property tax lightning under NMSA 1978 ยง 7-36-21.2.
The 3% annual valuation cap was originally designed to protect long-term homeowners from being priced out by rapid market inflation. However, because that cap resets entirely to market value upon sale, it penalizes moving.
As an illustration, consider a senior retiree living in a $600,000 family home who has owned it long enough that their annual property tax bill is held to about $4,900. They want to downsize and buy a smaller patio home valued at $400,000, a full $200,000 cheaper on the purchase price.
On paper, they are downsizing to reduce living expenses. But at the closing table, the cap dies. Their new tax bill on the cheaper house is figured on the full $400,000 market value, jumping to about $5,600 a year. The house is $200,000 cheaper, yet their annual property tax goes up by $700.
Once seniors run that comparison, they unpack their boxes and stay put. The tax penalty is invisible on the multiple listing service, but it is obvious on the notice of value.
Another example is the $950,000 house in the heights where after 20 years a senior pays $9,800 in taxes. If the senior were to sell and move laterally, at roughly 42 mills the senior's taxes would go up by $3,500 ($13,300 minus $9,800).
Why Senior Portability Is the Logical Path Forward
By focusing assessment portability specifically on seniors (age 55 or older) or disabled homeowners for a principal residence that is purchased within two years and occupied, the Legislature can protect fixed-income residents without upending the entire tax roll.
Under this model, qualifying homeowners selling a primary residence and moving to a new one would carry over their accumulated valuation gap. This directly frees up the larger homes that younger families and first-time buyers desperately need, while giving seniors a safe harbor to downsize.
Addressing the Fiscal Reality
Lawmakers will ask whether the schools and the county lose money. The operating budgets do not gain or lose on this. Those rates are held to a formula. A reset does not raise them, and a carried gap does not cut it.
Without going too deep into the weeds, bonds are a fixed payment. The house the senior leaves goes on the roll at full value. The discount follows the senior, up to $5,000 a year. If the new sales match the seniors who were going to move anyway, the bond base breaks even. The city is ahead on the first extra sale, because that closing pays gross receipts tax on a sale that does not happen now. Estates, investors, and short-term owners do not qualify, and their sales reset as they do today.
In other words, bondholders are paid either way. The listings are the thing the current law is holding back.
As an example: a senior lists a home at $900,000 and downsizes to a $550,000 townhome. The buyers of the $900K home are a successful mid-career family moving up from a $650K home which they put on the market. A younger family currently living in a $450,000 home buys the $650K home freeing up their property. A first-time buyer steps up from renting into the $450K property. These are all are listings that do not exist now.
Why This Matters for Policy
Introducing senior portability generates market transactions, commissions, title fees, and contractor renovation spending. Meanwhile, the county captures an immediate, full-market tax reset on the house the senior leaves behind, while continuing to capture full resets on properties sold by estates, investors, and short-term owners.
As an appraisal community, we should consider bringing our voice to the Roundhouse.
Mark Raney, SRA
