Arizona Property Tax Bill Would Harm Unhoused to Help Homeowners

If Arizona voters approve a November ballot proposal that entitles taxpayers to greater property tax refunds, it could alter property tax policy and public attitudes about unhoused populations.

The proposed policy would allow taxpayers a property tax refund for any expenses they incur to mitigate effects of the state’s failure to abate this “public nuisance.” But a more humane and workable approach would be to incentivize taxpayers to contribute to initiatives that assist the unhoused—not demand refunds from the state for failing to chase them off.

The policy on the table would fuel negative perceptions of unhoused populations by classifying homelessness as a disadvantage to nearby homeowners. It also would introduce a new method of taxpayer recourse that could broadly impact how to manage property tax policy and public funds.

Property Tax Intent

Property taxes have long helped fund a wide range of public services—from education and infrastructure to support for vulnerable populations such as the unhoused. In general, they can be viewed as taxes collected that benefit communities at large.

State governments typically have used tax revenue expenditures,
as through affordable housing tax exemptions, to combat housing shortages. Property tax abatements and relief generally target vulnerable and economically disadvantaged populations, such as through rebates to seniors and homestead rebates.

Arizona’s November proposal would compensate homeowners for having to suffer ill effects from the presence of unhoused people. It’s difficult to overstate the potential long-term harm this framing could cause.

Arizona, like much of the rest of the country, has an affordable housing crisis—with an estimated shortage of 270,000 homes statewide. One side effect of the crisis is an increase in homelessness. As the minimum income required to acquire housing rises, it leaves more individuals stranded on the wrong side of that line.

In Phoenix, the number of unhoused individuals rose 72% over the last six years. Parts of Arizona also face a crisis of heat-related deaths, especially among the unhoused, for which heat is the second most common cause of death.

Unhoused individuals are caught between the grinding gears of these twin threats, which could be entirely preventable with sufficient resources.

Redefining Taxation

The proposed refund program would carry significant policy implications beyond the immediate draining of state coffers. It implies taxpayers should be entitled to claim refunds for any so-called expenses incurred due to the state’s failure to enforce laws—this eliminates any selective enforcement discretion by the state.

In the example of the unhoused, it relates to the state’s failure to enforce prohibitions against illegal camping and panhandling. However, this shift could undermine broader efforts to provide for social services, enabling a path for individual taxpayers to demand refunds when their preferred policies aren’t pursued.

Taken to its extreme, property taxes could be seen as an opportunity for à la carte selection by each taxpayer of which services to fund and which to neglect.

If the proposal succeeds, later-year refunds may go out for costs incurred by the state’s selective enforcement of laws prohibiting unhoused people on public property. Next year, there may be a demand for refunds for taxes paid toward shelters or food for the unhoused.

If Arizona creates a precedent for issuing refunds whenever a taxpayer determines a state policy decision has cost them money, it will open the door to all manner of mischief.

Humane Policy

A humane policy would invert the proposed relationship between unhoused populations and property taxation: Property taxes should instead increase in areas with significant unhoused populations and be used to fund enhanced social services.

A just solution would incrementally raise property tax rates over time in areas with high concentrations of unhoused individuals. The increased revenue could be channeled toward more comprehensive social services, ranging from affordable housing programs and shelters to mental health services and job training.

The counterargument is that rising property taxes could drive away property owners who are most able to pay, essentially segregating regions into unhoused and affluent sectors. Setting a statewide property tax rate that reflects the need for enhanced social services could likewise incentivize residents to move to states that adopt policies more like Arizona’s current proposal.

The solution to this potential pitfall is simple, but not easy: Advocate for similar policies in other jurisdictions. One possible spoonful of sugar to make this particular policy medicine go down is to provide taxpayers an opportunity to substantially reduce their property tax bill—even below levels paid prior to any social service enhancement hike.

Instead of insinuating that unhoused populations are outsiders who should be chased away, we should reinforce that they’re fellow community members to be helped. Taxpayers could be offered tax incentives for donations made to approved nonprofits and private initiatives that assist the unhoused—from building housing to job training and mental health services.

This would create a virtuous circle—in areas where homelessness is rising, property taxes would also rise to meet the demand for services. Private initiatives that work with unhoused populations would see an increase in funding by taxpayers seeking to both lend a hand and act in their own pecuniary interest to lower their bill.

The more effective the private initiatives are, the more the unhoused population percentage would fall, and the lower the property tax bills would go.

Ensuring that funds raised target vetted initiatives is necessary to any successful policy reform. Transparency would be key to allocating funds toward programs proven effective in aiding the unhoused—not programs that seek to displace them.

Outlook

As Arizona voters head to the polls in November, they’ll shape the future of unhoused populations in their state, and define who the victims of the housing crisis are.

The state can set a powerful example by addressing homelessness in a compassionate way or reconceptualizing property taxes as money paid to hide the unhoused from those privileged enough not to count themselves among them.

If enacted, the proposal could exacerbate existing social divisions by using tax policy to categorize the unhoused as outsiders to society. If taxes are what you pay for a civilized society, as Justice Oliver Wendell Holmes Jr. said, what identity do people have when we see ourselves as paying taxes, in part, to have them removed?

Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and adjunct professor at Drexel Kline School of Law. Follow him on Mastodon at @andrew@esq.social

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