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Jeff Krauss, a Bozeman city commissioner and former county treasurer, was skeptical when he first saw the reappraisal notice for his south Bozeman home.

The Montana Department of Revenue, which values properties for tax purposes every other year, was telling him his had appreciated almost 20 percent over a two-year period — an eyebrow raising increase equivalent to tens of thousands of dollars.

But the home Krauss owns with his wife is, it turns out, anything but an anomaly, according to a Chronicle analysis of data provided by the Department of Revenue’s local office.

The DOR estimates — the best property data available to the public at a parcel-by-parcel level — indicate that the value of residential properties inside city limits rose a whopping 15 percent on average between 2014 and 2016.

Pretty much every home in the city — Willson Street mansions, college rentals, newer construction on the west side — is valued higher than it was two years prior, often drastically so. Of the 9,333 residential properties inside city limits, DOR statisticians estimate that only 227 lost value over the reappraisal cycle.

The rise behind those numbers creates a tremendous amount of wealth for existing property owners — $524 million inside Bozeman city limits alone — but pushes home ownership further out of reach for aspiring buyers and forces up rents when landlords buy properties to lease.

And, for homeowners who want to live in their homes instead of selling them, the higher property values primarily mean the potential for higher taxes.

It’s no news, of course, that Bozeman-area home prices are on the rise. Aggregate sales statistics published by local Realtors charted a 6.8 percent annual increase in the median price for detached homes sold last year, for instance.

But the DOR data, which includes townhomes but excludes condos owned without an accompanying parcel of land, gives an opportunity to look at shifting property values on a lot-by-lot basis, and untangle the value of structures from the land — and locations — they sit on.

Gallatin County residential properties

Yellow-red shading represents value change for residential parcels between 2014 and 2016, as estimated by the Montana Department of Revenue.

The median DOR valuation for a Bozeman home is now $326,000, up from $277,000. Three-quarters of homes inside city limits have appreciated by at least $31,500, the data indicates. A quarter are up $61,000 or more.

Countywide, the figures are similar, with half of properties increasing in value by $42,000 or more. Inside Belgrade, the equivalent figure is $34,000.

Homes in central Bozeman neighborhoods, some of the city’s most desirable real estate, have seen particularly pronounced increases driven by the value of the underlying land. That squares with other indicators of demand for downtown-area living — like the vacant home lot on South Tracy that sold after being listed for $345,000 earlier this year.

For example, the 13 properties facing the Story Mansion Park have appreciated by a combined $1.5 million in two years, according to the DOR data — more, actually, than the $1.3 million the city spent to purchase the Story Mansion in 2003.

Of the valuation increase for those parcels neighboring the mansion, 87 percent is attributed to the rising value of land as opposed to appreciation in buildings built on it — an average increase of $117,000 per property.

Citywide, about a third of the residential property value rise, $187 million, is based on estimated land values, with the remaining two-thirds attributed to building values.

It’s tricky to pin down exactly how the rise will affect taxes for individual homeowners — property taxes are levied based on several factors, including DOR’s assessments, local government budgets and tax policy set by the state Legislature, so they don’t always rise in lock step with property value.

With a growing tax base, for example, the city and county might be able to make their budgets work with lower property tax rates. Or they could use the leeway to increase their spending while keeping rates constant.

Official totals for tax base change, including commercial and industrial properties, won’t be available until the beginning of August, the DOR says. As such, it’s unclear whether overall tax base growth will match the rise in residential values.

Property owners with questions about their individual reappraisals can call the local DOR assessor’s office at 582-3400.

Homeowners also have until Aug. 3 to file paperwork requesting the department take another look at their property and can apply for relief through the state’s property tax assistance program.

In the meantime, though, as the city tries to figure out how to boost its stock of affordable housing, increasing land values present a significant obstacle.

Krauss, musing over the increase, suggested it means the city and big employers like the hospital may have to turn to land of their own in order to provide housing for their less-well-compensated employees. He also said it seems like Bozeman’s housing market is tracking more closely to the stock market than it is local wages.

“We’re so balance-sheet dominated, not income dominated,” he said.

“How do we house the 85 percent in a town dominated by the 15 percent’s capital?” he said. “That’s a factor in our policy — (it) has to be.”

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Eric Dietrich can be reached at 406-582-2628 or edietrich@dailychronicle.com. He is on Twitter at @eidietrich.

Locations

Eric Dietrich covers city government and health for the Chronicle.

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