City Assessments Up

Charlottesville real estate assessments are up 18.8% this year, John Yellig writes in today’s Daily Progress. Some areas increased by as much as 39%, while some were as low as 7%. Note that this is only a calculation of the market value of the house — the rate reflects the realities of soaring real estate prices in the area, and not any taxation decision on the part of the city.

I need a little piece of software that just posts this story February 1 each year. There seems to no longer be any need to write anything different each time around.

15 thoughts on “City Assessments Up”

  1. My Question: has the city bothered to notice that houses aren’t selling for so much or so quickly here lately? The market has definitely gotten soft – yet the assessor assumes that it’s safe to cherry pick a few ridiculously high “comparables” in a neighborhood and then jack up everyone’s assessment by the same percentage. This year I believe I will actually contest my newest – another 18% in a year when houses have practically languished on the market in my neighborhood.

    The upside to all this is that perhaps they will price out rentals in single family housing (stop the conversion of single-family family neighborhoods into student rentals).

  2. Good luck contesting your assessment! Don’t forget that they can just as easily raise your assessment as lower it. From what I can tell, the vast majority of city assessments are significantly lower than what the house could sell for, so it can be dangerous to fight it. I’m sure they set it up that way; they are consistently low because they don’t want to go through the hassle of dealing with reassessments.

  3. I wonder what would happen if a municipality just flat-out refused to reassess property for a few years. As an act of civil disobedience.

    According to state law, any county or municipality that levies property taxes is required to reassess everything every 2 years. In practice, this is so incredibly unpopular that one can only imagine the storm of anger that would be directed at the Attorney General for taking a city to court over it.

    Would Bob McDonnell dare to do anything about it if Charlottesville’s city councilors announced that they refuse to conduct reassessments? Just imagine McDonnell being painted as the poster boy for unfair taxation and government out of control. He could kiss his gubernatorial ambitions goodbye.

    This is the kind of thing that you could look forward to if I ever ran for City Council.

  4. Pete:The county assessor actually told me that they try to keep assessments at least 10% below actual market value in order to ensure that the assessment can withstand a court challenge. I am certain that my city assessment is at least %10 below what the house would actually sell for.

    Jack: It’s not the assessments that are so unpopular but the higher taxes that come with higher assessments. I am happy to see my house go up in value. The solution to higher property taxes is to reduce the tax rate. In the past City Council has made token reductions in the rate but never enough to compensate for the higher assessments.

  5. If we only reassessed every, say, four years, then there’d be really, really huge increases every four years. Instead of being really unpopular, they be really, really unpopular. I’m not sure that’s an improvement.

  6. madman: I agree we need to lower the tax rate, so that people are actually paying less. And that means lowering it substantially, not so little that with the increased assessment, property owners are still shelling out big bucks. Middle class and working class folks are being forced out by rising taxes, which in turn result in increased rents and mortgage payments. Landlords have to stay in business too- increased costs to them get passed on to the tenants.
    And it goes without saying we need alternate sources of revenue in place of real estate tax monies. More frugality on the part of city government too. Rob Schilling is right- the city does spend money on silly, unnecessary projects. $15,000 or whatever it was to Art in Place? Come on, I don’t want my tax dollars spent on those eyesores.

  7. Cvillelibertarian sees a benefit in higher housing costs from higher assessments because it may reduce the supply of student rental housing which he sees as a good thing and then Hollowboy sees the same thing as a bad thing because it forces people out of the city. I agree with Hollowboy and I wonder what kind of libertarian Cvillelibertarian is. I do want to see my property go up in value and I have had some bad experiences with a few of the renters living in my neighborhood but there are other ways of dealing with the problem than jacking up housing costs for everyone. It’s just wrong to penalize people for the way they pay for their homes because students make noise and take up parking spaces.

  8. It is immoral to tax non-existant profits. If we must tax (which obviously we must) we should be taxing transactions in which the money to pay the tax clearly exists. The very idea of property taxes is fundamentally flawed. However, the Dillon rule leaves us with no other choice for funding local governments until such time as it is overturned.

    The smart thing to do would be to freeze assessments on property at the time of purchase. Force local governments to vote to raise the tax rate if they want more revenue, rather than just smiling as assessments go up and they can claim that they’re not responsible for taking more money out of taxpayers pockets. You want more revenue? Fine – but have the balls to make the case openly and put it to a vote. Show some courage.

    This would force elected officials to think more seriously about ways to reduce spending. Nobody wants to be the guy who suggests a tax hike. It’s a way of making local government more accountable and more responsible with money.

    To do this we’d need action on the part of state government. Again with the Dillon Rule. Unfortunately, David Toscano gets a whole lot of his money from real estate developers. Developers who know that shifting the tax burden onto new development (which is also the cause of most new spending needs) will hurt their wallets. They need current residents to finance the infrastructure for their multi-million dollar developments. They want *us* to pay the lion’s share for their roads, policing, fire response, construction of new schools, water, sewer, etc. in a massive system of corporate welfare. So they’ve spent a lot of money getting a guy elected who hasn’t shown much inclination to do anything about his district’s number one issues, which are taxes and growth.

    Give it some thought. I sincerely think that this is our best way out of the woods on the problems of taxes and uncontrolled growth.

  9. I’ll agree that there are big problems with real estate taxes but the Dillon rule does not prevent the state legislature from changing the law. It does keep localities from adopting their own hodge podge of regulations. I think real estate tax laws do need to be changed but the changes should be uniform throughout the state. If individual localities were allowed to adopt different types of taxes adjoining localities would have very different taxes. You can be certain that the inequities would affect land and housing costs and very likely exacerbate sprawl and urban blight. Local real estate taxes are considered when people buy a home. The fact that real estate taxes are much higher in Charlottesville has influenced many people over the years and they have moved out of town for that reason.

    Albemarle and Charlottesville may by growing but it sure is not “uncontrolled”. The high cost of red tape and growth controls in Albemarle have had a huge impact on the rural areas in the surrounding counties. It would be worse if it weren’t for the Dillon Rule.

    And as for developers: they aren’t creating the demand just making money responding to it. UVa is the engine for growth. I think the nursing school is about to expand by 40% and there are all kinds of plans for expansion at the rest of the university. Thats where the bulk of growth that the developers are rushing to accomodate is coming from. Maybe the state should put more money into infrastructure development since it’s the state that is creating the demand.

  10. Disagree about the “red tape and growth controls” in Albemarle. Madman’s statement is just plain wrong. There are over 14,000 new housing units either approved or proposed for Albemarle’s growth area, which is enough to satisfy the next 20 years of projected growth in the county. This doesn’t seem like growth control to me. What’s happening in surrounding counties is simply a result of their own lack of effective planning regulations. His rhetoric is simply the BS spouted by the development community, which has one thing in mind…proffit for a handful of people. Oh and I’ve had it with the rediculous “affordable housing” argument developers use against Albemarle’s planning policies. They’re fooling fewer and fewer people…..

  11. Madman – I am a perfectly responsible libertarian – noting that preventing the conversion of the city’s family neighborhoods to student slums is neither libertarian, conservative or liberal. I am a landlord, and a homeowner in a single-family neighborhood. I do not enjoy seeing my neighborhood being slowly converted into Rugby Rd; I’ll use the same logic you applied to me, and assume your comments imply you’d welcome having a fraternity “satellite” move in next door to you – it’s great to have your kids playing with the beer bottles and other trash strewn up and down the street.

    I am not anti-student. Neighborhoods do far better when there is a mix of rentals, at most, with owner-occupied, or they become run-down slums. Landlords don’t take care of student housing the same way they take care of family rentals – that affects quality of life and property values, negatively.

    The increased taxation cuts into the viability of these single-family homes as rentals, since the recent build out of student apartments (Eagle’s Landing, Sterling University, etc.) have made the rental market soft. All I was doing was noting one upside of the changing economics at work here.

    There is nothing about this change which affects people, ‘based on the way they pay for their housing’ – it is more expensive to live in a single family home in the city regardless of the taxation – whether you are renting or own – the landlords most certainly attempt to pass on that increased tax cost to their tennants. I know that my own most recent three rent hikes to my tennants were just about exactly the increase in property tax – rents went up, but I didn’t profit any. The increases were obnoxious and disliked, but they didn’t make them move either. It is not property taxes that are forcing people out – it is the insane housing inflation. If you have impounds, take a look at your escrow analysis, you’re likely to find your monthly PMI (if you have it) or homeowner’s insurance, are at least as large a component of your montly mortgage payment as the city taxes. Not that taxes dont’ hurt, but they aren’t what’s driving the insane housing inflation – that’s the result of growth in our metro area, the desireability of living here, the terrible traffic and commutes, and the cheap money bubble from low mortgage rates.

    Moreover, the terrible transportation planning in the Cville/Alb. area is largely responsible for the huge increase in demand close in. Nobody wants that commute down 29N where developers have had a free hand to throw up subdivision after subdivision, on the cheap.

    Presumeably you think being a libertarian is nothing more than unrestricted ‘property rights’ and zero taxation – you’re wrong. That is not libertarian, that’s real estate developer/sales agent. Cvility has it nailed, dead on.

    Everyone Else: I disagree that city assessments are low. Both of my homes in the city have more than doubled in assessed value in the past five years. Yes, the market was quite hot, and houses were selling over asking price. But, in the past year, things have cooled considerably. At least two homes have been on the market in my neighborhood for over six months and haven’t moved. Their asking price is in line with the assessments we just got – they aren’t moving at that price – that means the assessments aren’t undervalued. The 10% business is a thing of the past, and has been for several years.

    The city used to engage in that type of tax relief – lowball assessments, with a high rate – and it resulted in long term problems because assessments and values got way out of kilter. As several noted, it just postpones the pain. More to the point, budget cuts to localities have sent them scrambling for extra cash. This is their way of getting it. Now they’ve got tax relief programs for the most sympathetic constituencies. And, they did make a token rate reduction. The appropriate place to raise questions about how much of a tax burden the city places on residents is during the budget process.

    I don’t know if I’m going to fight it or not – I’m going to check all sales data for my neighborhood and some other comparable assessments first. I am not in the slightest concerned I’ll come back with a higher assessment – the county may still be lowballing, but the city is not.

    I do not support the idea of a consumption tax – these are fundamentally regressive. The city has pretty well maxed out on the restaurant tax – they will start driving those businesses out of the city, and those seem to be about the only kind of business the city does well at creating/attracting.

    Property taxes are somewhat progressive – at least, they require those who can afford to pay for a more expensive property (whether a car or home) to pay higher taxes. What you’re really arguing for is a situation where people all pay more or less the same, regardless of their economic position/status. Wealthy single individuals can have very low transaction costs, where a poor family can have much higher transaction costs. Should the poorer family pay more? Talk about a scheme to drive “ordinary families” out of the city.

    I do not like property taxes very much, because, to some degree, they do impose a difficult burden on the elderly or disabled on fixed income – but those folks are eligible for tax relief. And, BTW, they are not a tax on unearned profits – they are a service fee for city services – you are taxed on capital gains when you sell. The state also taxes the transaction. A progressive income tax would do a better job of hitting folks for a fair share based on ability to pay (which is basically founded on the benefits the taxpayer is getting out of the business/work environment they have here), but, I am much happier with a property tax than an income tax.

    The major city budget cost is for the schools, and the schools are for residents of the city, whether renters or owners, and those residents can pay for the schools either directly in taxes, or in the taxes their landlord pays from their rent. Seems about right.

  12. Madman – I didn’t say that the increased assessments decreased the supply – you clearly have a very poor grasp of either economics or the local housing inventory. The reason that the rental market won’t bear the tax increases is precisely because the student housing supply has increased DRAMATICALLY. I said the economics no longer favor single-family housing (low density) being used as high-density housing (4-8 kids per house, regardless of the local ordinance against >3 unrelated persons in a single property).

  13. As something of an aside, I’ve been researching property assessments and property sales in the City and it’s interesting to note that the data seems to indicate (rather clearly, actually) that owners of more expensive properties are generally assessed at a significantly lower rate-to-value than owners of less expensive properties. Where a $400,000 home may only be assessed at 75% of its market value, for example, a $150,000 home may be assessed at 95% of its market value. In other words, lower- and moderate-income homeowners seem to be paying a higher rate of taxation than higher-income homeowners. At least in its implementation, therefore, our real estate property tax would hardly qualify as a “progressive” tax. This is something we’ve got to address.

  14. Dave – good info! I had no idea!

    It’s anecdotal and personal (therefore not necessarily statistically valid), but I do have two properties in the >$400k range, and I have my assessments at >95%, based on comparables.

    I’m guessing this is a side effect of the higher turnover and activity in the ‘hotter’ neighborhoods (I’m thinking of the latest Belmont ‘renaissance’ and similar activity/change in Fifeville). Seems to me that the city and developers have managed to successfully pull off some infill/redevelopment precisely because of the runup in values for older properties close in where more of the “affordable” stock was less expensive (and therefore in reach of more buyers). The annual change in areas like Rugby Hills or Blue Ridge Rd. is probably slower, in part because those properties don’t have as much turnover, so increases lag. What is your impression?

    I am in a neighborhood with pretty strong housing stock turnover – this may explain my issues.

    I agree: this is a really offensive distortion of assessments and taxation – not unlike the problems with Dividends, Capitial Gains and itemized deductions in the Federal Income tax – a regressive shift of the tax burden.

    I personally feel the assessor’s office has been very aggressive for the past 5 or 6 years, as a direct result of the need to replace state and federal budget subsidies that have dried up, even as localities are forced to address the much ballyhooed “post 9-11” world.

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