As home values fall, property tax revolt brews

In many cities across the US, homeowners are filing record numbers of assessment appeals, wanting their property taxes to reflect their shrinking value of their houses.

Patrik Jonsson/The Christian Science Monitor
Sunken dream: Jacquay Waller, an IT specialist in Atlanta, estimates that his house – currently assessed by the county at $380,000 – is actually worth about $250,000.
Patrik Jonsson/The Christian Science Monitor
Line up: Gene Burleson (c.) waits in line at the Fulton County tax office to appeal the county's assessment value of his house. As home values fall, assessment appeals at county tax offices are increasing.

Homeowners watching the value of their houses slowly ebb are storming tax offices from Ann Arbor, Mich., to Atlanta, demanding that county officials reassess their homes and lower their property taxes.

It is a question of fairness, says Gene Burleson of Atlanta, who stood in line April 1 to appeal his assessment. His house has lost 25 percent of its value since it was last assessed, he adds: “I’m just trying to insulate myself from coming tax increases."

Property taxes have become a rallying point for disgruntled Americans because, unlike sales or income taxes, they can be challenged directly by individual citizens: Some 40 percent of assessment appeals are successful. Yet the movement threatens already stressed counties, putting the tax receipts that pays for schools and police at risk.

“The property tax is the only tax where [a citizen] can go in and eyeball the guy,” says Billy Cook, executive director of the Institute for Professionals in Taxation in Atlanta, noting that appeals often lead to small-claims-style hearings to press one’s case against the county’s tax valuation.

“Think of all the taxes in the US: The taxpayer renders their returns and the government audits to make sure you do it right,” adds Mr. Cook. “The only tax where the taxpayer audits the government is the property tax.”

In many areas across the US, home values have dropped so rapidly that assessors have not been able to keep up. Even as their home values depreciate, homeowners are likely to see increases in their tax rates, because appraisals sometimes have been done years earlier.

“You have a lot of things coming together right now” resulting in the rush on tax assessors’ offices, says Joan Youngman of the Lincoln Institute of Land Policy in Cambridge, Mass. “You have homeowners knowing that the value has dropped. You have rapid shifts in the market. And on top of that, it’s harder for assessors.… It’s more likely that there’ll be inaccuracies now than when everything is stable."

Assessment appeals are up in cities nationwide:

- In metro Atlanta, more than 50,000 people – a 10-fold increase over last year – filed appeals ahead of the April 1 tax deadline. The result was long lines of grumbling taxpayers. Little wonder: A survey released Tuesday said average home prices in Atlanta are down to 1996 levels.

- In Scio Township, Mich., record numbers of appeal-seekers flooded Town Hall recently to batter the Board of Equalization with questions and complaints.

- In Nevada’s Lyon County, appeals are up 30-fold. One reason: Unemployment is at 15 percent, the highest in the state.

Some assessors say the trend is being driven more by dramatic headlines than by real shifts in property values.

“I think there’s a genuine concern for what property values have done, but I think there’s also a reaction to national headlines that are reflective of markets in far worse condition than ours,” says Phil Hogsed, chief assessor of Georgia’s Cobb County, north of Atlanta.

Still, the onslaught highlights the delicate balance of property-tax assessments. While the tax assessor’s job is technically nonpolitical – they assess value, while politicians set the tax rate based on that value for their revenue needs – there’s constant pressure to keep valuations high to maximize revenue.

Assessments can be political, as a recent Supreme Court case in Nevada showed. The court ruled that dramatic differences in assessments in different counties bordering Lake Tahoe suggested that more than just the real value of the homes and properties was taken into account.

“Politicians … put pressure on the local assessor to keep that value as high as possible so they don’t have to raise the tax rate,” says Cook of the Institute for Professionals in Taxation.

Given what’s happening now, however, elected officials will be under increasing pressure to debate publicly the prospect of higher taxes to fund government, Cook says. Many states’ expenditures were growing by 10 percent a year before the recession began.

“If house prices are down 30 percent in any given market, then the property tax rate has got to go up ... or the government’s got to shrink by 30 percent – something’s got to give,” says John Baen, a real estate expert at the University of North Texas in Denton. “Any taxing authority taxing real estate is always [eager] to increase values based on a few select sales of some cherry-picked, high-priced properties … yet on the way down they’re slow to react.”

Atlanta IT specialist Jacquay Waller stood in line this week at the Fulton County government complex. He bought his house in the Sandtown neighborhood for $350,000 two years ago. The county assessed it at $380,000. If he were to sell it today, Mr. Waller doesn’t think he’d get more than $250,000, based on comparable sales in the neighborhood.

“I just don’t believe the assessment,” says Waller. “I just don’t want to pay more in taxes on an amount that I could never sell it for.”

In good times, few people worried about their assessments and even saw high valuations as a good omen for their properties. Now, especially for those homeowners who bought at the height of the market, those values are a burden.

“People who bought in recent times at the highest prices are the ones whose values have fallen tremendously,” says Tom Richardson, a tax attorney in Ann Arbor, Mich., which has seen a record number of tax appeals this year. “It’s the people who have taken the worst hit who are now at risk.

Along with looming tax increases, those shaky valuations are forcing a secondary standoff between government and the people, says Sharron Angle, a former Nevada assemblywoman: “When people don’t feel like they can spend money because the government is going to tax them, and [homeowners] need money to forestall whatever attack the government is going to make on their pocketbook, it pits the government against the people and stagnates the economy.”

The National Taxpayer Union, an antitax lobbying group in Washington, claims that as many as 60 percent of homes in the US are overassessed. For the 722,000 homes in New Jersey that are potentially overassessed, average savings on the tax bill could equal nearly $2,000, according to the website

“It’s a muddled situation out there with what is a house’s true value right now,” says Verenda Smith, a spokeswoman for the Federation of Tax Administrators in Washington. “Everything is just an educated guess.”

“The standard wisdom is that homeowners win on the upside and lose on the downside and over time that evens out,” she says. “But they don’t want to hear that it evens out when they’re worried about their job and their house value.”

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