Greater Hartford Real Estate Blog

Property taxes are a sensitive subject in Greater Hartford. Just about every year there is a budget referendum in at least one local town as angry residents fight yet another property tax increase. The debate in some towns is more heated than in others (but we won’t mention any names).

You may be happy to know that rising property taxes are a hot topic in other cities and states as well. An editorial in this weekend’s Wall Street Journal highlights a number of areas that are experiencing increasing taxes at the same time as they see falling home prices. In Arizona, where there is a state property tax, property values have fallen 17% on average in the past year. But taxes are on the rise. Ouch!

Unfortunately the root cause of property tax tension throughout the US is likely to get worse. The economics of running a town are deteriorating. Let’s consider the revenue and expenses separately.

Nearly all of town revenue comes from property taxes. Although real estate has historically been an appreciating asset, that is perhaps not the case today. Let’s assume that property values have stagnated. Therefore town revenue has also stagnated.

Expenses, on the other hand, are rising even more quickly than their historical rates. Education (much of a town’s budget) is rising at 2.5x general inflation, healthcare (another significant piece) is rising at 2.0x general inflation. We all know about energy prices, which impact many of the services the town provides (police, fire, trash pickup, snow plowing, heating city buildings, …).

Revenue is stagnant while expenses are accelerating. We all better sharpen our pitchforks and ready our torches because in the current global economic environment, this dynamic looks like it will only get worse.  Other than protest, is there anything we could or should do?  Or should we just ride it out?  This is shaping up to be a big problem throughout the country.

There is an interesting article in the New York Times today about a buyer in California that is suing her buyer’s agent. Marty Ummel believes that her real estate agent hid information that similar homes in a neighborhood were selling for less, in order to keep a deal together and retain his commission.

There are a lot of things at play here; the real estate agent was also the mortgage broker (which to me seems to be a clear conflict of interest), each party has an appraisal stating a different amount for the time period when the home was purchased, there is no clear agreement if agents should provide price recommendations to a buyer.

The National Association of Realtors says it has no cases that revolve solely on valuation. It will be interesting to see where this case leads and the precedent that will be set. What happens if Realtors are no longer allowed to provide price guidance? How will this affect price recommendations for sellers? Will they need to hire appraisers?

New England’s “Rising Star” has several initiatives underway to promote economic growth and increase home ownership. I’ll be writing about some of these projects and programs in future posts. In the meantime, I came across an interesting article on the Wall Street Journal Online that talks about a very different strategy, purposely planning to shrink a city.

According to the article, Youngstown, Ohio has seen its population decline by 60% over the last fifty years. Heavily focused on the steel industry, Youngstown saw most of its steel mills close during the industry downturn in the 1980s. Tens of thousands of jobs left with the mill closures. Since then, Youngstown has been plagued with blight and abandonment. Over a thousand homes, businesses, schools, and other structures have simply been abandoned. In order for Youngstown to survive, the city planner and other city officials came up with a unique and controversial plan to shrink the tax base by razing empty structures in order to create more green space, reducing infrastructure and services accordingly.

I found this article refreshing. So many times we see cities trying to fight economic cycles with a short term view and rose colored glasses. It is impossible for every US city to grow at the same rate, yet we see declining cities continue to push for growth when it may not be the financially responsible thing to do. Just like a business, a city must reevaluate its strategic plan when faced with new economic challenges. Continuing to do the same thing and expect different results is foolish and naive. Transforming from a struggling larger city to a thriving smaller town should be viewed as a responsible way of using taxpayer dollars and safe guarding for future generations.