Affordable Housing in CT

Last week I talked about property taxes in West Hartford making housing unaffordable for some folks. This week it seems that we might want to look at affordable housing in CT in general. The Courant ran an interesting article a few days ago…

A Home They Can Buy…

Here’s a link to the official HOMEConnecticut site if you’d like to learn more…

HOMEConnecticut

Personally, when I moved here 3 years ago, I was surprised at how affordable housing actually was compared to other areas where I previously lived; Vermont, Boston and the DC area. However, I also live in Hartford, a town that often gets overlooked during home searches. I believe there are good buys out there if people are willing to keep an open mind.

West Hartford Taxes

This past Thursday evening I attended the Town Council budget hearing at town hall. The hot topic was the recent property revaluation and new mill rate. It was well attended, I would say over 60 people showed up, even though it was Holy Thursday and Passover.

By my observation, the majority of people were long time West Hartford residents, living in the town anywhere from 25-50 years. Several of the residents that spoke were from multi-generational families of WH. You could sense their great pride for the town, however there was an overwhelming sense of disgust due to the potentially huge increases most are facing with their new tax bills. Many of the attendees were either retired or nearing retirement. It’s not clear to them how they will be able to continue living in WH on fixed incomes. Younger attendees expressed frustration that they were getting priced out of the town because housing prices and tax rates continue to rise. Their jobs simply aren’t paying enough for them to afford living in WH.

Most of the suggestions for reducing the budget revolved around minimizing pay and fringe benefit increases for town employees. Additionally, there were requests to lower the school budget, but no real concrete solutions on how to actually reduce the education budget. Clearly, one of the main draws to WH is it’s school system. It’s a double edge sword to make significant cuts to the school budget, but then continue to expect curriculum, after school activities, and special programs to remain robust.

My belief of what will happen in the next 1-2 years is that WH will see a migration of its Seniors to neighboring communities such as Bloomfield, Farmington, Avon, and Simsbury. These towns have lower taxes, but many of the same services, so Seniors will flock there. House prices in WH will most likely fall because there will be more houses on the market than there will be buyers. Younger buyers that typically would have bought the houses in WH will no longer be able to afford them because of the high tax burden. WH will need to make a decision on if they change the way they tax commercial properties in town. Will Blue Back Square be able to shoulder more of the burden? Will there be enough residents to economically support Blue Back?

The next few years will be an interesting economic experiment for WH. What are your thoughts?

Your Neighborhood Tax Man

Today on CNN Money there is a piece about tax (un)friendly places … Tax Friendly States.

The primary result for us Nutmeggers is that we have one of the highest state and local tax burdens in the country at 12.2%. Connecticut ranks 8th in the Bureau of Economic Analysis’ report that ranks State and Local Tax Burden as a percentage of income. Vermont pays the most at 14.1%, while Alaska pays the least at 6.6%.

Since CT has the highest per capital income in the country, and our percentage paid is 8th, on a dollar basis we are paying the most in the whole country. Now there’s a victory to get excited about; UConn couldn’t get it done, but the tax man can. Go Connecticut!

Once we pile on the Federal income taxes, social security and Medicare our tax picture becomes downright depressing.

Perhaps there is a glimmer of hope. Most people don’t want to move from CT to Alaska, so our best option may be to head north to New Hampshire where they sport the second lowest burden at 8.0%. Or we could follow Killington, Vermont’s lead and try to secede from the state to join NH.

How Long Should I Stay Put?

You bought a house 2 years ago and now you’re getting the itch to move. Maybe you’ve outgrown the space, would like a different neighborhood, or want a closer commute. You’ve started going to Open Houses on Sunday, feeling out the market. This is what one of my colleagues refers to as the “Torture Tour.” Maybe you’ll find something and want to put in an offer. But what is your current house worth? Will you have enough equity to cover the costs of the sale and still make a profit so you can buy the next house?

Unfortunately, most likely not, unless you are looking to downsize or move to a community with lower home prices. Typically you need at least 3 or 4 years in your current home to realize enough market value appreciation to cover the sale costs such as agent commissions, conveyance taxes, and attorney fees. In today’s market where home prices have leveled off, this is especially true. If you bought a home and put in quite a bit of sweat equity, you may be able to eek out a profit.

If you find yourself in a position where you’ve only owned for a year or two and want to move, call a Realtor and have a Comparative Market Analysis done on your home before you start the “Torture Tour.” This will allow you to understand if you’ll clear the sale with a profit. The Realtor should provide you with an Estimated Net Equity sheet. This will show you if the estimated sales price will cover all of the costs (mortgage payoff, agent commissions, state and local conveyance tax, attorney fees, deed recording fees, paperwork costs, etc.). From there you can determine if you want to sit tight or can start to look.