Luxury Apts. Raise Values, Blood Pressure

East Rockers who live near State Street saw their property values shoot up. Those nearer to Whitney Avenue didn’t.

That’s because the impact of the city’s latest revaluation comes down to location, location, location —- and often how close you live to new luxury apartments.

Acting City Assessor Alex Pullen shared these additional insights and more with the Board of Alders Finance Committee Monday evening during a meeting in the Aldermanic Chamber at City Hall about the just-concluded, mid-decade property revaluation.

As reported earlier this month, the city’s 2016 grand list grew 8.42 percent over the 2015 list, and about 11 percent in the five years since the city’s last reassessment thanks in part to the explosion in market-rate housing construction. (Read more about that here and here.)

Pullen Monday night broke down those numbers by average and median changes in values in 31 mini-neighborhoods..

Five years ago, East Rockers were dealt a blow when the neighborhood’s property values rose while other neighborhoods saw theirs plummet, ultimately driving up property taxes for East Rock neighbors. That leap in taxes especially hit the high-income Prospect Hill section around St. Ronan and Prospect streets on the west end of East Rock, dubbed ​“East Rock West” in Pullen’s breakdown.

Now, an influx of luxury apartment buildings such as the Corsair Apartments in East Rock’s Goatville section means that on average the home values in East Rock East have gone up about 20.15 percent —while those in East Rock West have gone up a very modest 2.96 percent, less than the citywide 8.4 percent rise.

Some other highlights of Pullen’s presentation:

• Of the 31 residential mini- neighborhoods, about a quarter saw values slightly decrease.

• Of the others, only seven saw increases of 20 percent or higher. East Rock East just barely made the cut-off to enter the 20 percent-plus average increases club.

• The other neighborhoods that saw a significant percentage of their home values increase are: Fair Haven North and South, which have average value increases of 25.33 percent and 41.67 percent, respectively; Hill North and South at an average value increase of 56.54 percent and 31.71 percent; and Newhallville, which has an average value increase of 38.90 percent.

“This fits the trend of multi-family residences selling for higher prices this cycle than single family residences,” Pullen said. ​“Five of the seven neighborhoods are comprised primarily of multi-family residences.”

Pullen of course couldn’t say what those value increase meant for homeowners in the city when it comes to their next tax bill. The Board of Alders and the mayor set the next year’s mill rate when they approve a new budget in late spring, based on the newly expanded grand list. While generally home values increased for the city, the tax burden is being shifted toward commercial properties.

“Based on the data, we see a shift of the burden,” he told alders. ​“It look like the burden is going to shift slightly from residential and swing more toward commercial.”

Pullen said the gross residential property list shows a 7.4 percent increase, while commercial values show a 15 percent increase. ​“If you further stratify the data, condo values tend to be down slightly, single families on average are close to 7 percent and most multi-families on average is increasing by an even greater rate of 26 to 36 percent, depending on what kind.”

Some additional highlights:

• Neighborhoods that saw the biggest decreases in the average values of their property included Bella Vista (-8.03 percent), Lower Fair Haven (-5.00 percent), Brooklawn (-4.74 percent); and Upper Fair Haven (-2.57 percent).

• For the 2016 revaluation a new ​“neighborhood” — Lynwood Place, a one-block street sandwiched amid Elm Street and Edgewood Avenue between Park and Howe —had to be created because its residential property value increases were such an aberration from the patterns of neighborhoods like nearby Chapel West. A three-family property at 28 Lynwood Place, which was assessed at $113,000 in 2015 sold for $585,000 just a few months ago, while a two-family previously assessed in a similar value range at 340 Elm St. sold for $465,000.

• The amount of tax-exempt real estate in the city has continued to increase, up 31 percent over last year with an assessed value of nearly $7.9 billion. Pullen noted that the city will eventually be eligible for more state reimbursement through the Payment in Lieu of Taxes (PILOT) program.

• New businesses have opened 300 new personal property accounts in the city. But the personal property grand list continues to be driven by major employers in the city like United Illuminating, which remains the top taxpayer in the city, followed by Winstanley, FUSCO and Yale, growing it by nearly 3.4 percent. And though the city continues to push walking and alternative forms of transportation, the motor vehicle grand list also is up 4.82 percent.

Good News, Bad News

Pullen told alders that the good news is that the overall grand list has grown (potentially easing the citywide tax burden) and city property values are increasing. That’s likely good news for people looking to sell a home. It remains to be seen if that will be good news for those who want to stay in their home and not pay increased taxes. Pullen also pointed out that elderly homeowners who qualify for a state, or city program that freezes their tax bills pay might also find the news heartening because their taxes will remain the same while the value of their property increases.

New large-scale, luxury apartments also are winning, at least for now, because rents and occupancy rates are up. But for those developments that have taken advantage of five- and seven-year tax deferral plans the tax man cometh. Right now their taxes are frozen at their base assessment (what the property was worth before building began), but as their deferrals expire, what they contribute in taxes will increase.The city is anticipating about $13 million from the 2017 grand list and $70 million from the 2018 list when Alexion starts to phase out of deferral.

If there is any bad news, Pullen said, it could be for owners of smaller or older rental properties who might be forced to lower their rents to try to compete with the new luxury apartments. (That in turn could be good news for renters.)

“This class of property is valued on the sales and cost,” he said. ​“So the income produced by the unit may be decreasing, but the value would only reflect that if sales were showing the same trend. So, you may be renting your property out for less rent but if other people are buying properties of similar size and type because they think it’s a gold mine then it may cause your taxes to be higher than you want them to be.”

That was a sore point for East Rock Alder Anna Festa. She pointed out that her neighborhood has many elderly homeowners who live in mulitfamilies and depend on rental income from two or three units to stay there. Under current revaluation rules, only multi-family property with five or more are assessed partly by their potential as a profit-making venture; residences with fewer than five units are assessed in the same way that single-family homes are.

Festa said those people see the value of their homes going up, and subsequently their taxes, but are struggling to stay in their home and pay their tax bill because they can’t rent their now empty units. And because they’re not low-income they don’t qualify for the programs that freeze property taxes.

She suggested that some consideration should be given to those who are homeowners but also technically landlords.

Property owners still have until Friday to file an appeal of their assessments to the Board of Assessment Appeals.