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Soaring Home Sales Leave Revaluation Questions

Soaring Home Sales Leave Revaluation Questions

Source: Julie Martin Banks, CT News Junkie

With urbanites relocating in Connecticut due to COVID-19, home sales have soared, leaving residents in the 34 towns and cities going through revaluation wondering how property values will impact their taxes. 

Meanwhile, the state’s largest nonpartisan group of municipal leaders is also focusing on revaluation, specifically whether conducting these assessments on a regional basis, as opposed to town by town, would be more equitable and cost-effective. 

According to data from William Pitt Sotheby’s International Realty, Connecticut home sales ballooned 18% in 2020 compared with 2019, with a 58% increase in sales of homes in the $400,000 range. The company’s 2021 second-quarter report showed that this trend isn’t yet slowing.

“For the month of June both the number of unit closings and the number of properties under contract started to drift behind last June’s enormous numbers, which may signal the trend we’ll see moving forward,” according to the report’s intro written by Paul E. Breunich, the company’s president and CEO. “Yet if we are consistent with or a little behind last year’s third quarter, while remaining substantially above that time in 2019, we will remain on exceptionally strong footing. For now, the market is far ahead of last year—both year to date and quarter over quarter.” 

Revaluations, conducted in each municipality every 5 years, are meant to eliminate any inequities created since the previous revaluation, officials say. If a property changes in assessed value, the property taxes levied on it often change. Revaluation is intended to allocate the community’s tax burden based on the value of the property. 

In addition to the 34 municipalities that will be undergoing scheduled revaluation this year, Greenwich and Trumbull will be conducting theirs, which were delayed from 2020 due to COVID-19.

Assessments in Connecticut reflect 70% of market value, and for those undergoing a 2021 revaluation, the first tax bills will be due in July 2022. Residents will have the opportunity to appeal their assessments after the notices are sent out in November. 

In Meriden, the volume of sales and many home values have increased, according to Assessor Melinda Fonda. 

Houses are in the range of $160,000 – $350,000 are tending to sell within 30 days, according to her office. For example, a 1,950 square-foot home with three bedrooms and 1.5 baths, built in 1925, sold for $217,000 in 2019, and again this year for $239,000, an 11% percent increase. Meriden valued the property at $189,700 in its 2015 valuation. 

While higher assessments don’t necessarily mean higher taxes, residents might see tax increases as the value of retail properties has declined due to the pandemic. The office market has also taken a hit with more employees working from home. 

“This just means that relatively speaking homeowners will end up paying more and businesses less, at least those businesses that got hurt in the pandemic,” says Dr. Steven P. Lanza, associate professor of Economics at UConn’s Waterbury campus. 

Thomas DeNoto, president of the Connecticut Association of Assessing Officers, said the booming housing market does not necessarily mean that residents’ taxes will go up.

What it comes down to, he said, is each municipality needs revenue to run its schools, public safety and other departments.

In June, New Britain’s Common Council adopted a city budget for 2021-2022 that brings the tax rate down by 2% on personal property, real estate and motor vehicles. Media reports say the decrease was made possible by funding from the state as well as flat funding for the school budget.  

The Connecticut Conference of Municipalities, whose membership includes 168 out of the state’s 169 towns and cities, is putting the finishing touches on a report from a cost containment/shared services study prepared by the Collins Center for Public Management at the University of Massachusetts. 

CCM often has argued that Connecticut relies too heavily on property taxes: property tax revenue as a percentage of total local tax revenue is 98.5% compared to the national average of 72%.

CCM Executive Director Joe DeLong said the final report will recommend conducting revaluations by councils of governments instead of individual communities, the results of which would be a more equitable process. 

“At the end of the day, nobody likes to have to pay exorbitant property taxes that hold back growth,” DeLong said, adding that the report will also explore ways to replace the motor vehicle tax with alternate sources of revenue. 

While there could be a cost benefit to the regional approach, DeNoto, who is also Bristol’s assessor, said each assessor has specific needs for consultants to analyze certain areas in the revaluation depending on the residential or commercial activity going on there. 

Bristol is a member of the Naugatuck Valley Council of Governments, which includes 19 towns and cities, including Waterbury, Seymour, Derby, Southbury and Cheshire. “There are a lot of structural differences within the neighborhood and commercial corridors,” DeNoto said. 

With the current system, DeNoto said residents should be assured that a great deal of research is done to make sure assessments are accurate. “We don’t take it lightly,” he said. “We are not just pinning a tail on the proverbial donkey.” 

Meriden Assessor Fonda said residents can be actively involved in the process. 

“It is important for property owners to review their property record card and I encourage them to participate in the informal hearings in the fall of 2021,” Fonda said. “The informal hearing is a great way for the property owner to become more knowledgeable about their assessment and the process.”

In the meantime, Lanza said effects of the pandemic on business remain to be seen. While businesses like restaurants will have the opportunity to rebound as things move toward business as usual, businesses’ use of office space may be changed going forward. 

“The pandemic can have lasting effects on the way we do business to the extent that employers find that they don’t need to have the same kind of office staff on the premises that they did before,” Lanza said. 

And that is something that may continue to fuel home sales. 

“I think the surge of renewed interest in Connecticut as a place to live may be more sustained and if that is the case, the property values that have gone up might stay up,” Lanza said.

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