Atlanta Keeps Property Taxes Up, Poor Neighborhoods Down
The problem lies with how states and local officials compute property taxes. They do it without taking the effect of foreclosures on home values into account -- leading to tax bills that can quickly exceed a house's value.
What's really painful, though, is that the neighborhoods in the study suffered a whiplash of investment and abandonment not so long ago. I know, because I helped make it happen.First, the study. The Atlanta Neighborhood Development Partnership (ANDP), an non-profit outfit with a board of directors as weighty as its name, makes grants and loans to promote housing in low-income neighborhoods. It found in 2009 that assessors were valuing houses in its target neighborhoods as if the subprime crash had never happened.
CEO John O'Callaghan told me that, while trying to budget a construction project, the partnership found that a house's annual property taxes would cost nearly $2,000 in a neighborhood where some houses are selling for just $25,000. So it hired Robert Charles Lesser, a respected assessment firm, to see what was out of whack.
The Lesser study pulled data from the FMLS, a multiple listing service, which the report says eliminated any artificially low sales figures from deals between friends or courthouse-steps auctions. In one ZIP code, it found, median property sales values were 79 percent lower than median tax values. Today, a sequel report came out. After a year of advocacy and some progressive legislation (as well as coverage by the Atlanta Journal-Constitution) , assessors have managed to bring tax calculations closer to reality -- but not fast enough.
"The 15 zip codes with the highest foreclosure rates saw an average decline in appraised value of 10 percent, compared to an overall average decline of 7 percent for the five-county area," said the report. But those 15 ZIP codes still contribute 41 percent of the region's tax overpayment.
The ANDP, said O'Callaghan, is trying to promote a law that would give buyers more time to appeal their assessments. This would follow last year's passage of a law requiring county assessors to consider "foreclosure impacts" in tax valuations.
There's something broader worth thinking about here. Foreclosures affect the value of paid-up homes because a house's price reflects the safety and coherence of its neighborhood. In the mid-1990s, I worked at ANDP, helping raise money for housing construction in poor neighborhoods near intown Olympic venues. In some cases, nonprofits were working smartly in these neighborhoods to bring well-managed housing and retail. In other cases, money was moving in faster than expertise. The neighborhoods are still poor.
In the late 2000s, money rushed back into these neighborhoods again in the form of subprime loans. There's a lesson to learn here: money to build great urban neighborhoods should come in small increments, with lots of due diligence, and lots of work to make sure that houses and commercial and educational uses grow in sync.
But as the study shows, nobody has figured that out yet -- which may be the most taxing problem these neighborhoods face.