More Than Their Share: Property Taxes in Atlanta Neighborhoods Hardest Hit by Foreclosures: As the Foreclosure Crisis Continues to Decimate Neighborhoods across the Country, It Leaves in Its Wake Displaced Families, Vacant Homes and the Potential for Inflated Property Taxes
Adams, Susan, Partners in Community and Economic Development
Property taxes that fail to reflect sinking market values create an unfair burden on residents of high-foreclosure neighborhoods. Atlanta Neighborhood Development Partnership (ANDP), a housing nonprofit that for 18 years has focused on development, lending and public policy to support mixed-income communities, has identified the need to address property tax disparities as a critical part of a comprehensive regional foreclosure response strategy.
"Distressed neighborhoods will not begin to stabilize and come out of this crisis until vacant homes are occupied again," said John O'Callaghan, president and CEO of ANDP. "When property taxes are out of line with true market values, it not only hurts families struggling to keep their homes, it deters future buyers from moving into the neighborhood--leaving homes empty and values depressed. This is both an equity issue, ensuring that impacted homeowners do not pay more than their share, and a neighborhood recovery issue."
What accounts for inflated property taxes in high-foreclosure communities? Until very recently, tax assessors in Georgia and many other states did not consider foreclosed and bank-owned home sales in their property valuation assessment formulas, which include a review of recent comparable sales. As a matter of standard practice, foreclosed and bank-owned sales were considered "invalid" or outlying sales and not representative of the market as a whole.
However, the real estate market in Georgia and metro Atlanta has changed dramatically over the last two years. Georgia ranked eighth in the nation in foreclosure filings in 2008. Last year, there were more than 85,000 foreclosure filings in the state--44 percent more than in 2007 and a 117 percent more than in 2006. Metro Atlanta accounts for 81 percent of Georgia's foreclosures. In fact, Atlanta ranks third nationally (behind only Las Vegas and Detroit) in the number of vacant rental units and single family homes, according to U.S. Census Bureau statistics.
ANDP first developed experience in the impact of property tax issues on lower-income families in 2008, when the organization led a successful effort to double the Homestead Exemption for the City of Atlanta and Fulton County. Through its "Keep Atlantans Home" campaign, ANDP found legislative sponsors in the Georgia General Assembly; researched best practices on Homestead Exemptions; built a broad network of support within and beyond the affordable housing community; and generated hundreds of calls and emails to legislators.
At the close of the 2008 General Assembly session, legislators voted to increase the Atlanta-Fulton Homestead Exemption from $15,000 to $30,000 over three years. (It had not been updated since 19930 Voters overwhelmingly approved the measure on the November ballot, resulting in an estimated $23 million annually in property tax savings for low- and moderate-income homeowners.
"We knew from our Homestead efforts and experience in development that higher property taxes were a serious obstacle for lower-income neighborhoods," said Sharon Gay, ANDP's Board Chair. "As we retooled ANDP to focus all of our attention and resources on foreclosure response, we directed our policy efforts to address the impact of the crisis on property taxes."
Research shows highest-foreclosure areas run greatest overpayment risk
To understand and quantify the risk for overpayment of property taxes in Atlanta's highest-foreclosure neighborhoods, ANDP hired Robert Charles Lesser and Company (RCLCO), a national real estate advisory firm, to compare home sale prices and tax-appraised values in the five-county core of metro Atlanta (Clayton, Cobb, DeKalb, Fulton and Gwinnett Counties). The scope of RCLCO's review included the 15 ZIP codes across the metro core with the highest foreclosure filing rates.
The initial report from RCLCO, which included home sales from the first six months of 2008, found that the 15 highest-foreclosure ZIP codes would account for an estimated $71. …