Taxes Reassessed in Housing Slump as Prices Decline

LOS ANGELES — Home owners across the nation are looking to county governments to reassess the values of their homes in the face of flattening and falling prices that have befallen scores of markets. Downward assessments, done at the request of homeowners or pre-emptively by government, appear to be most pronounced in areas where the housing market was exploding just a few years ago, or where economic conditions are poorest.

In Maricopa County, the largest in Arizona, a “large percentage” of the one million single-family home owners will see their houses reassessed at lower rates in February, said Keith Russell, the county assessor. In Phoenix, the largest city in the county, housing prices fell 8.8 percent over the last year, according to the S&P/Case-Shiller index, which monitors the residential housing market.

Among the roughly 200,000 parcels in Lucas County, Ohio, 7,083 owners requested reassessments in 2007, about 10 times the yearly average, said Anita Lopez, the assessor, who ran for office on a campaign to adjust assessments.

“Citizens know the market is slow if not declining,” Ms. Lopez said, “and they are informed and feel comfortable in challenging their county values. People here can’t sell their homes, they have less money, and they don’t understand why the government is asking for more money in a declining housing market.”

Local governments, which rely heavily on property taxes, will have to find ways to replace lost revenue or face having to cut services, lay off staff members or delay projects. The possibility of those losses has alarmed officials in areas already facing large numbers of foreclosures and slumping sales, products, in part, of the mortgage credit crisis that has rippled through the country. [Sunday Business.]

“Government has been the beneficiary of increasing home prices,” said Relmond Van Daniker, the executive director of the Association of Government Accountants. “And now they are on the other side of that, and they will have to reduce expenses.”

While every state and local government has its own methods for assessing home values for tax purposes — some do it annually, some every five years, and everything in between — many counties are hearing from residents that they would like their homes reassessed, or have taken steps to bring the taxes down of their own volition.

While in some areas, a county or city is required to make whole any loss in revenues to schools, public education is a frequent beneficiary of property tax revenues. “They are obviously concerned,” Ms. Lopez said about her county’s school systems.

No one has aggregated the total number of counties reassessing home values, and many counties take at least a year to catch up to the marketplace. In some places where reassessments are rising, the numbers have yet to approach historical heights.

For example, in 2007 roughly 1,800 homeowners asked for reassessments in Los Angeles County, far above the average of about 500, yet far below the tens of thousands of homeowners in Los Angeles who looked for tax adjustments during some years of the downturn in the 1990s. But elected officials and property tax experts said that the numbers were notable and that they expected them to grow in 2008.

In San Bernardino County near Los Angeles, tens of thousands of owners of the 860,000 homes will have their assessments lowered in the coming year, said Bill Postmus, the assessor, rivaling the numbers during the California real estate crash of the 1990s.

“You should see more of this activity,” said Chris Hoene, director of policy and research at the National League of Cities. “It is mostly in areas most likely to be seeing some decline, like Southern California, Florida, and big cities in the Midwest,” rapid growth areas that are now seeing the other side of the curve.

The United States Conference of Mayors recently released a report showing that the value of taxable residential land had declined by $2.9 billion in California from 2005 to 2008 based on current tax rates, and by hundreds of millions of dollars in other major cities. “We are hearing a lot about this housing market change and its effect on city revenues every day,” Mr. Hoene said

Cities where home values have fallen the most are the obvious first place to look for residents clamoring for reassessments, but that is not always the case. Some states, like California, Michigan and Nevada, have statutory caps in property tax increases, which mean the market value of single family homes almost always exceeds the assessed tax values, except in a major downturn.

However, even in California, if a home buyer made his purchase during a market top in the last several years, he might be in the position of qualifying for lower assessed values. For instance, in Santa Clara County, where pricey Palo Alto and San Jose are located, 17,758 properties were reassessed downward for the 2007-2008 tax period, compared with the same period from 2000 to 2001, when the number was closer to 300.

“Obviously 2001 was the dot-com boom,” said Larry Stone, the Santa Clara assessor. “And the whole assessment role in my county was carried by a very hot residential market,” which has substantially cooled.

In his area, prices, and therefore values, remain strong in high end residential areas with great schools, Mr. Stone said. The coming reassessments are driven in large part in the lower and middle markets, especially the condo market, where the greatest part of the subprime lending problems have occurred.

Indeed, areas with high levels of foreclosures, vacant housing and a reduction in prices expect to see adjustments to the property taxes continue, which is bad news for local governments.

“Rising tax values are not usually a popular thing,” Mr. Hoene said , but homeowners tend to accept it, even begrudgingly, when they know the market value of their home is on the rise. “But the minute you think that your local government assessment practices are out of whack with what is happening in the market,” he said, “you will not accept it.”

Heat a casualty in foreclosures

Tenants in some foreclosed Boston apartment buildings are living without adequate heat because the new landlords - mortgage companies often based in other states - have not repaired broken systems or paid for the delivery of heating oil.

Karla Herrera, who gave birth to a daughter Wednesday, has lived without heat in her Roxbury apartment since November, when the system broke. "Sometimes, I turn on the oven for 20 minutes for heat," she said in Spanish, speaking through an interpreter.

Some foreclosed buildings also lack electricity, or hot water, or even running water, and the tenants may have no one to call: The new landlords often fail to provide tenants with a contact number, as required by Massachusetts law. And when landlords can be reached, the response is often so limited - half a tank of heating oil, for example - that the problems recur within a few days.

City officials say they have dealt with a dozen cases in the last two weeks of utility problems at foreclosed apartment buildings. Michael Kelley, acting administrator of the city's Rental Housing Resource Center, said the numbers are rising as foreclosures pile up and temperatures drop.

He said the city is searching for ways to compel companies to fulfill their responsibilities as landlords. The city also is trying to persuade the companies to improve voluntarily. "It is a sad state of affairs," he said, "that it takes a government agency to reach out to a responsible party to get some action."

At Boston Medical Center, a growing number of children who live in foreclosed buildings are being treated for problems related to a lack of heat, hot water, or electricity, according to the hospital's legal aid clinic, the Medical-Legal Partnership for Children.

One malnourished child was living in a building without running water, making it hard for the mother to mix formula. A child with sickle-cell anemia was treated for pain after temperature fluctuations in an unheated apartment caused the disease to flare up. The medical center's emergency room has treated children whose asthma inhalers cannot be recharged because their apartments have no electricity.

State law prevents utility companies from suspending service in the winter months if a tenant can prove financial hardship. Ellen Lawton, the legal aid clinic's executive director, said that isn't always enough. "The law on the books says they can't, but they do," she said. "And then who do you go to to get it turned back on?"

Massachusetts requires landlords to heat apartments to 68 degrees by day and 64 degrees at night. But on a recent 25-degree morning, Herrera's apartment was comfortable only with a winter coat. The thermostat was broken. When the heating system was engaged, the vents blew cold air into the living room.

Herrera's heating problems actually date to February, before the foreclosure. It is not uncommon for such problems to precede foreclosure, since landlords in financial trouble often allow their buildings to deteriorate.

more stories like thisIn August, Herrera received a letter from a representative of IndyMac Bank, a California company, informing her that it now owned the building. She wrote back to say that the gas stove wasn't working. That problem was fixed in early October. Shortly after Thanksgiving, however, the heat went off and the electricity stopped working in every room except the kitchen.

Herrera said she bought space heaters for her bedroom and her son's bedroom, both operating on extension cords run from the kitchen.

She is scheduled to return from the hospital tomorrow with her new baby girl and said she is resigned to the possibility that the heat still won't be working.

"At the beginning I was very upset but I see that in any case, with pressure or without pressure, things basically continue all the same," she said.

Contacted by the Globe, IndyMac said it was committed to fixing any problems.

"The last thing we want to do is have people living in the buildings we now own, freezing," said Grove Nichols, a company spokesman. "If it's our responsibility to provide heat to the building and to the occupant, then that's what we're going to do."

Mortgage companies say they are trying to make the best of a situation forced on them when the previous landlords defaulted on their loans. Most companies try to empty buildings quickly by paying tenants to leave, and evicting those who don't.

But legal aid attorneys can stall the process for months with procedural issues and counterclaims.

In late November, when the heat went off at Herrera's apartment, the company responded to one request for repairs with a note suggesting she should leave if she wasn't happy.

It also is common, according to legal aid attorneys, for companies to deliver a small amount of heating oil - 100 gallons, for example, into a tank that holds 250 gallons. When that runs out, the tenant must begin the entire process again.

Esme Caramello, a legal aid attorney with the WilmerHale Legal Services Center, who represents Herrera, said another client has lost heat four times this fall because the company did not provide sufficient oil. The mortgage company in that case, also IndyMac, has been operating under a court order to provide heat since mid-November.

The oil ran out on Dec. 6 and was not restored until Dec. 11, after Caramello returned to court. The heat went out again on Dec.16, and was not restored until Wednesday.

Once again, the tank was not filled. The oil is likely to run out around Christmas.

Heating is not the only problem. The walks outside Shareka Murdaugh's Roxbury apartment building have not been shoveled since the season's first snow. At more than nine months pregnant, Murdaugh can't do it.

All but one of the other tenants, a woman with a new baby, left after receiving $1,000 from New England Group, which represents the new landlord, GMAC Financial Services.

Murdaugh's reply to the offer: "Are you serious? Where do we have to go?"

The women say they started calling New England Group in early November to ask for heating oil.

On Nov. 30, the company arranged for the delivery of 100 gallons, they said. It lasted four days.

On Wednesday, after the intervention of City Life/La Vida Urbana, a tenant advocacy group, the company delivered another 100 gallons. But the radiator in Murdaugh's bedroom isn't working. She has covered her windows in plastic. Two space heaters are pointed at the bed. She uses them so continuously that one of the extension cords melted.

Michael Abbott of New England Group denied responsibility for heating the building.

He referred calls to a law firm, which referred calls to GMAC, which said there had been some miscommunication.

"We will go ahead and immediately take care of these things," said Stephen Dupont, a spokesman for GMAC. "We do everything we can to make sure that we're living up to our obligations."