Mandy Empire Buys Up The Block

A local mega-landlord continued buying the block on Sherman Avenue — leaving tenants wary about what comes next, and in some cases making plans to move as quickly as possible.

Wary about what comes next.This is what is coming Next

The Gift of Gab "The Gentrification Song" Official Music Video

https://youtu.be/ArwI4l8N4Mk


The Hackney Gentrification Song

https://youtu.be/i-F_SmhVzmk

How does Vision Appraisal get so far off target on so many of these large commercial rental properties? Every time I read about a commercial property sale it seems that the appraised value is much smaller than the actual sales prices. Here are just a few examples from NHI articles that caught my eye:

Building Appraised Sold for
123 Church 3,349,800 6,400,000 52.3%
297 George 3,228,300 5,000,000 64.6%
245 Whitney 1,300,000 2,310,000 56.3%
738 Whitney 623,000 950,000 65.6%
202-208 Sherman 863,800 1,650,000 52.4%
1245 Chapel 20,016,000 39,625,000 50.5%

The above were all sold in the last couple years with the 2017 appraisals. Most of the homes (single and multi-families) in my neighborhood seem to have appraisals that are much more in line with sales prices (appraisal usually 85% to 100% of recent sales prices).

I wish I had more time to do a more in-depth study but it seems these big commercial rental properties are paying way less in taxes (base on appraised value relative to actual sales price) than the average homeowners.

I mean if a building goes for $1,650,000 how is it only appraised at $863,800? How can the appraisal be THAT far off?

They want the land.
As far as Vision App. goes. Look at what they say your house is worth---and what you can sell it for.
Bite me in the neck.!!!!!

Opin1. This group doesn't care about appraised value. They often pay cash or private money mortgage. They pay over list price. It doesn't bode well for the City down the road. When they decide to leave new haven, they will leave eye sores behind.

opin1,

Properties typically appraised by one of three methods: construction cost, commercial value, or comparable sales. Typically, new construction projects are appraised roughly at their construction cost as derived from building permits. Commercial buildings are typically appraised at their commercial value, or a ratio of their income. Residential properties are usually appraised by comparable sales. Property appraisal is far from an exact science.

Often times developers and homebuilders will under-report the true cost of construction for building permits in order to pay less in building permit fees. Also not included in construction costs are marketing costs that might be associated with leasing up a building.

Commercial value can be difficult to ascertain. Sometimes, tax assessors will audit a building to find out it's true commercial value, but this is a time-consuming process that is not practical for every building.

Comparable sales is similarly flawed because each building is different, and houses especially become more different over time as alterations are made or not made, services and equipment are upgraded or not, and other factors in neighborhoods change.

As you've noted, New Haven appraises property values far below what they may sell for. This is not unique to New Haven. I suspect that during the next revaluation, the tax assessor will take into account recent sales history when determining the property value. Determining value can be difficult. Is a house only worth the cost of its physical materials? How much is high quality construction worth? Intricate trim and detailing?

As for Mandy, I'm less concerned with them buying multifamily apartment buildings and more concerned with them buying dwellings on individual residential properties throughout neighborhoods. New Haven's property is increasingly being owned by a small number of investors rather than individual homeowners. New Haven needs to be more worried about land dispossession.

Can the NHI clarify what it means for a landlord to "be released" from a lead abatement loan? Does that mean that the borrower paid it back or that the borrower was forgiven from paying it back? Is there any indication that the work was completed? Either way, why would the city forgive loans to a slumlord?

A few NETZ entities own a number of single family and small multi family houses in Hamden too according to Vision Appraisal records.

Jonathan, you're right that appraising property values is far from an exact science. But you would expect the differences between appraised values and sales prices to roughly balance themselves out for those properties that have not seen substantial investments in recent years. But, as Opin1 notes, it seems that most of the multifamily buildings covered in these stories have sales prices well above their appraised values.

The difference between appraised values and sales prices is a two-edged sword. If this is a widespread phenomenon, it could reduce the mill rate after the next revaluation. But taxes for properties such as 202-208 Sherman would go up substantially. No one has suggested that Mandy is a charitable organization; most if not all of any tax increase would be passed on to the tenants.

Tom, one of the commentators (1644?) on an earlier piece in this series suggested that a heat map would be a useful complement for your stories. Sounds like a great assignment for an intern!

@JH, I understand its not an exact science, and that there are different ways to come up with the appraised value. So I can understand some appraisals being off, and even off significantly. However, as Kevin M stated, you'd expect the the appraisals and sales prices to balance out the more properties you look at. If there's a pattern that large residential rental properties are consistently appraised lower (as a percent of sales price) than smaller (single to 3-family) homes, that is absolutely a problem.

I think you missed my point when you said, "As you've noted, New Haven appraises property values far below what they may sell for. " I was not noting those numbers as being representative of New Haven overall. My point was those larger buildings all seem to appraise far below single to 3-family homes (as % of sales). All those ones I mention appraised at 50% to 65% of their sales prices. Based on my experience looking at properties on vision appraisal I would estimate most single to 3-family houses appraise at 85 to 100% of their sales prices.

I just love the fact that an entity which owns over 300 properties (a business investment), pays the same tax rate that I do on my one humble abode.

What mechanisms might be available to avoid a near-monopoly (or oligopoly -- Mandy and Pike) of ownership of residential rental properties in this town?

It's a matter of scale. If you look at New Haven's recent market rate apartment buildings, for instance, they cost the developers roughly $200,000 per unit to construct. That is close to what the City is valuing these buildings at. However, because of the exorbitant rents that these buildings are getting, they are selling for far more than what they cost to build. These buildings are selling for closer to $300,000 per unit. That is not a tangible value tied to the actual cost of construction; that is the value that is bestowed upon the complex in the mind of the purchasers based on the rents the apartments are yielding.

In other words, because residents are way over paying for rent to be in a hip, cool apartment complex with private amenities, real estate investors are willing to pay top dollar for the building, which far exceeds the construction value of the building. In my opinion, this is unsustainable, and I wouldn't be surprised if within the next ten years some of New Haven's new apartment buildings go into foreclosure once tenants realize that their apartments are not worth the price they are paying for them.

So scale matters. The city's valuation (more closely related to construction cost) is going to be farther off from the market value (related to rental income) as the number of units in a building increases. So you would expect that the valuation of a three-unit building would be closer to its market value, while a 200-unit complex is farther from its market value by a lot. At least this is my understanding of the situation.

Gretchen,
I'm not sure I support each of the following measures in isolation, but here are a few strategies that might discourage absentee ownership of residential properties:

-Have the New Haven Fair Rent Committee exercise its power to institute rent control
-Strictly enforce the building code on absentee owners (though if enforcement unfairly targets certain owners, that could open the city up to lawsuits)
-Further restrict development rights in residential districts (downzoning)
-Expand individual homeownership opportunities, existing programs, and funding for outreach and education

I am potentially in favor of each of these initiatives if done correctly and in combination with a robust expansion of the city's accessory use and structure zoning provisions to allow homeowners to create accessory dwelling units on their property. In my ideal world, low-income families would become homeowners and cover their mortgage payments and property taxes by renting a unit on their property to market rate tenants. Whether accessory dwelling units can meet market rate housing demand and all low-income households are able to take on the responsibility of homeownership are open questions, but in light of the increasing transfer of New Haven's land to absentee real estate investment interests I think they are questions worth exploring.

JH

No governmental appendage of NHV could legally cap the rent that a private landlord charges. The city may be able to negotiate these kinds of things in exchange for something else but they can't blankly demand it of the private market.

robn,

Yes, you are correct. I overstated the New Haven Fair Rent Commission's authority. For some reason I had the idea that the Commission was authorized to cap rents, but I doubled checked and its limited to issuing rulings for individual cases and establishing escrow accounts for tenants in cases of landlord noncompliance with building codes. My mistake - thanks for catching it!

Gretchen et al

The single biggest thing that the city can do to slow the monopolization is that lower spending and lower taxes. As we continue to tax more people out of the city, the number of buyers for properties decreases and it becomes easy for one owners to gobble up a lot of property.

As far as how to get the city to slow its spending binge.....no idea

JH, using construction cost to determine appraised value doesn't make sense:

JH - despite my last post I usually think your comments are spot on and always appreciate your insight. I think your idea to loosen the restrictions to allow more accessory dwellings makes perfect sense.

opin1,
Allow me to clarify. Your questions will best be answers by the New Haven Tax Assessor Office or staff from Vision Appraisal. My comments regarding tax appraisals are my attempts to explain the discrepancies that you have noted. I do not mean to endorse any single method of property valuation, nor do I approve of the discrepancies that you've pointed out. I am merely trying to make sense of those discrepancies and present an explanation. I believe my interpretation is correct, but at the end of the day, it is just my opinion. I'm not exactly sure what can be done to rectify the situation.

As for valuations of older buildings in the city's neighborhoods, there are good reasons why houses west of Orange Street in East Rock are more expensive than house to the east of Orange Street. The houses to the west were built by and for relatively wealthy families, while the housing to the east was primarily for middle class households and laborers, so the houses are very different in terms of size, quality of construction and materials, and architectural features. Accounting for the discrepancies between Goatville and Newhallville is a little more complicated. Fundamentally, the two neighborhoods have nearly identical housing stock, yet their property values vary enormously. Some of the explanation has to do with location, schools, and investment. Many of the houses in Goatville have updated mechanical systems, renovated kitchens, and restored facades. Meanwhile, some properties in Newhallville have not been updated or renovated to the same extent. Again, it is much more complicated than this, but that is at least part of the explanation.

Following up on MyTwoCents above: Is there any precedent for a "progressive" property tax? A sliding tax rate based on a landlord's total portfolio of properties rather than something flat? That might dissuade huge land grabs like this while easing the burden on individual homeowners.

JH, I agree the price discrepancy between Goatville and Newhallville is only slightly due to things like updated mechanical systems and renovated kitchens. The main reason for the price difference is people are willing to pay more to live in ER or Wooster. As you point out, nearly identical housing stock yet values differ greatly. And the appraisals reflect the price differences. This supports the notion that the appraisals are based on sales prices, not construction costs. That's why I feel large apartment buildings also need to be assessed/appraised the same way, based on their market value. The building in this article sold for $1.65m, it shouldn't be appraised at $863k. 245 Whitney sold for $2.3m, it shouldn't be appraised for $1.3m. The Novella sold for $39.6m, it shouldn't be appraised for $20m. 123 Church sold for $6.4m, it shouldn't be appraised at $3.35m. These appraisals give a relative tax break to the large companies like Mandy and the Novella when you and I are taxed closer to what our homes sell for. Not sure why Vision Appraisal had them so far off but hopefully they get it corrected next time around.

OPIN1,

You just got my attention. The last time I remember having an argument about this subject was pertaining to 360 State when Bruce Becker was trying (successfully) to weasel his taxes down. My argument was that, lacking a comparable, the construction cost was a valid determinant of the market value. They've been allowed to weasel it down to $68M which is a pathetic $136,000 per unit, completely out of line with the construction cost of high rise and completely out of line even with the perceived value of brand new units lavished with amenities. City Hall has sold us down the river. Not only do these properties get 7 years+ phase in; when they're finally phased in, they're paying far less than people in buildings of lesser quality. Yet another reason (added to the large pile of union collusion) that the FBI should be crawling up the keister of this city government.

robn, add 360 to the list then. Appraised at $136k per unit - I agree that's bs. Novella sold for $40m and has 138 units ($289,000 per unit); and that building has smaller units and the construction is of lesser quality than 360.

I can buy using construction cost in the rare event there's no comparable sales or income data, as was the case when 360 was built (since it was the first modern apartment building constructed downtown in decades). But since then many more have been built, rents have been established, and there's even been some comparable sales.

Perhaps this is the windfall Mayor Harp is looking for. All she needs to do is have a re-assessment of all large commercial properties, have their appraisals bumped up to their actual values, and that should cover the budget deficit. Too bad only you and I are still reading this, and maybe JH, lol.