145 Dwight Apts Sold For $34.6M

34.6 million! Wow! Evidently the buyer didn’t see this “luxury” pile of toothpicks and fake decal bricks during its “construction”.
BTW there’s a bridge in Brooklyn I have for sale.

According to my rough count, about two-thirds of sales of large apartment buildings sold in the past year went for substantially (20%+) over their appraised value. Some have sold for twice the appraised value.

Appraising, particularly for properties such as these, necessarily involves making judgments that reasonable people can differ on. And the national boom in housing prices continued for months after revaluation. The Case-Schiller national home price index went up nearly 11% between October 2021 and August 2022 (latest data, prices were falling by that point). But if 360 State had been appraised at 89% of its sales price, it would have generated nearly $800,000 more per year in tax revenue, or reduced other taxpayer’s bills proportionately.

The under-valuation is limited to certain types of properties. In contrast, sales prices for one to four unit buildings has been much closer to their appraised values. For example, the package of small buildings that Mandy recently bought sold for 2% over their combined appraised value. FWIW, I think the appraised value of my home is reasonably close to its market value.

I do not believe the assessor acted improperly. But I think we need to have a conversation on how the city values large commercial properties.

Sven, over the past year many buyers have bought large multifamily buildings/complexes for a millions of dollars over their combined appraised values. These include new developments and decades-old properties. The older buildings include some we both would view as landmarks. They also include the buildings recently sold on Grand Ave., which have zoning permission to be converted to apartments. The buyers may all be mistaken. But I wouldn’t bet on it.

Hello Kevin, I have a question to you, 220 Stevenson road here shows a sale price of $510,000 and an appraised value of $310,000 - would you not agree it somehow contradicts your point of view of a specific issue with commercial properties, that's precisely 70%? Also, have you actually really ever appraised a commercial property? The capitalization rate determines the value based on the net income and in New Haven the taxes are almost half the expenses, so the change in tax has a dramatic impact on the value. Therefore, the value is based on the tax and not the other way around. When a tax case is litigated, the tax is then removed, and the cap rate + the tax burden are computed, and the value calculated. In other words, a buyer can buy a property based on its current value with current taxes, get reassessed on the citywide reval on the sale price, which would mean the tax will devalue the property, then go to court, and still get a reduction, because the judge would calculate what the value is with the tax burden (a legal term known as loaded cap rate) and not with the actual sale price. So even if you disagree with the city assessor Mr. Pullen (who I agree with 100%) - judges assigned by the state don't apply the law as literally as you would suggest. It's really a non issue.

Nelson, you confuse assessed and appraised values. In October 2021, the assessor set the appraised value of 220 Stevenson Road, a single family home, at $310,000. By law, the appraised value for such property is its fair market value (FMV). The assessed value is 70% of this amount.

In October 2022, Ms. Chang paid $510,000 for the property. Home values had risen somewhat in preceding 12 months, but nowhere this 65% jump. There is a presumption that fair market value is what a willing buyer pays for a property sold by a willing seller. The property’s FMV was certainly lower 12 months earlier, but not $200,000 lower.

And your statement that “the value is based on the tax and not the other way around” is wrong. Taxes, other operating costs, and many other things determine a property’s FMV. But, by law, property taxes = FMV x .70 x the Local Mill Rate. (The formula does not include tax deferrals or abatements and does not apply to farmland or other property in the 490 program.)

The income a commercial property generates is an important variable in determining its FMV. For small commercial properties, it is often sufficient. There is a reasonably solid relationship between the amount of income a three flat produces and its sales price. Recent sales prices for most small commercial properties have been close to their appraised values. As you would expect, sometimes the price has been higher, sometimes lower.

Buyers sometimes pay over fair market value. But recent sales of large commercial properties have consistently and substantially been over their appraised values.

I have no quarrel with your point that New Haven property taxes are a burden on small landlords. Several of my friends in this group. But the systematic under valuation of large commercial properties and of some higher value single family homes such 220 Stevenson is part of the reason their taxes are so high.

Judges may not apply the law literally. But the city needs to follow the law.

The state's 490 program is predicated on the fact that a property's fair market value can include a speculative component. The legislature created the program in 1963 to help preserve farms and other open space land. A 50-acre farm might be worth $5 million as a farm. It might worth twice as much as a subdivision site. Landowners who participate in the program agree not to develop their land. In exchange, their land is valued based on its current use, rather than its fair market value. There is a substantial difference between the two.

For most property, speculative value is minimal if not zero. I could not tear down my house and replace it with a 10-story apartment building without a variance. I'm not going to apply for a variance, and there is no legal basis for granting me one. The same is true for most small commercial properties. While the owner of a three-flat could fix it up and get somewhat higher rents, it is unlikely they could convert it to a 10-story apartment building.

The situation is very different for large commercial properties and vacant lots. Their owners often have an economic rationale for intensifying their use, and the money to pursue this. (My land use attorney friends are very good at their jobs. But they are not cheap, my former colleague in particular.)

The speculative value of such properties is inherently squishy. Assessors are prudent in being conservative in setting this value for assessment purposes. But contrary to the apparent practice of the NH assessor, it is more than minimal for this class of properties. The result of this practice is that everyone else pays higher taxes.

The assessor is undoubtedly a conscientious and honorable public servant, a big deal in my book. But in this particular area, he has erred. The city cannot, legally or ethically, change the under valuations. But it should be mindful of them in setting tax and other policy.

Kevin: A clarification on PA 490: the owner does not need agree to never develop his land. Owners of farms, forests, maritime heritage, and where the town has opted to allow it, open space lands pay taxes based on the present use. The idea is that high taxes based on the fair market value, i.e., the development value, will not force landowners to sell. So long as the use of the land is not changed, taxes are laid only on the value as it is used. Note, zoning, etc. approvals for development do not change the taxes, only actual use. Griswold Airport in Madison was taxed as open space even though its value had soared due to development approvals.

1644, I didn't say"never" but otherwise you are correct. The 490 program has expanded in scope but, as you note, its rationale has not changed.