I am watching the discussions about the budget, growing obligations, new expenses and concomitant higher taxes, with concern. The lack of public input over the continued escalation of property taxes is confounding. The fact that Brattleboro continues to pursue this path, given the current economic situation and future portended, seems like trying to deny the coming tsunami. While income sensitivity is a panacea for some, the property tax bite has moved beyond unreasonable into unsustainable. The fact is, Vermont has the third highest tax burden in the nation and Brattleboro has one of the highest tax burdens in the State.
A strong relationship/correlation exists between taxes and home values, and the nexus of rising taxes and diminishing home values is now quantifiably evident in the Brattleboro market. The combined cost of financing and tax burdens makes qualifying for a mortgage under the new federal guidelines challenging. Only those who are able to make large down payments and who can meet tighter income to debt ratios can qualify. Home values, as a result, at the upper end of the market, particularly those above $350,000, are falling 10, 15, 20% or more. Prices are now below the cost of construction. These homes, as a result, mine included, now list for prices significantly lower than their assessed value – as sellers chase the affordability equation. Upper end homeowners who have taken their homes off the market sit in ‘maintenance mode’, not making improvements or contributing to community development while attempting to wait out a market that is sure to even decline further when VY closes. Interestingly, middle market homes seem to be unaffected by the market based on sales figures obtainable from realtors and on-line resources. And therein lies the problem….
While some may say, ‘so what’, the reality is that the drop at the upper end will have a significant tax impact on middle/lower value properties come the next town appraisal – or even earlier if everyone rushes the reassessment window early. How? Simple math. As upper end appraisals drop and withou significant new construction (it is cheaper to buy than build), the grand list will shrink. This makes middle market homes, which are holding their value, a larger piece of the Town’s fixed property tax burden. The result; mid-market homeowners will see sharply higher taxes. This impact will also affect the rental market as owners pass on rising costs to renters.
Years ago, when the property tax burden shifted from business to residential owners, we saw this same impact. Now, I believe, property owners face the same consequences from within the residential market. Even those families eligible for income sensitivity will not be immune.
I do not have a solution, I only point out that if taxpayers do not engage in a dialogue to change course now, Brattleboro will have a massive ‘for sale’ sign on it – because home ownership will be unaffordable for everyone.