Broken tax system hurts the poor

Georgia’s property tax system is broken and homeowners in our most vulnerable neighborhoods are paying the greatest price. The AJC’s “Property Tax Meltdown” series highlights the need to reform systemic flaws that grossly over tax low-income and high-foreclosure neighborhoods and often under tax more stable affluent neighborhoods and commercial properties.

Fairness and due process are the foundation of a trusting relationship between a government and its people. But metro assessment practices have essentially violated that trust by over-billing low-income residents living in high-foreclosure neighborhoods by up to triple their fair share of property taxes.

Georgia law is pretty simple. Local assessors must set values at a price that a willing buyer would pay to a willing seller. In a competitive marketplace that value is the sales price at the time of purchase. Until very recently, it was a standard practice for assessors to exclude sales of foreclosed homes from their valuation formulas. In 2008, thanks to a change in state law, assessors can no longer legally ignore the devastating impact of foreclosures on our neighborhoods.

Across all five metro counties, low-income residents of high-foreclosure neighborhoods suffer the most from flawed assessments and the resulting tax burden. During the late 90s, these neighborhoods were the victims of mortgage fraud, flipping and predatory lending. As a result, they have been over-assessed for nearly a decade.

By contrast, owners of higher-end homes would often contest their tax assessments because their neighbor was paying less. Few have argued that they couldn’t sell their house for the assessed value. This bears out in the AJC’s research — in Atlanta’s most stable zip codes, assessed values are still only 84 to 88 percent of demonstrated market sales, despite the depressed market. This was especially true with commercial properties. Fulton County’s commercial digest was grossly undervalued. Until last year, Fulton’s commercial properties had not received a complete revaluation since 1991.

Property tax values in low-income, minority neighborhoods were already inflated prior to the onset of the foreclosure crisis. Now, these homeowners are living in the neighborhoods most ravaged by foreclosure. According to ANDP’s research, at the end of 2008 homes selling in southwest Atlanta’s Pittsburgh neighborhood were selling for a fraction (on average 20 percent) of the county’s assessed value. Fulton recently made a 27 percent average adjustment, but these residents are still paying $1,300 dollars more in taxes annually than they should.

The crisis is affecting homeowners and renters alike in our most damaged neighborhoods. Nonprofit affordable apartment communities are being assessed at up to three times market appraisal values. The increase in rent to cover the higher tax bill is squeezing residents, many of whom are minimum wage earners.