Property

Danbury has seen property values soar in the last year. There are trickle-down effect concerns.

The increase in property values in Connecticut and across the country saw the average listing in the five communities surrounding Candlewood Lake jump to $461,511 this year as the real estate market continues to feel the squeeze from high demand and limited inventory.

In Danbury, Brookfield, New Fairfield and Sherman; and New Milford, the 15.8 percent rise in property values in 2022 compared to 2021 stands below the national average increase of 21 percent, according to Zillow data compiled by Hearst Media Connecticut.

But the effects of the increase are being felt by many home and business owners who will see their property taxes increase as a result of the trend.

That is particularly true in towns like Brookfield where a mandatory revaluation will see a 3.1 percent average increase to the local property taxes paid by local residents and property owners. For residents in the town who own lakefront properties, the added tax burden is even more poignant.

“Everybody is thinking, ‘well my taxes are going to go up 3.1 percent,’ but it depends on your individual revaluation,” George Walker, a local realtor, said this week. “My valuation increased 24.6 percent…however when I crank that out under the new mill rate and everything like that, my taxes are not going up the 3.1 percent, they are going up 6.9 percent.”

“The burden of the tax increases are hitting, from what I can see, a significant amount of that is being picked up by people who live on Candlewood Lake and Lake Lillinonah,” Walker said.

Walker, a former member of the Brookfield Board of Selectman, owns a property located on Lake Lillinonah, but he noted those on the shores of Candlewood Lake saw an even higher property value increase as a result of the town’s revaluation process.

“Some of those people are 30 percent, or more, higher in their valuations and what happens when they do the arithmetic is they are going to, sadly, find out that it’s a very significant increase in their real estate taxes,” he said.

Walker acknowledged that many will think , “well you live on a lake, so it makes sense you are paying more,” but the commercial real estate agent said the impact is significant. By his calculations he will be paying $1,000 more in his real estate tax this year.

“That is not pocket change – even though I am a real estate guy and that sort of thing, I am 80 years old and every dollar counts to me now.”

Higher property values, inflation a ‘double whammy’

In Connecticut, property taxes are the primary source of income for municipalities along with personal property taxes levied on vehicles – which also increased this year.

“Car values increased on average anywhere between 12 and 16 percent,” said First Selectwoman Tara Carr last month. “And its strange this year, because car values usually go down but because of the pandemic and the supply chain issues — and if anyone has tried to buy a car recently we all know that prices are exorbitant, if you can find a car at all.”

With the rising property values, rent prices have also increased as limited real estate inventory pushes would-be buyers into the rental market – a dynamic strained by record-setting inflation levels seen in the U.S. this month.

Rotua Lumbantobing, associate professor of economics at Western Connecticut State University, noted the U.S. economy quickly contracted in 2020 as a result of the COVID-19 pandemic, “but it bounced back quickly once local economies started to open.”

When that happened in Fairfield County and across Connecticut, the overall demand for goods “shot up, while many workers were quitting their jobs, (and looking for better ones),” the professor wrote in an email.

Now, ongoing supply chain issues and increased demand is contributing to rising prices, the professor explained.

“Some goods, like housing, take time to build/make and rely on other goods/material,” she wrote, adding: “The Russia-Ukraine War exacerbates inflation, as both countries are main producers of wheat and Russia is one of the main oil and natural gas producers in the world.”

With the rising prices and a “tight real estate market in Fairfield County,” the increased property values seen for homes and vehicles this year are doing more to hurt homeowners than help improve the value of their assets when it comes to the amount of taxes they are paying.

“That is a double whammy for owners of either or both goods, especially the ones who recently bought a new home or car,” she said.

Housing and education needed

Solutions that can help mitigate the impact of the economic conditions, “are pretty standard as economics goes,” she said. The economics professor noted housing, particularly affordable and high-density housing developments, should be incentivized at the state and local level.

At the same time, Lumbantobing recommended Gov. Ned Lamont extend the recently introduced gas tax holiday through the end of the year while exploring ways to grant expanded tax breaks for poor and low-income households because inflation hits those populations harder.

“The poor and low-income households are the ones who create jobs. Why? Whatever extra money they receive, whether it is through higher income or tax breaks or anything else, they will spend most of it,” she wrote.

“This will incentivize firms to produce more and hire more workers, who will spend their money, too, and so on. This is how jobs are created.”

“Finally, I want to mention that unemployment rate in CT is currently 4.6% (as of March 2022), which is one full percentage higher than at (the) national level,” explained Lumbantobing.

“We need to do more, as a society, to lower that rate. Education goes a long way as an investment in human capital,” she added. “The state needs to support its K-12 school systems, community colleges, and public universities. These are institutions that educate future generations of the state.”

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