Jessie Cheung, Staff Photographer
A state-mandated revaluation in 2021 found a 32.6 percent reported increase in property values across the city of New Haven since 2016, when the last assessment was conducted. And when property values rise, significant increases in property taxes must follow.
To soften the impact of the corresponding property tax hikes, Mayor Justin Elicker has made plans for a gradual phase-in over the next five years. The increase will be divided up by an equal amount each year — a 20 percent increase in the mandated property taxes, for example, would occur in intervals of 4 percent annually.
Although this revaluation points to larger trends of economic growth and development in New Haven, some residents fear the impact that tax increases will have on smaller landlords and homeowners. Also present are concerns about gentrification in historically Black and Hispanic neighborhoods, where property values have risen the most significantly in this new assessment.
“If your [property] value changes, your property taxes will change,” said Elicker in an interview with the News. “Especially in a place like New Haven where there’s a lot of investment and people buying properties, over five years, you can see in some areas of the city a pretty dramatic change in property values. … That’s what we saw this time around, that property values really skyrocketed … especially in some neighborhoods that have historically been challenged.”
As a result of these changes, the city anticipates a $5.6 million increase in property tax revenue in the 2022-23 fiscal year compared to the previous.
In addition to the five-year phase-in, Elicker’s budget also includes a decrease in the mill rate, or the ratio of taxation per thousand dollars in property value, from 43.88 mills to 42.75 mills. Without the phase-in, however, Elicker would be able to drop this mill rate further, but property owners would have to face the full increase in taxes all at once.
At a budget workshop in mid-March, alders debated about which approach would burden New Haven homeowners the least. City Budget Director Michael Gormany said at the workshop that the current plan with the phase-in had been chosen as the “best option citywide” given the disproportionate increases in certain neighborhoods.
“The phase-in’s intention is to ease people into their new higher property values, and to ease people into the change in taxes,” Elicker told the News. “The majority of people in the city benefit from the phase-in, meaning that their taxes go up less than they would have had we just done a full implementation of the new valuation.”
The areas of the city most impacted by the revaluation are Fair Haven, Chapel West, Newhallville, the Hill and West River, according to Elicker. In these neighborhoods, property values have climbed by as much as 60 to 100 percent.
At the virtual budget town hall in March, New Haven residents and landlords voiced their concerns about the impacts of the property tax increases. Local real estate developer Nitsan Ben-Horin, who is based in New York, warned that landlords would have to increase their rents to compensate for the tax increase, even with the phase-in.
“A commercial landlord is not going to look at the phase-in the way that a private person would,” Ben-Horin said. “He or she is going to say, well, in four or five years this is where I’m going to be, so let me start raising the rents now before I fall behind, because let’s face it, if your taxes went up to 60 percent, there’s no other way to pay it.”
He compared the tax increase and the phase-in to a “panic button for landlords.”
Patricia Wallace, Chapel West resident and former director of elderly services, urged the city to consider the effects of the tax increase on her “often forgotten” neighborhood. As a small landlord, she said that her long-term tenants would not be able to tolerate an increase in rent. However, as a retired adult living on a fixed income, she would struggle to pay property taxes without such a rent increase.
“I think really trying to understand what this is going to mean for places, especially the ones where the value made this big jump, would be a good thing,” Wallace said. “The big landlords, they’re going to be fine, but the little landlords are where a lot is going to be going on. Are we just going to gentrify the heck out of these neighborhoods with this kind of tax approach?”
In response to such concerns, Elicker told the News that he didn’t expect all landlords to naturally increase rents whenever taxes rose. He said that “landlords will charge what the market allows them to charge,” adding that landlords do not tend to drop rents when property taxes decrease.
He also pointed to the number of city programs that “help support people that are struggling to pay rent.” His proposal for a $53 million investment of American Rescue Plan funds, which is currently in front of the Board of Alders for review, includes an allocation for “additional direct rental assistance.”
Economic Development Administrator Michael Piscitelli told the News that this value increase in New Haven’s grand list of taxable properties was anticipated due to trends of higher rents, incomes and residential property trade values throughout the city. These patterns are “part of an overall series of economic conditions relative to resiliency out of the pandemic.”
However, for renters and smaller landlords, he noted that the expected increase in property taxes and rents could add to current inflationary pressures that influence residents’ investment decisions and “everyday life.”
“Those pressures are significant and it’s one of the reasons why our mission here is to maintain a high level of economic resiliency, such that we’re creating good living wage jobs in the city,” Piscitelli said.
In response to concerns that these property tax hikes will privilege mega-landlords, Piscitelli said that such trends are difficult to forecast at the moment, although the city will be monitoring the issue closely.
He emphasized, however, that “large portfolio landlords” are a significant concern to the city, pointing to the mayor’s plans to establish the New Haven Land Bank with American Rescue Plan funding. This initiative would allow the city to “be more nimble” in the real estate market, able to buy and hold properties until they can find a “high and good use” that would benefit the city as a whole.
Some residents and advocacy groups, including the Sisters in Diaspora Collective, have recently criticized the city’s plans for not dedicating more funding to initiatives like the Land Bank. The current Phase 3 ARP investment proposal allocates $4 million to the Land Bank.
“Figuring out the distributional effects of property taxes is an extremely complex endeavor,” Yale Law School professor David Schleicher told the News, in part because the phase-in affects whole “areas” of the city, rather than specific categories of property owners. “The universe of people who own property in [an] area will be both individual homeowners in the area where the property values are going up and landlords in that area.”
For example, the phase-in would have comparative advantages for wealthy mega-landlords in low-income areas, but comparative disadvantages for homeowners in wealthier neighborhoods like East Rock, where property values didn’t rise as much.
Schleicher noted that New Haven is in an especially difficult situation because Connecticut towns rely more heavily on property taxes than towns in other states, leaving the city with fewer options for generating revenue. He added that New Haven, like most other towns in Connecticut, also suffers from the effects of years of underfunded pensions.
“Ordinarily, if a city saw huge property value increases, it could cut taxes and get a whole bunch of new programs,” Schleicher said. “Right now, New Haven is paying for government services enjoyed by a previous generation of residents. It’s paying for the pensions of workers who provided schools and policing in 1980 and 1990.”
The city of New Haven has created a website where homeowners can view a calculated estimate of how their property taxes will change under the mayor’s proposed budget.