Many Rochester property owners are reeling over a holiday greeting from City Hall: Notices that their property assessments are going up -- way up, in many cases.
City property values rose 19.3% on average in a citywide reassessment, to $90,864 from $76,145, with the biggest jumps being in the South Wedge and Upper Falls neighborhoods, where the typical home value soared 37% and 34%, respectively.
The increases are something of a double-edged sword for property owners and those struggling to find housing.
On one hand, the spikes suggest owners could sell their property for more today than in years past. On the other, an assessment increase often translates to a higher property tax bill. Both exacerbate housing affordability in a city where one-third of the population lives in poverty.
Across the board, 87% of residential property owners saw their assessments rise, according to the city. By contrast, only about one in four commercial properties saw an uptick.
The assessments will be reflected on property tax bills for the 2021 fiscal year, which begins July 1.
Kristen Schmidt was notified that the assessment on her corner-lot home in the Browncroft neighborhood went up $104,600, an amount she figured would raise her property tax bill by $1,500. Records show Schmidt paid nearly $5,800 in city taxes this year.
"They want people to stay in the city, they want people to pay their fair share, which I'm more than willing to do," Schmidt said. "But they're also making it harder."
Not all property owners will pay more taxes, however. Whether an increased assessment means a higher tax bill depends on the tax rate and levy, which will be set next summer. Should the rate be reduced, property owners whose assessment increases were below the city average will likely see their tax bill decrease.
All of these adjustments end up shifting the tax burden within city neighborhoods. For instance, as things stand, the increase in home values in the South Wedge translates to that neighborhood assuming an additional 18% burden. Meanwhile, in the East Avenue neighborhood, where assessments rose on average by nearly 12%, the tax shift fell almost 8%.
"I think it's important to note your assessment going up is not guaranteed that your taxes are going to go up," said city spokesperson Justin Roj. "There's a couple other things, the mayor held the homestead levy flat last year. So what happens there is, as home values increase, the rate is likely to drop going forward."
A healthy housing market
The city re-evaluates residential and commercial properties every four years. Under state law, assessors are to place a value on a property that hews closely to what that property would sell for on the open market under normal circumstances.
There are 65,196 residential and commercial properties in the city. Of those, 47,785 saw their assessments rise; 5,282 were unchanged, and 1,853 saw drops, according to the city.
City Assessor Michael Zazzara explained that the city mostly bases the residential assessment figures on actual sales of comparable homes dating back the previous two years. But, he added, appraisers also drive or walk the streets and take note of how properties actually look, and factor in that information.
"(The comparable homes are) not necessarily the same street," Zazzara said. "But we have the city broken down into 132 different evaluation neighborhoods. So it's properties that are alike in size or condition that are also, say, north of 490 on Culver Road."
For those who follow the local housing market, the assessment increases should come as no surprise. Earlier this month, Realtor.com ranked Rochester as the sixth-hottest housing market in the nation, with a 4.7% increase in sales and a 0.4% increase in prices.
Still, the assessments have startled city residents and exacerbate the challenge of ensuring affordability.
Roj and Zazzara cast rising assessments as a good thing and a reflection of healthy market trends. They said the growth in value suggested more first-time homebuyers are choosing Rochester.
"It's affordability and the amenities that (the city) offers," Roj said. "It's really driving the market, and you really do have many more options to live and work in the city."
Cause for concern?
Many city residents are skeptical of the claim that first-time homebuyers are driving the market. They counter that rental housing is moving the market in their neighborhoods.
Kathy Kurz, who has lived on Cypress Street in the popular Highland Park neighborhood for 25 years, said she has seen an influx of investors seeking to buy up houses to convert into rental properties. She pointed to one house on Cypress that has sold four times -- most recently in July -- since she's lived in her home.
"All through the years, I've got mailers stuck in my mail slot or letters saying we're interested in buying your property," Kurz said. "I actually got a text; how this guy got my phone number, I don't know. '"
Kurz is facing a $30,300 increase in her assessment and her house, she said, is already in need of exterior work. Records show her home is now valued at $114,300.
"It's not necessarily about the tax bill," Kurz said. "Let's say I die tomorrow and my daughter wants to sell the house, she's not going to get $80,000 for it. That's what the assessment is supposed to be about, this is what your home is worth."
Rochester real estate listings are crawling with limited liability companies based in the suburbs and beyond looking to make investments. Some of their names leave nothing to the imagination, such as Pittsford-based MakeMoneyInRental LLC. Last spring, the company paid $180,000 for a house on Gregory Street in the South Wedge that was assessed at $80,000.
Neighborhoods like much of South Wedge and Highland are zoned R-1, meaning they are reserved for low-density residential properties. The city code states those neighborhoods should be predominantly owner-occupied, but that's not always the case.
For example, according to recent census data, just a third of the R-1 homes in the tract around Cypress Street were owner-occupied.
Bruce Mellen, president of the Upper Mt. Hope Neighborhood Association, is concerned that investment rental properties will proliferate and supplant the owner-occupied residences.
"My desire is to get us down to a 40% (rental occupancy), I think that would be huge for the neighborhood," said Mellen, whose assessment went up almost 22%.
"Some of these landlords are getting between $650 and $850 per person for houses that were $120,000 when they purchased them," Mellen said. "You do a calculation on the rate of return and it's a hell of a lot better than the stock market."
Mellen points specifically to White Coat Properties LLC, a Victor-based company that bought nine single-family homes around the University of Rochester in 2017. White Coat is clear about its target market -- the company's website is studenthousinginrochester.com.
Kurz has the same concerns about investment rental properties in the Highland Park neighborhood.
"I'm middle-class, if you want to have a solid, consistent neighborhood, you've got to attract people like me," Kurz said. "If it's just rental properties, at some point in time, you're dealing with the fact that it's an investment, and prices are based on, 'How much are you willing to invest?' "
Fighting your assessment
Assessments can be contested.
The deadline to challenge an assessment is known in the industry as "Grievance Day." In most New York municipalities, that day is the fourth Tuesday in May. In Rochester, however, Grievance Day is the third Tuesday in March, or March 17, 2020.
Contesting an assessment involves presenting evidence to the city's Board of Assessment Review as to why a property's assessment should be lowered. Property owners can represent themselves or send a delegate.
The board is a panel of five people appointed by City Council to render decisions on assessment challenges. The proceedings are scheduled in 10-minute intervals and recorded. Property owners are given five minutes to make their case; the assessor has three minutes, and two minutes are allotted for discussion.
Mounting an effective challenge requires a property owner establishing a fair market value on his or her property. That can be done through comparable sales and private appraisals. Neighborhood real estate agents can help track down previous sales.
The burden of proof is on the property owner, not the assessor. By law, the value the assessor placed on the property is presumed to be correct.
The board does not make decisions on the spot. Results of the board's deliberations are mailed at the end of the hearing process for the year, which is typically late April in Rochester.
If the board denies a reduction, a property owner can appeal the decision to a specially trained hearing officer through a process called a Small Claims Assessment Review.
Here are some handy tips for a successful review offered by the city on its website:
- Fill out a Real Property Tax Law form 524 (RPTL 524) and file it with the assessor.
- When your proceeding date is scheduled, show up on time.
- Be prepared with your materials — comparable sales, photographs, appraisals — in order.
- Follow deadlines, obey official requests, and be respectful.
- Remember, the assessment is assumed correct unless you prove otherwise.
The Rochester Board of Assessment Review will be hosting informal interviews through February. If you believe that your assessment is incorrect, contact the assessment office at (585) 428-7221. Complaints to the board are open until Tuesday, March 17.
Gino Fanelli is a CITY staff writer. He can be reached at gfanelli@rochester-citynews.com.