Land Use
 

Short-term rentals create a long-term problem: soaring taxes for the rest of us

Peter Horjus

Tax bills are doubling as the city reassesses the author’s Marigny neighborhood, a hotbed of B&B listings.

I got my new property tax assessment from the assessor’s office a few weeks ago. And like people all across the city, I was unprepared for what I found inside.

I own a house in the lower Marigny, the neighborhood I’ve lived in for 17 years. It’s a typical 2,000-sq.-ft. double shotgun on a regular-sized lot.  I live in half and rent the other half to the most wonderful tenant in the world,  a native New Orleanian who works in the service industry and has rented from me for 11 years.

It’s an old house with all the usual troubles: cracked plaster, old termite damage, peeling paint, struggling heat and air conditioning. The neighborhood also has the usual troubles: crime, flooded cars in the recent pump failures, potholes, and worsening public transport.  But even with all the challenges, I love my house, my neighborhood, my friends and neighbors. Most of the important people and places and events in my life are less than a half-mile away.

So anything that threatens my ability to remain in my house and in my neighborhood, or the ability of others to do the same, is a big deal to me.

My property had previously been assessed at $246,500.  With my homestead exemption, this meant I was paying about $2,680 in property taxes per year.  And while I know that real estate prices are going up in the Marigny, Bywater, and much of the rest of the city, my 2018 assessment was dispiriting: $426,900.   This brings my new tax bill, due this coming January, to an estimated $5,250 — about double what it was this year.

If my taxes were not paid from my escrow account, I would have five months to save an extra $2,570. Instead, my monthly house note will be going up by $215/month permanently, and an additional $200 or so a month for the rest of the year to cover what will be a negative escrow.

As a good citizen and statistician, I went online and scoured the assessor’s data base to see how my changes compared to homes around me. Many of my neighbors had seen similar increases to their assessments, bringing up our values to those of recent sales which include flipped, fully renovated homes that are now primarily short-term rentals. But there were several examples of similar properties as close as 100 yards away that were valued at half or less than mine.  So with 15 or so examples of radically different assessments, I went down to City Hall to contest my assessment.

I was pleasantly surprised to be warmly welcomed and efficiently screened. In less than 10 minutes, I was sitting with a city appraiser to discuss my situation.  He was intelligent, informed, empathetic, and patient.  He was also incredibly kind when, out of frustration, anger and an overwhelming sense of powerlessness, I started to cry. The tears came with my realization that the city has little interest in protecting its residents.

When I showed the appraiser my list of neighboring properties assessed at less than half the value of my house, he dismissed those appraisals as irrelevant because they are located in a different “Assessment Area,” one they hadn’t got to. “Next year they’ll probably see the same increase,” he said.

He went on to explain that the values are based primarily on square footage and recent sale prices.  He pulled up the database of recent sales to show me.  I asked where I could access this database for closer study, only to be told it is not available to the general public. He suggested that I find a real-estate agent, who would have access to this kind of data, and ask them to prepare a CMA (Competitive Market Analysis), which would then give me more information with which to contest my appraisal.

When I showed him my list of repair needs and rough edges that, in my mind, make my house worth less than the fully renovated/flipped homes that dot the neighborhood, his supervisor stepped in. He was less than kind. He informed me that without date-stamped photos, a recent certified appraisal, and a quote from a licensed contractor for the essential repairs, my claim was baseless.

Pulling all that together would take time and, of course, more money.  I was travelling for work the next week and would not be able to assemble the documents before the rolls closed in mid-August.  He proceeded to scold me, telling me that the tax rolls had already been open two weeks, so it was my fault if my schedule involved out-of-town travel. “Those are the facts,” he said, turning on his heel. “Factual doesn’t always mean right,” I replied as he exited the room, a comment that earned me a small whoop of approval from someone hidden in the maze of cubicles.

Alone again with the appraiser, I explained that the reason properties are selling for such high prices is probably, in large part, because residences formerly occupied long-term by tenants or owners are being used commercially, as short-term rentals. I also expressed my feeling that the city’s investments in tourist-focused changes, like the St. Claude Avenue street car, have also increased the cost of remaining in the neighborhood. (More on this below.)

The appraiser agreed with me.  “It’s true,” he said. “Soon it’ll be too expensive for anyone to actually live there, and it will be a neighborhood for tourists only.” Unfortunately, he said, the assessor’s office cannot take these facts into consideration when valuing properties.

At this point I was tearing up, and I explained to him that even though I could probably absorb the increased taxes, not everyone in my neighborhood could. These skyrocketing assessments — and there are more to come — are going to be a very large nail in the coffin of what once was a real neighborhood, my home. At this point he offered me some advice: “Well, if you can’t afford your increased taxes, maybe you should consider selling your house and move somewhere cheaper.” I think this remark, as stupid as it was insensitive, was actually an attempt to be helpful, or at least realistic.

Rather than throw a fit that would have resonated through the walls of the mayor’s fifth-floor office suite (my voice can do that), I offered this otherwise kind man some advice of my own: “Never say that to anyone ever again.  Because what you are saying is that people who can’t afford to have their property taxes doubled don’t deserve to stay in their homes.

He acquiesced.

Clicking on a couple of links on his computer and then tapping on a calculator, he said he could offer me a revised assessment at $389,000.  This would bring my taxes down from projected $5,250 to about $4,700.  Not a big savings, but I accepted the offer. What allowed him to offer this small reduction, I’m not sure.  It could have been my tears, my reams of rejected data, the information from the secret home-sale price database. Or maybe it was because, deep down inside, the appraiser knows that what the city is doing is morally wrong, and this was his way of exercising his limited power to help.

When short-term rentals were illegal, the city turned a blind eye. Now the rules have been loosened and STRs are spreading faster than ever. Adding to the problem, the decision to finally enforce the ban on STRs in most of the French Quarter has only driven the STR epidemic more deeply into adjacent neighborhoods such as the Marigny.

Home buyers are often taking into account the significantly higher revenue they can get using a house commercially as an STR rather than a residential rental, which makes a half-million dollars for a double shotgun no longer seem like a poor investment.  This leaves longer-term tenants with fewer options and exploding rents,  property owners with soaring taxes, and — all of us — with fewer neighbors.

The STR problem is only accelerated by the city’s collapse into the arms of the tourism industry, with expensive, publicly funded infrastructure additions such as the Rampart/St. Claude streetcar (a tourist trolley), the St. Roch market (a pricey food court), the cruise-ship terminal at Poland Avenue (the nation’s only cruise-ship terminal in a residential area) and the Crescent Park (a gentrifier’s delight, landscaped so as to leave no space at all for basketball, soccer or other recreations that appeal to kids from the blue-collar families who flourished in Bywater until recently).

City officials seem unembarrassed by the bias in their public spending. As I reported in The Lens two years ago, the RTA bluntly stated that one of the reasons for building the Rampart/St. Claude street car was to hike up property values. And, as I and others predicted, the trade-off has been to make public transport worse for New Orleans residents simply trying to get to work.

We need to explode the myth that gentrification is somehow good for residents of lesser means. Yes, rising property values may result in a one-time windfall as low-income households bail out of neighborhoods they can no longer afford. But owning a home these days really needs to be seen as a privilege restricted to the better off.

The propaganda put forth by fake grassroots groups — astroturf organizations — claiming that STRs are a handy way for people of lesser means to cover higher housing costs falls flat when we acknowledge that STR income is NOT available to the most vulnerable. That grouping would include those who don’t own (renters), those with children who do not have the luxury of empty bedrooms, and those who still rent to long-term tenants, out of good conscience and disgust at what STRs are doing to a city that was once a community of neighborhoods.

Those not profiting from STRs are paying higher property taxes in part because of those who are profiting from STRs.

So, what can we do? This is where it gets complicated. I would say that we should seek the advice of the city planners and officials, but they are the ones who got us to where we are now.

One response that would at least mitigate the problems I and others face would be to follow the example of other cities and cap annual increases in property taxes, as Robyn Halverson urged last year.

Another approach is to adjust taxes and home assessment values in a way that takes STR use into account.

First, considering that the STRs are commercial activities, it seems logical to tax them at the commercial rate (15 percent of fair market value) rather than the residential rate (10 percent of fair market value).

And shouldn’t a residence operated as a business lose the Homestead Exemption? The exemption currently reduces the property tax burden on an owner-occupied residence by about $1,000.

Perhaps these adjustments could be made proportional to how much of the house is in commerce. But here’s a simpler approach:

How about we simply ban all STRs. Unenforceable? Not in the French Quarter. Maybe less posh neighborhoods deserve the same attention from city officials.

Whatever the solution, Mayor Mitch Landrieu’s administration needs to stop talking out of both sides of its mouth. The city cannot pat itself on the back and claim it is making progress towards affordable housing when neighborhoods all across the city are becoming unaffordable to owners and renters alike.

Peter Horjus

Peter Horjus, a survey statistician in international development research, is active in the Marigny community, his home for 17 years.

The opinion section is a community forum. Views expressed are not necessarily those of The Lens or its staff. To propose an idea for a column, contact Lens founder Karen Gadbois.

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