A light bulb went on when I read Ed Harrison’s comment implying that Carol Ann Zinn was 
wrong in her assessment that $400,000 was moderate-priced housing in Chapel Hill. Sally Greene had asked Zinn at Monday night’s public hearing what her moderately priced condos would cost. Zinn did not put a dollar figure to it as they wouldn’t be built for 4 to 5 years, even if approved that night. Gene Pease asked what moderately priced housing costs today, and Zinn told him about $400,000.
According to the Chapel Hill Board of Realtors’ website, the 2011 year-to-date average sales price of a home in Chapel Hill is $391,395. That includes new homes and resales. New homes always sell at a higher price than comparable “used” homes. Zinn knows real estate, as she has been building what people want to buy in Chapel Hill for more than 30 years.
The realization that some members of Town Council don’t know how much it costs to own a home in Chapel Hill today sheds light on why they have made some decisions that don’t seem to be in touch with how most of us live.
Over the 15 years I’ve lived here, I’ve watched the Manhattanization of Chapel Hill. As Matt Czajkowski pointed out Monday night, when you restrict supply of a desirable asset, the price goes up. In Chapel Hill, the price of housing has gone up in recent years, which increases our property tax bill.
This is why some voters (not just me) rail at the council’s decisions to restrict housing supply even more. Council members perhaps bought their homes more than a decade ago when housing prices weren’t so high, and they are employed or supported by spouses who can comfortably afford the high property tax bills – high because they’re based on the county’s market-value house valuations, not so much because of the $1.69 per $100 of assessed value.
Ironically, the first two-and-a-half hours of Monday night’s meeting were devoted to comments from Northside residents who are being pushed out of their neighborhood due to high property taxes and the redevelopment that comes with small homes in desirable locations. Bill Strom, when he slunk out of town in 2009, bought an apartment on a street in Manhattan that 15 years ago was lined with tenements occupied by low-income residents. Then developers came in, bought them out, and resold them to the wealthy for renovation. Low-income residents were pushed farther away from the city center.
Over the past decade, Chapel Hill housing prices have reduced the diversity we used to value in town. Everyone below the upper-middle-class struggles to make ends meet these days in Chapel Hill. A building moratorium won’t prevent home prices from rising. That’s clear from Carrboro’s mill house neighborhoods, which on a price-per-square-foot basis are the most expensive housing in the area. And restricting multifamily housing in areas the council has target for dense growth makes no sense at all.
– Nancy Oates
Terri Buckner
/ June 22, 2011Residential properties, even multifamily construction, costs the town in services. We know that single family homes cost $0.76 for every $1 in property tax. Has anyone done a similar assessment for condos?
WJW
/ June 22, 2011The basic premise of your article is correct of course. Artificially restricting supply will most likely increase the cost of an item. That is basic economics.
Instead of the average sales price per home, I think the median sales price of $335K is a better indicator than the average (it doesn’t take too many $600K plus home sales to up the average). A companion indicator would be the price per square foot over time so that the size of the homes being sold doesn’t skew the average and/or median.
To Ms. Buckner, where does that cost figure of $0.76 for every $1 in property tax come from that “we know”? Is that for Chapel Hill alone, Chapel Hill and Carrboro, or all of Orange County, or all of North Carolina? I would certainly like to see what is in the cost side before I accept your number as gospel. There might be (maybe not) alot of nice to have govt costs and it not all be need to have govt costs.
Are you implying that the marginal cost to the local govt is higher for 4 people living in a home with a higher property tax bill than 4 people living in a home with a lower property tax (I think you are stating that the cost rises and falls with the property tax number?)
And if I read the number right, the govt receives $0.24 in “profit” from each new $1 in property tax?
Nancy Oates
/ June 22, 2011WJW — The only problem with using the median is that in the past couple of years, more lower-priced homes have sold than high-priced ones. Tougher lending requirements contributes, as does the increase in people on fixed or reduced income selling homes due to the ongoing cost of property taxes that rise with home values. That’s less likely to affect higher-wealth property owners. It also puts more lower-priced homes on the market. Also, buyers may be uneasy committing to a pricey home until they are sure the economy is recovering, while buyers in the lower price ranges might see this as a time when their goal of homeownership is affordable.
Runner
/ June 22, 2011I’m posting this reply to another article here.
One note of caution, the Chapel Hill Town Council elections are set up as a popularity contest. All 3 seats up for election are open seats. That means that the top 3 vote getters win the seats.
In order to unseat any of the undesirable incumbant, the “restore common sense” voters will need to focus on only one or two new candidates to elect. Voters should not “round out” their ballot with a 2nd or 3rd choice from the incumbant list.
Terri Buckner
/ June 22, 2011I should have said a single family home generates $0.76 in taxes for every $1 spent to support it. That comes from Orange County Planning, and it is one of the primary data points behind the push for economic development. I don’t remember the exact number for commercial properties, but the generality is that they generate $4 in taxes for every $1 of support service.
-K
/ June 22, 2011I am curious to know if the generality (from Terri Buckner) of a 4:1 tax:service ratio applies specifically to Chapel Hill, to the Extra-Territorial Jurisdiction (ETJ), and/or to Orange County as a whole. One hesitates to compare Orange County ratios for single family homes with a general ratio.
In another topic related to Ayden Court, I am having difficulty understanding how a larger supply of $400K condos, or of higher-priced single family homes, can effectively provide low-to moderate price housing, since a household income must be at least $160K / yr to quality for a $400K mortgage (using my own ‘generality’ of 2.5Xannual income). I understand the payment-in-lieu concept, but someone must actually build low-price housing in order to provide housing for the low-income population.
Lastly, on property taxes. Suppose that all I cared about was the property tax I pay. In that case, no matter what my home is worth, I should want everyone else to build (or own) much higher-valued housing because my relative tax rate would decrease as a result. If all new housing is less valuable than mine, my relative tax rate increases. Folks who argue that expensive housing is bad for taxes either own an expensive house, or are thinking about something in addition to the property tax.
Terri Buckner
/ June 22, 2011As I said above, the revenue/cost numbers come from Orange County Planning. You would need to contact them if you want the details of how they made the calculations.
-K
/ June 22, 2011Terri, thank you. I now understand you to say that in Orange County, the tax:service ratio is 4:1 for commercial property, and 0.76:1 for single-family homes. Maybe one of the listening council members could supply the equivalent figures for CH, and CH-ETJ. Thank you again.
WJW
/ June 22, 2011Ms. Buckner: Could you please point out where this $1.00 in govt spending and $0.76 in taxes come from?? I called the Orange County Planning department, and the person who I spoke with had not heard of this. Now, that does NOT mean it does not exist, it just means I’m not fully buying it. The cost side of the equation can easily be changed up (buy 4 more buses and increase the routes: 20 more policeman and firemen; build another elementary school; etc.) or down.
Ms. Oates: All of the items you stated certainly would impact the median, but I don’t see how that makes the average price a better proxy than the median price for how much a typical or “moderately priced” home would be selling for.
By the way, I looked at the info on the CH realtor site, and there is nothing that would indicate that the prices don’t already reflect the lower prices of townhouses and condos. It just says “homes” not detached homes. Maybe a “home” is a condo and/or townhouse as well?
Fred Black
/ June 22, 2011Runner, FOUR Council seats and the Mayor will be on the ballot in November. In effect, that means that every elecction can change the majority of the Coouncil. We will learn soon whiich ncumbents will be on the ballot and therefore, if there will be any open seats.
Terri Buckner
/ June 22, 2011I’m pretty sure Craig Benedict was the source of the information on the cost of services for residential and commercial property. If not, check with the Economic Development officer.
-K
/ June 22, 2011Terri Buckner, please do not tell us to verify your ‘facts’ for you. Either you know where your got your information, or you don’t. If you don’t, your comments are arguably speculation.
BT
/ June 22, 2011Craig Benedict’s planning department was the one that brought us the county comp plan update debacle a few years back. I wouldn’t count on their numbers to be accurate, and I wouldn’t be surprised for that department to not remember material they generated, regardless of its accuracy. These are the people who print agenda items on paper and scan them in as PDFs to put on their website. They do this instead of getting free PDF-making software off the web that would make clearer copies that are also searchable and accessible to those with visual impairments.
Linda Convissor
/ June 23, 2011Nancy,
You say that over the past decade high housing prices have reduced diversity. I too have the sense that our economic diversity is narrow, rather than broad. But when we moved here in 1978 and had what seemed like the reasonable idea of buying a small cottage within walking distance of campus, we couldn’t find any houses in our price range except some poorly-built Farmer’s Home ranches that needed major renovation. We were lucky to find a fine “CH” house that had been moved to Durham County and let go to ruin that we could afford to buy and spend the next 20+ years fixing up. My long-winded point is that there hasn’t been affordable housing in CH for a long time. I don’t know how long, but it isn’t a new phenomenon. It may or may be worse now, but it’s not a new problem.
I’m also interested in your comment that more lower-priced houses have sold. I’ve never heard that – what is it based on? It’s very interesting and I’m guessing reflects that many older apartment complexes have been turned into condos. Or is it something else?
Anita Badrock
/ June 24, 2011The tax information number that Terri quotes comes from a study commissioned by the Orange County Economic Development Commission from a researcher at NC State who does this type of work throughout the country. I believe the work was done in 2007-2008, but I am not sure, the information should be on the OC website. I was part of the EDC when the study was done.
The numbers are comparable to what has been seen throughout the country. Residential properties are not self supporting. The specific numbers might change, and the gap might be wider or smaller in certain jurisdictions, but many studies have been done on this topic and the data bears out that residential properties consume more in local services than they pay for, and commercial and agricultural properties are net revenue positive in terms of taxes paid for direct services provided at the local level. That of course does not take into account–for any of the properties—indirect costs, benefits, or impacts.
Nancy Oates
/ June 24, 2011So what we’ve suspected all along is correct: We need to attract more businesses to Chapel Hill. And Town Council could have made a cursory step in that direction by passing the sign ordinance that the town staff and advisory boards recommended. But, no. Council would not allow logos or distinctive fonts or the businesses’ colors. This is why some of us tear our hair out. People on council are smart, yet some of the decisions they make reflect that they don’t think things through.
Terri Buckner
/ June 24, 2011Thanks for the reference Anita. Do you know whether there are studies that breakdown the residential costs by housing type? For example, does multiple family as Aydan Court was proposed to be come closer to paying for itself that single family homes (which Aydan Court will now become theoretically)?
CitizenWill
/ June 24, 2011Renkow’s study is here: http://www.cals.ncsu.edu/wq/lpn/PDFDocuments/orangeCOCS.PDF
The COCS study was commissioned to determine tax appropriateness.
I’ve expressed concern numerous times that these numbers have 1) not been validated outside their intended use (establishing tax fairness for farmland), 2) they are used to establish policy without considering the cautions the author proscribed, 3) haven’t been updated to reflect the substantial changes that have happened since the baseline data was accumulated, 4) uses a quite broad and general analysis of all of OC and doesn’t reflect “local” conditions.
Here’s what Renkow said in 2006:
ToM Field
/ June 25, 2011The solution to the high cost of housing in our wonderful town is very simple. Bring in business, let them run wild, reduce taxes and services and then houses will become very cheap, since the price to live in commercial sprawl is much cheaper than what it costs to live in (the ever uglier – but still desirable) Chapel Hill.
Robin Cutson
/ July 3, 2011So here’s the bottom line, the study for our area confirms what other studies have shown across America: Residential development costs more in services and infrastructure than it generates in revenue. (Our study showed residential development generates only 76 cents in revenue for every dollar paid out while commercial development generates $4.21 for every dollar spent in services.) Commercial development (i.e. businesses) also adds vitality to a town and reduces people driving to Durham to shop. Mixed used developments don’t help because they do nothing to fix the imbalance of too much residential compared to businesses.
Only those with little understanding of economics would depend on a supply and demand model in terms of cost of housing in a town. Nancy Oates is simply wrong in assuming lots of housing will drive down housing costs—and the reason is because residential housing DOES NOT generate enough revenue to pay for itself–which means property taxes and fees must increase—and this increases the cost and affordability of housing—if your monthly property taxes are almost the same as your mortgage, housing becomes unaffordable.
Housing costs depend not only on sales price but the market value assessment—-when an area has too much residential it goes into an economic hole so it must raise taxes—taxes on homes can be raised directly via property taxes or by simply raising the valuation of the house and property (if a house formerly valued at $200,000 is re-valuated to be worth $300,000 then even if property taxes didn’t rise, the government would still collect more taxes on that home because the government inflated its value—which means you are also paying more for that house.
Chapel Hill already has too much residential development compared to commercial development (like retail). It also already has lots of condos sitting empty and even single family homes are taking longer to sell. Building more high density housing like condos will simply continue to put us in an economic hole and will do nothing to bring down housing costs and taxes. This is fairly basic economics and it is scary to think that there are still some people out in positions of power and influence who still can’t grasp the basics. This also means that working class citizens will eventually be taxed out of Chapel Hill—and there goes diversity.
And of course, protecting water supplies and water quality by not building high density on sensitive watershed property is also healthier for citizens and cheaper in the long run. If a waterway becomes impaired your tax dollars are used to clean it up. The more your drinking water supplies become impaired the more chemicals are needed and treatment costs go up (along with rationing). Bringing in more businesses—especially low water use businesses such as retail—is necessary to keep taxes and housing prices affordable. (and aren’t we all tired of having to drive to Durham to go shopping?)
So the bottom line, is all those on the Council who voted against high density condos on Aydan Court were protecting the ecosystem, your waterways, drinking water supplies AND helping to keep your taxes and cost of housing lower and more affordable. Those who voted FOR the high density condos on Aydan Court obviously were NOT protecting the ecosystem, waterways, drinking water supplies or keeping taxes low and housing affordable—-perhaps because they care more about catering to rich developers for campaign contributions or maybe some future job. After all former Mayor Rosemary Waldorf now works for development Corporation. And one of Ms. Zinn’s development team used to be on the Chapel Hill Planning Board. Or maybe they just don’t understand anything about protecting the ecosystem or anything about economics. In any case, those concerned about the environment, drinking water supplies and keeping taxes low and housing affordable had better work to re-elect those who voted against Aydan Court and to vote out those who voted for the high density condo development.
Oh, and BTW, soon our area will be shipping its garbage out-of-state because our landfill will be full. The talk is we will be using Durham’s trash transit station. Durham currently ships its trash into Virginia. And this is an excerpt from an article about that in the Washington Post:
“But as Virginia residents, environmentalists and an increasing number of politicians take a closer look at the booming (imported trash) business, there is fear the state will become the nation’s trash pit and that the environmental and road safety problems already surfacing will grow. Moreover, the communities where the landfills sit are largely poor and African American, raising complaints from some that they have been targeted. ” http://www.washingtonpost.com/wp-srv/local/longterm/trash/trash1112.htm
In other words, soon Chapel Hill will be engaging in social injustice by shipping its garbage out-of-state. If an area grows to the point where it can no longer take care of its own trash and must “stick” it to poor minorities in other states, then maybe it’s time to curb growth—isn’t this one of the elements of “sustainable growth?”
Nancy Oates
/ July 4, 2011Robin, I agree that building too many condos, such as the town-subsidized condos at 140 West is risky without a strong market for them. And, yes, they will likely raise nearby property values in the working-class neighborhood of Northwood, reducing our diversity. But you overlooked the diversity that Aydan Court would add, increasing middle-income housing at the same time it adds more than $1 million to the town’s affordable housing effort. Aydan Court would be located in the transportation corridor targeted for dense growth and would be in an area of high demand, so it wouldn’t have some of the risks that 140 West has. And I believe it’s wrong to deny entry to people who want to live in our nice town unless they are wealthy. You and I have been able to find homes we can afford, even though we aren’t wealthy. Why would you want to deny that opportunity to others?
Robin Cutson
/ July 4, 2011The taxpayer subsidized condos were, and are, a complete fiasco. And using taxpayer’s money to subsidize private for profit development is ridiculous and unethical even if it is not illegal.
And I’m glad you recognize that gentrification does raise property taxes and therefore drives out the working class.
And therefore it should not be difficult to understand that too much residential development also raises taxes for everyone which increases the cost of housing for everyone and therefore drives out the working and middle class because residential development costs more in taxes paid out that it generates in tax revenue coming in. The more residential development an area has, the more that area will go into an economic hole which means escalating taxes and fees unless there is a good balance of commercial development—which Chapel Hill DOES NOT have.
It is also illogical to say building expensive condos (starting at $400,000) that are very small will increase “diversity” by adding middle income housing. What diversity? Even the representative from the Housing Trust stated they would rather have a payment of cash instead of the developer building a few affordable condos on their site because “families won’t won’t to live in these small condos.” The only people these small luxury condos MIGHT appeal to is wealthy elderly people or wealthy young people (trust fund kids) without a family. So, no, the Aydan Court condos would not have increased diversity—but more housing like this WILL decrease diversity by driving out middle-income families and young people just starting out because they won’t be able to afford the high property taxes and fees on top of a mortgage payment. So the bottom line is that it is YOU, not me, who appears to want only wealthy people to live in Chapel Hill.
As for the affordable housing payment I want to make the following point:
We cannot continue to rezone environmentally sensitive property and grant SUPs to allow developers to destroy the environment and our watershed areas and drinking water supplies under the “justification” that we can wrest some affordable housing, or cash for affordable housing, out of some wealthy developer. Destroying our ecosystem and our drinking water supplies hurts everyone—not just the citizens of Chapel Hill but our neighbors in other towns who depend on Jordan Lake for their drinking water. Only the most short-sighted or callous among us would continue to support development that harms the ecosystem. And I would also like to point out that developers who have made fortunes off their developments are perfectly free to donate money to affordable housing for a fat tax deduction without being forced to do so by inclusionary rules—are we to assume that these developers are so greedy that they refuse to do this and give something back to the community?