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Real Estate Bubble

Dear Mr. Murphy:

Thanks for responding to my letter.  I'd like to answer your response, if I may, because you raise some important issues.  

I perceive from your response to my letter as well as from your second article, "Reassessment II," that you believe in fairness, i.e., you argue that high-end homes are under-assessed when compared to middle-range homes.  

Unfortunately, reassessments don't correct the inequity you describe.  The Town consistently undervalues very expensive homes because it's more difficult to value one-of-a-kind estates than it is to value average homes.  As a result estates tend to be undervalued by a couple of million dollars whereas average homes are valued close to or above market value. Average homes are also overvalued because the Town disavows the negative impact of incompatible or high-traffic businesses that operate in and around working class neighborhoods.

The inequity of reassessments is further exacerbated when the Town reassesses during the type of real estate "bubble" that exists today. Since working class homes are assessed at the peak of the market, the real possibility exists that, when the market softens, these homes will sell at prices less than assessed value.

It seems to me that the best way to correct the inequity you describe is not via a reassessment but rather by imposing an estate tax which can be increased or decreased annually depending on market conditions and the needs of the Town.

I'd also like to address one other issue pertaining to economic fairness.

As a result of the last reassessment, working class couples who save their money to buy homes in Southampton have no reassurance that their taxes will remain stable and reasonable, and that's not good for the working class, for real estate or for the economy.

In my opinion Mr. Heaney and Ms. Kabot have a limited point of view that "plays out" in strange ways.  For example, Ms. Kabot has announced that her goal is to eliminate "blight" in Southampton.  So the Town Board passed a law forbidding homeowners to hang laundry in front of their homes.  On the other hand, neither Ms. Kabot nor the Town Board have a problem with noisy and dirty sandmines.

Why would someone be offended by clean laundry and not be offended by a dirty business?

It seems to me that Mr. Heaney and Ms. Kabot represent a small group of business owners who prefer to operate without restraint and who don't care for homeowners who get in their way, which is one of the reasons I believe Mr. Heaney and Ms. Kabot have exempted businesses from the reassessment.

Now I happen to support business but it seems short-sighted to do so at the expense of homeowners.

As an example of this short-sightedness, I'll use East Quogue where colleagues of Mr. Heaney and Ms. Kabot run businesses.  Local bar/liquor store owners who, by their own admission are down-scale, own a lot of real estate in the business district and should therefore receive tax breaks from the reassessment. These owners have also received subsidized housing along with property tax breaks. They support sandmining and argue that they don't want to live in a rich man's town.

So, on the one hand, businesses that own relatively valuable property expect the working class to subsidize their homes, property taxes, business taxes and school taxes.  

On the other hand, more upscale businesses in the hamlet who rely heavily on discretionary income could potentially lose business as homeowners lose discretionary income to rising taxes.  Therefore the benefits of a tax break would be wiped out by a loss of income.

I understand your argument that a working class guy who has owned his home for the past 10 years may not be paying enough taxes, but will raising his taxes to the level of wealthier homeowners in order to subsidize a small number of businesses achieve the fairness you desire?

Finally, comparing Southampton's taxes to the taxes of Shoreham/Wading River also presents a problem. Fifty percent of the homes in Southampton are second homes whereas Wading River is a year-round suburb. If, indeed, 30 percent of homeowners in Southampton received decreases in assessments and 30 percent received increases, then it's conceivable that wealthy second-home owners received decreases and working class homeowners received increases. Once again, I don't think this is the fairness you hope to achieve.

Thanks for listening to my opinions.

June 06, 2006

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