When Mecklenburg County’s 365,000 new property tax valuations go out in January, homeowners are likely to be the ones paying most attention — but renters could be in for a bigger surprise.
That’s because while property taxes typically have the biggest up-front impact on homeowners, who get the bills directly and pay them annually, this year’s revaluation is raising property values far more for commercial properties. And commercial property includes Charlotte’s 106,000 or so apartment units.
That could mean higher property taxes for those apartments when bills go out in July, and apartment owners are likely to pass at least some of that increased cost to tenants. And while homeowners typically get the lion’s share of attention during revaluation season, almost half of Charlotteans rent, according to the U.S. Census.
“A lot of people are like it’s not my problem; I’m not a homeowner,” said Mecklenburg County commissioner Pat Cotham. “This is going to affect you just as much, maybe even more. It’s not on their radar.”
The county plans to finish its initial revaluation of every property in Mecklenburg by the end of the year. At a presentation earlier this month, Mecklenburg County Tax Assessor Ken Joyner said the value of all real estate is up 51 percent so far.
That doesn’t mean everyone’s going to see a huge tax bill increase. The city and county already passed budgets with property tax increases this year, but next year — the first when the new values kick in — they can set “revenue neutral” tax rates, meaning they lower the rate to collect the same amount of money. By law, they’re required to publish the revenue neutral rate, but can choose to set it higher.
But even a revenue neutral tax rate could mean bigger bills for some. The median home value is up an average of 38 percent, Joyner said, while the median commercial property is up a whopping 79 percent.
Right now, about 35 percent of the county’s property tax base is commercial and 65 percent is residential real estate. That means that when the county sends out property tax bills next year, many single-family homes could see smaller bills, while commercial properties get bigger bills, because commercial properties will make up a bigger slice of the county’s tax base pie.
Some of the commercial properties that are likely to see the biggest tax increases since the 2011 revaluation appear to be older apartments, many of which have been bought by investors in recent years.
▪ The Arcadian Village apartments, which date to 1970, sold in February for $24.3 million. The 348-unit apartment community on Idlewild Road is assessed at only $3.4 million for tax purposes, public records show.
▪ The Grand Reserve at Pavilions apartments at I-485 and U.S. 29 sold for $46.9 million last year — almost three times more than their assessed value.
▪ Even some newer buildings have seen big jumps. The Berkshire Dilworth, on Morehead Street, was assessed for $43.5 million, but sold in 2016 for just under $75 million.
Ken Szymanski, executive director of the Greater Charlotte Apartment Association, doesn’t expect a huge jump in rent. But he said apartment owners will have to pass some of their increased tax bills on to tenants in the form of higher rent.
“It may not happen immediately, but it’s inevitable,” said Szymanski. “The company will ultimately pass that on to consumers in the marketplace, to the extent they can.”
He said apartment operators have been watching the revaluation closely, and many expect to be hit with higher bills next year.
“Any owner knows that’s imminent,” he said. “It’s not a reason for (renters) to be alarmed.”
Indeed, property tax bills are far from the only factor driving rent, which is up 36 percent in Charlotte over the past five years, to an average of $1,142 a month, according to Real Data. The supply of new apartments — some 27,000 are planned or under construction over the next few years — could hold down rent increases, as the supply balloons and properties compete with each other to lure tenants.
And landlords won’t be able to summarily raise the rent on tenants with leases in place until those leases expire, of course.
At the Arcadian Village apartments, tax records show the owners paid about $129 per unit for property taxes last year, or just under $13 a month. Even if property taxes tripled, and the owner passed all of that along in increased rent, that would add $26 a month in rent to cover the tax jump.
But Cotham said higher taxes are just one of many potential factors that could push rent higher. “Value add” investors, who buy older apartments and renovate them to raise the rent, for example, have bought up about 13,000 apartments in Charlotte in recent years.
“The camel’s back is already broken. It’s just another bone in the broken back,” said Cotham.
And for low-income renters and those on a fixed income, even a small increase can make a difference, making it harder to buy groceries or pay for prescriptions, for example.
“Twenty dollars (a month) can be a big deal,” said Cotham.