Ongoing property tax debate Governor's tax cap plan has grass-roots support Removing uncertainty and holding down cost should help spur sales, local Realtors say By Jeff Swiatek and John Russell, The Indianapolis Star  11/2/2007 Gov. Mitch Daniels' property tax cap plan is expected to help stabilize a housing market that's suffering one of its worst downturns since the early 1990s. The far-reaching proposal has won the support of real-estate professionals as well as the Indiana Apartment Association despite the fact that it taxes rental properties at higher rate and doesn't extend them homestead exemptions, a benefit sought by many landlords. What seems to have sold residential real estate interests on the governor's plan is its cap on property taxes. They'd be capped at 1 percent of the assessed value for houses and 2 percent for rental properties. Being able to figure your property tax bill in advance, using the simple cap formula, is an appealing feature to builders, agents, and home buyers and sellers. "At least homeowners would now be able to buy and sell a home knowing what the taxes will be," said G.B. Landrigan, president of Landrigan & Co. Realtors. He blames soaring real estate taxes for his company's inability to recently sell a Northside house that was listed for sale at about $380,000. Although Marion County's assessments are being redone, the house's new property tax bill had soared this summer to $9,500 a year -- more than double what it would be under the governor's plan. That, in part, is why the Indiana Association of Realtors said the governor's plan represents the "major surgery" needed on the tax system. "Realtors stand ready to help," Karl Berron, chief executive of the Realtors group, said in a statement. The Realtors not only like the cap idea, but they also support the plan's call for eliminating township assessors in favor of handling assessments at the county level. That would likely reduce the number of inaccurate assessments, which one 2005 study found had occurred in at least a third of bills, said Mark D. Brown, director of policy and research at the state Realtors group. By capping bills and standardizing assessments to reduce errors, the governor's plan would help steady a state housing market that ranks 10th nationally in foreclosures, he said. Brad Davis, chief executive of Davis Homes in Indianapolis, agrees. "Right now there's a lot of paralysis out there as far as buying homes. (The governor's plan) would help clear it up," he said. A 1 percent cap on property taxes "is reasonable," Davis added. H. James Litten, president of home sales at F.C. Tucker Co., Indianapolis' largest residential brokerage company, agreed, saying a 1 percent cap would limit drastic tax hikes and "be a positive for real estate. Marion County and surrounding counties will be impacted very positively by this." "There's much to like about it," concurred Kurt Flock, vice president of Flock Real Estate Group, which specializes in selling homes Downtown. "You want to do something permanent in nature" to address soaring property taxes, he said, "and that is as fair as you can probably make it." The housing market in Center Township, which encompasses much of the pre-UniGov Indianapolis city limits, is reeling, Flock said, with just 18 homes priced at more than $100,000 listed as sold in October in the Realtor's Multiple Listing Service, which counts most home sales. That compares to 776 homes above $100,000 that were listed for sale. If the feeble sales pace keeps up, it would take more than two years for the current inventory of listed homes in Center Township to sell. Northside homeowner Laura Hile, who has led recent property tax protests, including hosting a "property tax relief yard sale," said the governor's plan still leaves people vulnerable to big tax hikes if their home's assessment is significantly increased. "My fear is . . . people will think what he (the governor) has planned is good enough. I think there are better ways (to rein in rising property taxes)." The Indiana Apartment Association, which represents landlords who own or manage about 200,000 rental units across the state, said it supports the 2 percent property tax cap for rental properties. The group said its members have seen property taxes nearly double in the past three years. "We're very happy to be included in the governor's plan for tax relief," said Lynne Sullivan, executive director of the Indianapolis-based group. But some say they would like the relief to go further. They point out that rental properties, unlike owner-occupied houses, are ineligible for homestead exemptions, mortgage deductions and other credits, which can add up to thousands of dollars a year in savings per property. "Residential rental property owners get zero deductions for anything," said Greg Ross, a Broad Ripple landlord. He said rising taxes on his properties in recent years led him to sell five single-family homes he owned as rentals. He now owns one single-family rental, 12 doubles and a 20-unit apartment complex. Ross said he's unable to pass along higher taxes to tenants, because renter demand is so soft that rent increases would scare off tenants. But his tax bill keeps climbing. Taxes on one of his properties have soared from $980 a year to $3,800 a year. The good news for landlords is occupancy rates at apartment sites in the Indianapolis area are creeping up. The occupancy rate now stands at 90.1 percent, up from 88 percent two years ago, according to George Tikijian, who brokers sales of apartment buildings and has tracked the market for more than a decade. Tikijian said he wishes the governor's plan would tax rental properties at the same 1 percent rate as single-family homes. "If you think about it, there is some inherent unfairness," he said. "We're pleased to not be in the 3 percent (the proposed rate for business properties), but why would one class of housing get a 1 percent cap and rental housing pay double that?"