Home equity wipeout prompts fear of gentrification in east Winston-Salem
The black residents of Winston-Salem east-side neighborhoods that packed into the pews at First Calvary Baptist Church, where Winston-Salem Councilman Derwin Montgomery is a senior pastor, testified last week that they’ve seen $60,000, $70,000, as much as $80,000 in equity wiped out from homes they worked hard to improve over the years — figures that represent from 55 to 71 percent of their 2009 tax values.
The various black elected officials who showed up to hear their concerns understood the problem well. Montgomery has seen almost 60 percent of his home value wiped out. NC Rep. Ed Hanes Jr.’s father, a retired school administrator, watched his home value wither from $168,000 to $49,000.
Forsyth County Commissioner Everette Witherspoon, one of two members who represents District A, estimated that the combined wealth lost by the 100-plus people in the church falls somewhere in the range of $3 to $4 million.
The last tax revaluation in Forsyth County took place in early 2009, before the full brunt of the recession had taken effect, and this year’s assessment gauges the full damage of the housing crash. The revaluation has resulted in a loss of value across the county — 88 percent of all properties — but the pain has not been shared equally.
A map produced by the Forsyth County Tax Department shows that the deepest decreases in property value — upwards of 35 percent and more than 50 percent — are clustered in predominantly African- American areas of Winston-Salem east of US Highway 52 that were also hit hardest by the foreclosure crisis.
“You cannot penalize people in my community who take care of their property and don’t sell their property,” Forsyth County Commissioner Walter Marshall said at the community meeting. “There’s no sales, but the property value is dropping 40 or 50 percent. Now, that’s ridiculous. Nobody’s going to tell me that’s fair. Somebody is gaming the system, and we know it.”
Marshall and Witherspoon represent District A, which was drawn to ensure minority representation and covers the east side of Winston-Salem.
The homeowners at the community meeting became increasingly frustrated during a presentation by Tax Assessor John Burgiss, interjecting questions before he had finished and collectively expressing anger at some responses as the meeting progressed.
Yolanda Hairston, who lives off of Carver School Road, held up record cards from a sample she conducted of properties in Ardmore and the Reynolda Road area — predominantly white neighborhoods on the west side — and cited property values that had dropped from $106,000 to $103,000, $113,000 to $100,000 and $170,000 to $166,000.
“And then I come to my neighborhood,” Hairston said. “And last year my house was valued at $128,900. This year, it’s valued at $57,815 — a $71,000 difference. I understand fair-market value, but something’s wrong with the calculation when stable neighborhoods that are not turning over a lot are being penalized because we don’t have the high rate of turn that other neighborhoods have that are driving sales prices up. There needs to be some kind of adjustment in the numbers for the stable communities where people choose to live in their homes.”
Another woman echoed Hairston’s sentiment.
“We have to take the market as we find it, ma’am,” Burgiss said, prompting outbursts of protest.
Much of the back-and-forth between the tax assessor and the homeowners focused on the fact that qualified sales — standard transactions that exclude sales under duress, discounted sales from one family member to another, sales that include furnishings, or sales any other circumstances that would otherwise skew the data — are a primary driver of property valuations. The relative dearth of qualified sales on the east side of Winston-Salem — the area that has also been hit hardest by the foreclosure crisis — makes it more difficult for assessors to find reliable data on which to base valuations.
Burgiss presented two slides in his PowerPoint presentation showing sales in the core of Ardmore compared to sales in four east-side neighborhoods in an attempt to make the point that there was more data in Ardmore, but the information served to anger east-side homeowners further rather than to reassure them.
Burgiss directed the audience to a sample property on Shalimar Drive, located in a Census tract that is 59.8 percent non-white. He noted that the property was appraised for $95,200 in 2009, sold for $70,000 in 2012 and was reappraised at $58,700 this year.
“No!” the homeowners uttered in collective horror and outrage.
“Go on the rich side of town and revalue theirs like that,” one man called out. Burgiss defended the valuation by noting that the 2013 value was more closely aligned with the sale amount than was the 2009 value.
An analysis of 10 properties in the core section of Ardmore that were sold in 2012 based on Burgiss’ data shows that they lost an average of 4 percent of their valuation over the past four years, compared to 10 properties in east-side neighborhoods sold in 2012 that lost 35.1 percent of their value on average over the same period.
Notwithstanding the anecdotes of dozens of black homeowners and statistical analysis showing that predominantly black neighborhoods have lost more equity than majority white areas, Burgiss said in a recent interview that he doesn’t pay attention to race.
“I wouldn’t know of any correlation because we don’t look at the demographic data; we look at the sales data,” he said. “It’s about the sales that have occurred. We are following the sales and the market. What those sales values are, are determined by buyers and sellers in the market and not anyone in the assessor’s office.”
Burgiss said his office used the same formula for assessing properties across the county.
“I’m obligated to follow the statutes that are in place today,” he said, “and we have done exactly that.”
Looked at another way, the central Ardmore properties recovered 96 percent of their value after the market bottomed out in the depths of the recession, while the east-side properties recovered only 64.9 percent of their value.
Winston-Salem Councilman Dan Besse, who represents Ardmore in the Southwest Ward, noted the implications in his e-mail newsletter last week: “The good news for neighborhoods which have seen an average increase in market values is twofold: You know that your neighborhood is an especially desirable place to live, and that if you decide to sell your home and move you’re likely to get good value for it. The bad news is that unless we cut spending so much that essential services take a beating, the average homeowner in those neighborhoods is likely to see a higher individual tax bill.”
The Rev. Paul Lowe Jr., who is the pastor of Shiloh Baptist Church, was among the community leaders who hinted at a nefarious purpose in the valuations during the meeting.
“It seems as though our neighborhoods are being targeted,” he said.
“When I hear people go from $90,000 to $20-some thousand, I mean that’s epidemic proportions. Something is wrong in these revaluations.”
Lowe asked members of the NC General Assembly who were present to file a bill providing additional time for residents to appeal their revaluations.
“If that doesn’t happen,” he said, “we’re going to watch gentrification take place in our communities.”
Rep. Ed Hanes Jr. (D-Forsyth) said he was working with legislative staff to do just that, and Sen. Earline Parmon (D-Forsyth) said she plans to work closely with Hanes on the legislation. Hanes said the purpose of the state law governing revaluations that is on the books is to avoid “a punitive tax.” “My argument to that is that in this day and time punitive can be looked at in the opposite way,” he said. “And that is, it could be considered that as we’re going through this real estate downturn — since valuations are what they are, nationwide — that it is punitive, in fact, to take my father’s house, for example, from $168,000 to $49,000. That’s punitive to him. That’s punitive to his children, who he wants to leave a legacy to along the way. And so that’s the argument that I’m trying to put forth to get us into the second prong of an evaluation that would require us to go back and redo the entire appraisal process.”
Hairston echoed Lowe’s fears about the mass devaluation setting off a wave of gentrification.
“I think there’s something bigger afoot,” she said after the meeting. “When a whole community gets devalued by 60 percent, that makes it real easy pickings for someone to come in and buy the whole thing up.”
At the prodding of Joycelyn Johnson, a community leader who is challenging Derwin Montgomery for the East Ward seat on Winston-Salem City Council, Burgiss agreed to push back the deadline for appeals from Tuesday to March 12. Property owners who dispute their valuations can also appeal to the Forsyth County Board of Equalization by June 28. Commissioner Everette Witherspoon urged residents to appeal to the tax assessor’s office instead, explaining that the board of equalization tends to attract people from the real estate industry who are motivated by a desire to reduce tax burden and would not necessarily be sensitive to concerns that properties are undervalued.
Witherspoon noted that Mecklenburg County hired an outside firm to review the county’s 2011 revaluation in response to complaints about equity, although in that case property owners with fast-rising values took issue with appraisals that caused them to pay what they contended was an inordinate share of taxes. Witherspoon said Burgiss shouldn’t take his comments personally.
“We have to look systematically at how we’ve done this revaluation,” he said. “It’s no disrespect to you, but other counties have had independent assessors come in and look at it because it wasn’t fair.”
Burgiss said cases of his office reviewing entire neighborhoods for accuracy are rare but not unprecedented. In those cases, the assessor’s office asked the board of equalization to change the values.
“We have brought neighborhoods to them in the past,” he said. “Not many times, but there have been cases when we realized we made an error on a neighborhood.
“If there’s an error,” he said, “we’re certainly open to looking at it.”