Bud­get stale­mate hits hous­ing mar­ket

Mal­loy’s pro­posal puts pres­sure on lo­cal taxes, home own­er­ship

The Register Citizen (Torrington, CT) - - FRONT PAGE - By Chris­tine Stu­art ct­newsjunkie.com

HART­FORD » A Con­necti­cut econ­o­mist and a real es­tate agent say Con­necti­cut’s bud­get stale­mate — and the pro­pos­als be­ing put forth to re­solve the bud­get deficit — would hurt the hous­ing mar­ket.

Gov. Dan­nel P. Mal­loy’s re­vised ex­ec­u­tive or­der, which would go into ef­fect if the Gen­eral Assem­bly fails to pass a bud­get in the next few weeks, elim­i­nates state ed­u­ca­tion fund­ing, also known as the Ed­u­ca­tion Cost Shar­ing grant, for 85 Con­necti­cut towns and re­duces fund­ing to an ad­di­tional 54 com­mu­ni­ties. It re­stores fund­ing at 2017 lev­els for Con­necti­cut’s 30 low­est-per­form­ing school dis­tricts, in­clud­ing Hart­ford, Bridge­port, Water­bury and New Haven.

Mean­while, Mal­loy’s orig­i­nal bud­get asks cities and towns to con­trib­ute to teacher re­tire­ment costs, which, ac­cord­ing to mu­nic­i­pal­i­ties, would force them to in­crease prop­erty taxes. Moody’s In­vestor Ser­vices re­cently re­ported that the abil­ity of mu­nic­i­pal­i­ties to use bud­get re­serves is a chal­lenge in Con­necti­cut be­cause the me­dian rainy day funds for cities and towns is 13 per­cent, which is lower than the na­tional me­dian of 31 per­cent.

Don Klep­per-Smith, an econ­o­mist with DataCore Part­ners in New Haven, said any at­tempt to

bal­ance the state bud­get at the ex­pense of ed­u­ca­tion grants would dam­age an al­ready frag­ile hous­ing re­cov­ery.

He said, even though sales of sin­gle-fam­ily homes are up this year, “me­dian prices for sin­gle-fam­ily homes have been ex­tremely soft.”

In July, the me­dian price of a sin­gle-fam­ily home in­creased 2.7 per­cent to $267,000, com­pared with $260,000 a year ago. Prices were rel­a­tively flat for the first five months of the year.

“To cut ECS grants to mu­nic­i­pal­i­ties as out­lined in the gov­er­nor’s cur­rent pro­posal would place sig­nif­i­cant up­side pres­sure on lo­cal prop­erty taxes and sig­nif­i­cantly in­crease the cost of home own­er­ship,” Klep­per-Smith said.

He said spend­ing power is run­ning well be­low his­tor­i­cal norms.

Anna Sava, a real es­tate agent in the Hart­ford area, said 75 per­cent of a home’s value is tied to the qual­ity of the lo­cal school sys­tem. Tak­ing away any state sup­port for that school sys­tem will “guar­an­tee the death of this state.”

She said it’s still a buyer’s mar­ket at the mo­ment and mid­dle-class home­own­ers with homes val­ued be­tween $200,000 and $450,000 are hav­ing a tougher time sell­ing them with­out mak­ing im­prove­ments.

“Gone are the days when you had the lux­ury of be­ing in this town (West Hart­ford) and be­ing able to turn your house for a profit with do­ing a min­i­mal amount of work on the home,” Sava said.

Mean­while, Con­necti­cut, ac­cord­ing to the Cen­sus, has been los­ing pop­u­la­tion. It also has an ag­ing pop­u­la­tion.

“Our pop­u­la­tion is ag­ing out, the fi­nan­cial bur­den is far too heavy on the mid­dle por­tion and our sus­tain­abil­ity is based upon how at­trac­tive Con­necti­cut is to that young per­son who’s go­ing to come here and build a life,” Sava said.

Klep­per-Smith said cut­ting ed­u­ca­tion fund­ing would make hous­ing less af­ford­able at a time when the lack of af­ford­able hous­ing is al­ready a ma­jor eco­nomic de­vel­op­ment is­sue.

If the gov­er­nor’s ex­ec­u­tive or­der is en­acted, “ECS cuts would raise lo­cal prop­erty taxes and also pro­mote a drop in me­dian hous­ing prices from our cur­rent base­line sce­nario, where prices are al­ready soft­en­ing due to out-mi­gra­tion.”

He said law­mak­ers need to re­mem­ber that for “ev­ery dol­lar earned in me­dian hous­ing val­ues, re­search shows that con­sumers will spend another 7 cents in the lo­cal economy be­cause of the added home eq­uity and gen­er­ally feel­ing bet­ter off fi­nan­cially. Con­versely, any pol­icy ini­tia­tives that serve to de­press lo­cal hous­ing markets and re­duce hous­ing val­ues will in­evitably have ad­verse ef­fects on our state and lo­cal tax base.”


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