Housing values have rocketed higher across most of New Orleans over the last four years and have spiked dramatically in gentrifying areas near its historic core, according to new estimates from the Orleans Parish Assessor’s Office — changes that likely portend much bigger tax bills for homeowners in fast-appreciating areas.

The increasing prices highlight a growing crisis in affordable housing in New Orleans and could play a role in further straining household budgets when property owners get their new assessments later this month at the end of a quadrennial citywide reassessment mandated by law.

The unveiling of the tax rolls will kick off a review process that will last through the end of the year, including a chance for extensive appeals. But it is nearly certain to result in significantly higher tax bills in areas of the city where values have risen steeply.

The exact changes to the new tax rolls are still not final. Assessor Erroll Williams’ office has not yet finished fine-tuning its assessments to a point where a citywide average or an overall increase for the roughly 166,000 properties in the city can be calculated.

Moreover, it will be up to the various entities that receive tax revenue, from the city and the Orleans Parish School Board to the Audubon Commission, to determine the new tax rate. That figure, along with the new valuations, will determine what people actually pay in taxes.

But the preliminary data show that certain areas — such as the district around the new Mid-City hospitals, St. Roch, St. Claude and the Fair Grounds Triangle — will see big increases.

Nearly 26,000 residential properties — or almost one in six citywide — are in neighborhoods that saw average sales prices jump by more than half over the past four years, according to the assessor’s data. Almost 9,500 of those are in neighborhoods where the sales price went up by more than 75%, and thousands of properties sit in areas where it more than doubled.

The changes charted by the Assessor’s Office represent a steeper climb than the city saw during its last four-year assessment cycle, Williams said.

“The value change is much more substantial than from 2012 to '16,” he said. “There’s a lot more million-dollar sales. It’s scary what people are paying a million for. How much of that is real value? Or is this people moving here? How much is it affected by Airbnb, location and character changes in the neighborhood?”

There are exceptions to the growth curve, but they are relatively few. Parts of New Orleans East and Algiers have seen drops in value, according to Williams. Homeowners in those sections will almost certainly get some tax relief, although the figures are a sign that those neighborhoods are struggling.

How much the overall change in values that Williams has noted will be reflected on an individual tax bill will depend on a number of factors. Those include final reviews by the Assessor’s Office, and the result of any appeal. They could also be impacted by a new constitutional amendment aimed at spreading increases for hard-hit properties over four years. And most important, tax bills will be determined by the tax rates set by the various taxing bodies.

But the potential for a major jump in tax bills could exacerbate an affordable housing crunch that is already putting the screws to the working class.

Pushing out residents

Rising housing costs have been blamed for pushing many long-time residents out of desirable neighborhoods in favor of wealthier newcomers in a city where average wages are low and stagnant. And while the new assessments simply account for the realities of the market, larger tax bills could drive costs for both owners and renters even higher.

The number of people being forced out of their homes due to rising costs is now causing displacement on a level almost comparable to a “second Katrina,” said Patrick Egan, executive vice president at Latter & Blum, who has been working with a team at the firm to come up with ways to spur more affordable housing development.

Williams' office is putting the final touches on the property assessments for the coming year. That starts with figuring out the average sales price in the city's various neighborhoods over the previous four years.

But the sales prices account for only part of what value will be assigned to a property. Whether a property is a single-family home, multi-family complex, a condo or other dwelling must be considered, as are factors like the condition of the property, Williams said.

While much of that is determined by a computer algorithm, the assessor’s staff also goes through the property rolls by hand to make adjustments. Those adjustments were still being made this week, leaving it unclear exactly where the final rolls will end up.

“I don’t have all the answers; I just know we don’t create the market,” Williams said. “What we get paid to do is analyze it and see if it makes sense and make sure everyone pays their fair share.”

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Assessments can be challenged at various levels before they become final, starting with Williams' office. He said he encourages residents to take advantage of that right if they feel their homes were assessed too aggressively.

“We’re reasonable; we’re looking at it from the viewpoint that we don’t know” all the details about a particular property, Williams said.

Dramatic price changes

The data compiled by the Assessor’s Office spotlight the effects of the spread of gentrification throughout the city, though the areas that jump out likely will not come as much of a shock.

Take the Marigny and Bywater, two areas that already saw prices rise dramatically in previous years. The average price per square foot in much of Marigny is now $276, according to the new figures. It’s significantly higher in the Marigny Triangle, between Esplanade and Elysian Fields avenues, where the price falls between $293 and $339. Bywater comes in a bit lower, at $221 per square foot, but still far higher than it was less than a decade ago.

But those prices, once nearly unthinkable for those neighborhoods, have pushed a second wave of gentrification into surrounding areas, which have in turn seen dramatic spikes over the past four years. In the rapidly changing St. Roch area, average prices have increased by more than 90 percent, going from $65 per square foot to $125.

Nearly as dramatic are changes in St. Claude and areas of the 7th Ward, particularly those near the North Rampart streetcar line that was completed in 2016. Portions of the neighborhood near Rampart have seen average prices increase by more than 70 percent, with homes in some areas commanding an average of $150 a square foot.

And the increases don’t stop there. Farther away from the river, near Florida Avenue, prices increased by 40 percent to 60 percent, suggesting the rising values are pushing farther out.

Central City has seen large increases as well, with areas along the Oretha Castle Haley Boulevard corridor jumping by 50 percent.

All those increases are dramatically higher than one would see with a series of 5 to 6 percent annual increases in prices — the magnitude of change that real estate experts typically expect, said Paul Richard, with Latter & Blum. On the high end, such increases would amount to an increase of around 26 percent over the four-year timeframe included in the assessor’s data.

While the vast majority of areas in the city should brace for increases, there are exceptions — mostly in New Orleans East and Algiers.

The East saw prices dip in several neighborhoods, including Little Woods and some areas along Chef Menteur Highway. Large sections of Algiers — outside of the historic area of Algiers Point, which saw some significant increases — are seeing prices fall as well.

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In many cases, the increases reflect trends that began during the recovery from Hurricane Katrina. In the years after the flood, younger residents from across the country have flocked to the city, particularly to neighborhoods in the historic core, said Egan.

That, combined with other factors — including low interest rates that have given buyers the ability to afford higher-priced homes and the proliferation of short-term rentals — put significant pressure on the market, he said.

All those factors have come at a time when there has been a huge loss of cheap housing, thanks to the storm — and yet relatively little new affordable stock created. A report in April by the affordable-housing group HousingNOLA found that while there’s a need for nearly 33,600 additional affordable homes in the city, only about 414 units had been made available between September 2018 and March. Even those making a decent living are now unable to afford many neighborhoods.

Egan said Latter & Blum is about to begin pushing for solutions aimed at providing homes within financial reach for a wider portion of the city’s residents. That includes pushing for zoning that would allow for building more accessory units on properties and utilizing public-private partnerships to develop affordable housing in areas such as the Lower 9th Ward, which Egan noted has more than 900 vacant or blighted acres that could be used for new housing.

Few options for some

Nestled between Broad Street and the racetrack, the Fair Grounds Triangle is a racially diverse area whose residents fought in recent years to shut down a corner liquor store that had been a magnet for crime and otherwise to make improvements to the neighborhood. Over the past several years they've reaped the benefits of that effort, with residents saying they now feel safe bringing their children down streets where they wouldn't have gone before.

But those improvements also attracted more interest in the neighborhood and a spate of new homes being built and sold on vacant lots. And that, in turn, has driven up prices dramatically.

A group of residents reacted with shock when they were told the average sales price in their area has jumped by more than 91 percent, putting the average price per square foot around $165. The spike, and the possible higher taxes it represents, has left them feeling that the improvements they made — and their efforts to keep long-time residents in the community — may now be repaid with higher bills that could make their homes unaffordable or force landlords to jack up rents.

Their goal "wasn't to push anyone out of the neighborhood," said Beverly Swinney, a homeowner who has lived in the neighborhood since 1995 and rents out units on her property.

An unaffordable tax bill would leave residents with few options.

"If we're forced to sell here, we can't afford anywhere else in the city," said Morgan Clevenger, president of the neighborhood association.

Several residents said they worry about where they might have to cut back to pay a higher tax bill. And, in an area that flooded during the 2017 summer storms and faces continuing problems with drainage and even a leaking pool at the Stallings Playground, the neighbors said they were upset at the idea of paying higher taxes when they don't see improvements in city services.

And simply owning a property that's more valuable doesn't help with the day-to-day expenses.

"That's only good if you're selling your home," said Gwendolyn Davis, who has lived in the neighborhood for 42 years.

Impact still to come

The final impact the price increases will have on tax bills is not yet clear.

First, a constitutional amendment passed last year phases in higher taxes over four years for property owners who see their assessment rise by more than 50 percent.

Then there's the possibility of a new amendment, which will be put to the voters this fall, that would allow New Orleans to design a program that would provide property tax breaks to keep people in their homes or provide incentives for affordable housing. However, the details of that plan have not been worked out.

The state constitution also prohibits local governments from automatically reaping a windfall from a reassessment through a mandated “roll back” that cuts the tax rate to a level that leaves the government collecting the same amount of money as it did before.

But the rollback can be overridden by the City Council and other taxing authorities including the School Board, Sewerage & Water Board and levee districts. Such a “roll forward” can increase the tax rate up to the same place it was before the roll back.

It’s not clear how the various government agencies that receive property taxes in New Orleans will react to the assessment increases that would bring them millions of dollars in additional revenue. However, Mayor LaToya Cantrell’s administration has been aggressive in seeking out new revenue sources, citing the city's rotting infrastructure and other needs, and Chief Administrative Officer Gilbert Montaño suggested at least some hikes might be in the cards.

Montaño said he had yet to see the increases estimated by the assessor. But he said unfunded needs in the city, including the cost of recurring expenses that are already part of the budget, make it unlikely the city would roll back its millage rates all the way.

The city’s five-year financial forecast projects a 9.5 percent increase in revenue from the reassessment, a figure that could well be in reach given the new price averages.

A major consideration for the administration will be how to pay for police raises that were put in place under former Mayor Mitch Landrieu and approved by a City Council that included Cantrell. The raises were pitched as necessary to recruit and retain police officers, but the previous administration funded the first two years of the program with one-time money that came from permitting fees on the conversion of the former World Trade Center building into a Four Seasons Hotel.

That money will run out by next year, and the plan had always been that new money from the reassessment would fill the resulting $13.2 million gap, Montaño said.

While sympathetic to those getting higher tax bills, Montaño said the city needs more money than it now takes in each year to improve services, provide more funding for affordable housing and infrastructure, and meet other needs.

“A city of this size and this level of service should have a much higher level of revenue,” he said. “Most people realize we aren’t funded the way we should be.”