One in 355 homes in Queens faced foreclosure during the third quarter of this year, and the continued spike in foreclosures throughout the state could begin affecting local government finances, according to a recently released report by New York State Comptroller Thomas DiNapoli.
DiNapoli’s report entitled Meltdown: The Housing Crisis and Its Impact on New York State’s Local Governments, shows that property tax revenue, which is the primary source of tax revenue for local governments, could decrease by as much as $1.3 billion this year, and cause governments to raise taxes to offset the deficit.
“Over time, lower property values can lead to lower property tax collections,” DiNapoli said. “With no end in sight to the housing crisis, many local governments will find their finances stretched pretty thin in order to maintain services.”
In 2007, property taxes accounted for more than 44 percent of total revenue from local governments. If property values decline by roughly 5 percent this year and results in a loss of $1 billion to $1.3 billion in tax revenue, local governments would have to raise tax rates by 5.3 percent to raise the same amount of revenue as last year.
“Property taxes are the foundation for local tax revenues, but that foundation is weakening,” DiNapoli said. “While New York State is less affected by the housing crisis than other states overall, there are some regions where foreclosures have increased by more than 500 percent since 2006 - which lowers the value of surrounding homes and puts demands on municipal services.”
From July to September of this year, Queens had 2,346 foreclosures, which was a similar number to the same period in 2007, but a dramatic increase compared to that time in 2006, which saw 1,136 foreclosures, according to data from RealtyTrac.
In a recent interview with The Queens Courier, Queens State Senator Malcolm Smith, who could become the Senate Majority leader in January, said that addressing the foreclosure crisis would be one of his conference’s first priorities.
“I agree with President-elect Barack Obama that we should have a moratorium on mortgage foreclosures so that people can reconfigure,” Smith said.
Meanwhile, the high rate of foreclosures is also the impacting the property values - in a negative way - of other homes in their neighborhoods.
During the first half of 2008, 1,787 homes were sold in Queens for at a median price of $550,000, however, that represented a stark decline from 2007 when 2,688 homes were sold with a median price of $580,000.