The growing number of foreclosed rental properties in the country is starting to be noticeable. Industry experts said that many landlords, who are facing property tax increases, are wary of increasing rents because they know that they would lose a significant number of tenants.
Foreclosed rental properties happen when revenue losses were incurred which led subsequently to mortgage default because of owners’ inability to make payments. Some experts said that rental property owners could not pass on the real property tax increase because the apartment price is determined by the market.
They said that owners who would think of incorporating the property tax increase on rents would surely find themselves owning an empty apartment, and subsequently, a foreclosed rental property.
Bridgeport, Connecticut acting assessor Elaine Carvalho said that all residential properties in the city were appraised at 70 percent of the market value. She added that the revenue generated by apartment buildings and large residential properties are factored into their assessment.
She explained that city residents who own income-producing properties are required to submit an expense and income report annually. She added that her office will use the old property assessment if the owner fails to submit a new report.
Meanwhile, Connecticut Coalition of Property Owners Association President Richard DeParle said that raising rents at this time when the rental market is languishing is the worst move that a property owner can do. The move will just turn away tenants, result in lost income and a foreclosed property.
DeParle said that some owners have even lowered their rents in order to attract tenants. He pointed out that it would be easy to absorb utility or tax increases or settle for a low rate of return than lose tenants.
Northbrook Apartments manager Michael Jacques said that he was forced to increase rents by almost 7 percent in 2008 because of high property assessment, insurance costs and utility bills. However, he would not consider increasing rents this year because majority of his tenants have lost their jobs and struggling to pay their rents.
The Helping Families Save Their Homes Act provides that tenants living in a foreclosed property must be allowed to stay for at least 3 months or until the lease expires.
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