EDITORIAL: County’s revaluation challenges homeowners

With the start of a new year, Carteret County homeowners are facing a double whammy when it comes to the financial liabilities of homeownership- anticipated increase in homeowner's insurance and the potential of an increase in ad valorem taxes as a result of a recently completed property revaluation. In both cases there is little the property owners can do since they are controlled by forces outside of their control, but it does require paying attention to the details.

In January of last year, the N.C. Rate Bureau, representing the 110 insurance companies licensed to sell home insurance in the state, sought approval from the N.C. Department of Insurance (DOI) to raise home insurance by an average 42.2% statewide. The state is divided into 29 different zones or territories based on risks associated within each geographical region.

The lowest increase of 4.3% is proposed for territory 380, which ironically includes Haywood, Madison, Swain and Transylvania counties, devastated by Hurricane Helene. The highest increase, 99.4% is proposed for Territory 120 which includes the coastal areas of Brunswick, Carteret (Bogue Banks), New Hanover and Pender Counties. The remainder, or mainland regions of those counties are proposed to see a 43% increase.

In February, a month after the rate increase was presented to the DOI, N.C. Insurance Commissioner Mike Causey rejected it on the grounds that is was "excessive and discriminatory." In October the Rate Bureau and Insurance Commission began a quasi-judicial hearing that took over 10 weeks to complete. The decision to accept or establish some compromise on the increase now resides with Causey.

Reporting on the rate case, News & Observer reporter Chantal Allam quoted UNC-Chapel Hill law professor Don Hornstein who said, "There's no way on God's green earth that the rate bureau is going to get what they've asked for," but there is every reason to expect an increase. It's just a matter of how much. Observers anticipate the commissioner's decision before the end of January.

At the same time that the insurance hearing was conducted, Carteret County was receiving a report on a countywide property revaluation which indicates that properties across the county are woefully undervalued. State statute requires counties to conduct revaluations of property at least every eight years if not more often to assure accurate values are considered for property tax purposes. If the county's fail to fulfill these reappraisals the state can penalize the county by withholding tax reimbursements that are returned annually.

In the October county commissioner's meeting, Ryan Vincent, owner of the company contracted to appraise all 62,200 individual properties in the county, gave examples of discrepancies between tax records and market values that have increased since the last revaluation in 2020. Picking from every region of the county, the valuations varied from a low of 104% increase to a high of 576% increase or almost 6 times the original values as indicated on the county's tax records.

For most home and property owners whose primary investment is their land and home, these increases seem to indicate a good financial investment. But these increases are a double-edged sword. Yes, they show a financial gain for the owners but at the same time the increases in valuations will be used to calculate both county and municipal ad valorem taxes and the amount of insurance coverage that will be required which are, on the flip side, a financial expense or liability.

Carteret County has seen a rapid run-up of real estate values over the past 40 years due to its coastal geography, its easy access to both inland and ocean waters, as well as its relative security when impacted by natural disasters such as hurricanes. The county's natural attractions have resulted in major financial investments of high-end home sites that are attracting even more interest in the area.

These investments are now impacting, some would say distorting, the property values to such a point that modest and low cost structures, also described as starter homes, are pushed aside to make room for larger, more expensive homes. These developments when added to the already inflated costs of construction and the prospect of both increased property taxes and insurance premiums, are having a negative impact on low and moderate priced homes, a problem that is already being experienced in other regions of the country.

Reporter Nicole Friedman noted in a Dec. 23 issue of the Wall Street Journal that insurance rate increases and increased property taxes caused by "surging home values," are pricing homeowners, let alone would-be homeowners, out of the market. "These ballooning expenses are rewriting the math of homeownership," Friedman writes. "In September, 32% of the average single-family mortgage payment went to property taxes and home insurance, the highest rate ever for data going back to 2014, according to Intercontinental Exchange (a multinational financial firm)."

Friedman goes on to point out that in five major metro areas, "at least a quarter of borrowers spend more than half their monthly mortgage payment on taxes and insurance, according to ICE." The result of these increased taxes and insurance premiums intensifies a lack of affordability for new or potential homeowners. It also threatens existing homeowners, particularly homeowners on fixed incomes.

The combination of increased property appraisals and the subsequent increase in property taxes as a result of the county's property revaluation has the attention of at least one Carteret County Commissioner, Mark Mansfield. Speaking about the revaluation in the October commissioner's meeting, Mansfield, who is repeating as the commissioner' vice-chairman, attempted to allay fears about the impact of the new valuations, stating that the tax impacts will be determined by the tax rate per $100 of value as well as the appraised property values.

The commissioner is right about the tax rate being a deciding factor, but when it is all said and done, property owners will still feel the impact of the new valuations for county and where applicable, municipal property taxes.

There is little that can be done to mitigate the growing cost of home insurance in the county. The potential insurance premium increases are dictated by the increasing number of insurance claims across the state, influenced by ever increasing construction costs and rising property values. As for the final decision on insurance rates, that is in the hands of Commissioner Causey who has to be concerned that his decision does not force insurance companies to leave the state because providing coverage becomes a financial liability to the companies.

The only local control over homeownership for the county rests with the county commissioners, who will be tasked with finding ways to fund county services while keeping in mind that their decision on the ad valorem rate will directly impact accessibility of homes for the majority of residents. The growing liabilities of homeownership is a concern that should get the attention of all the commissioners and one that should motivate county taxpayers to pay attention as county and municipal boards begin budgeting for the coming year and decade.