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When Corporations Buy Local Homes, We All Pay Out-of-Town Investors Help Drive Prices Higher

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Above image credit: In 2021, 16% of all homes sold in Missouri were purchased by corporations. This is higher than the national average of 13%. (Canva photo illustration)
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5 minute read

The arrival of Jackson County’s latest round of property tax assessments has once again sent homeowners into a frenzy. 

At coffee shops and in online forums, neighbors are nervously chatting about dramatic increases they’ve seen, and passing along contact information for real estate agents to help with appeals. 

Confronted with a rush of inquiries and protests, the Jackson County Board of Equalization has extended the deadline for property owners to appeal their assessments until July 31, with long wait times continuing to plague the understaffed assessment department.

This is the second time in five years that many property owners in Jackson County have seen dramatic leaps in the county’s assessment of their home’s value.

The average increase this year in assessed property value in Jackson County is around 30%. 

Actual tax bills, when mailed at the end of the year, should reflect the relationship of one’s property assessment to their neighbors’ property values. 

Some inconsistencies among Jackson County property tax assessments have raised questions about the accuracy of the county’s assessment process. But other homeowners are facing the reality that their home may simply be becoming more expensive than they can afford.

Gail McCann Beatty, Jackson County’s director of assessment, told The Beacon in April that much of this year’s 30% increase can be explained by a general increase in market value.

Her insights, along with interviews with other people familiar with housing trends in Jackson County, present a complex set of factors that are making it more expensive to live in Kansas City. 

Getting Homes to Market Value

Under Missouri statute, Jackson County is required to assess all properties at market value.

The reasoning goes, if all properties are assessed at 100% of market value with few errors, then all property owners would be taxed fairly based on the actual value of property they own.

Six years ago, Jackson County received a letter from the Missouri State Tax Commission, informing the county’s assessment department that its property assessments were not in compliance with the state’s standards. 

For years, Jackson County undervalued properties. In 2018, the county assessment department, headed by a newly appointed McCann Beatty, was tasked with bringing all 301,000 properties up to market value.

This, she told The Beacon, explains the dramatic spike in property values that Jackson County homeowners saw in 2019.

With some exceptions, McCann Beatty said, the county brought its assessments up to state standards prior to the 2023 assessment cycle.

“There are parts of the county that we’re still trying to get to value. It’s not something that happens overnight because of the number of properties we have in the county,” McCann Beatty told The Beacon in April. “But I would say the majority of what is driving up these values right now is simply an increase in value.” 

She said the county has seen property values increase by an average of 14% or 15% per year. That explains, she said, why property tax assessments in Jackson County have increased by an average of 30% in the two years since 2021.

Out-of-state Investors Driving Up Jackson County Property Values

For years, Kansas City residents have spoken anecdotally about how difficult it is to buy a home in today’s housing market.

Houses are selling quickly, and often well above asking price. And when an individual is going up against an investment company with better cash flow, it’s tough to win a bidding war.

In 2021, 16% of all homes that were sold in Missouri were purchased by corporations, called “institutional buyers,” which often flip the houses or rent them out, according to an analysis by the National Association of Realtors. This is higher than the national average of 13%. A separate study, by the nonprofit newsroom Stateline, found that nearly a quarter of homes that sold in 2021 were bought by some sort of investor.

According to the Realtors study, this occurs more frequently in areas with a higher Black population, and where rents are increasing.

“There’s definitely a move by several large companies to buy and manage single-family homes as rental properties,” said Michael Frisch, a professor of urban planning at the University of Missouri-Kansas City. “What that is, in some ways, is a change from local ownership to national ownership. And with national ownership, people have deeper pockets and greater sources of capital.”

Geoff Jolley, the executive director of Kansas City’s Local Initiatives Support Corp. (LISC), which advocates for affordable housing and financial stability, said out-of-state investors are having a dramatic impact on housing in the Kansas City area.

“We see investors coming in buying properties immediately,” Jolley said. “They’re just buying them and adding them to their balance sheet. It’s an investment for them. And so they don’t really care about the nuances of negotiating the price or having the survey done ahead of time and all the things that you as a homeowner might actually care about.”

In Cincinnati, LISC found that affordable houses bought by investors were less likely to reenter the market — they often remained rental properties, with corporate owners deferring maintenance for years. The Greater Ohio Policy Center reports that the corporate investors buying homes results in the inflation of home values, market instability and displacement.

With out-of-state investors driving up demand for houses while shrinking the supply, prospective homeowners end up paying more. And when property assessments are tied to market value, property assessments go up.

Jolley said LISC is trying to formally study the impact of out-of-state investors on home prices in the Kansas City area, but he suspects that Kansas City is similar to Cincinnati. He has heard from housing officials about one out-of-state investor who owns more than a hundred single-family homes in the Kansas City area.

“We keep hearing … ‘Some investor candidate paid above the asking price and beat our offer, and they did it within two days,’” Jolley said. “I want to pull the data in and say X% of our property right now is owned by people who don’t live in Missouri or Kansas. I want us to at least have that knowledge.”

Jackson County Property Tax Bills Drive Displacement

Across Kansas City, housing costs, including home values, are increasing faster than income.

A 2020 housing study commissioned by the city of Kansas City calculated a displacement risk ratio (DRR) among Kansas City neighborhoods. This analysis compares housing costs to income — a higher DRR score means that long-term residents are at greater risk for being priced out of their neighborhoods.

Citywide, the DRR was 2.5 — roughly on par with Philadelphia and St. Louis.

But certain neighborhoods scored much higher, including the Westside, Beacon Hill, the Historic Northeast and a few neighborhoods east of Gladstone in Clay County.

In the Westside, where rapid gentrification has threatened to displace longtime residents of the historically Latino neighborhood, the analysis gave a high DRR score of 8. There, current homeowners were able to receive a property tax break through the Chapter 353 tax incentive program.

In many neighborhoods, though, homeowners and prospective homebuyers are facing a painful cycle. Fewer affordable homes on the market mean higher prices. Higher prices mean higher property assessments and, often, higher taxes.  

“Property taxes and insurance are both significant drivers of people’s overall mortgage payments,” Jolley said. “A property tax increase has a real impact on people’s payments and housing costs, and it ultimately impacts their determination of whether they can afford to stay or not. And if you’re on a fixed income, that decision point is much more real.”

Josh Merchant is a local government reporter with The Kansas City Beacon, where this story first appeared. The Beacon is a member of the KC Media Collective.

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