Evening star., 1940-05-04
Depression Barred
Excessive Really
Taxes, Says Report
Found to Exceed Cost
Of Capital Investment
In a Property

VI SoPItoi Investment
In a Property
When taxes increase to the point
Where they are higher than the cos
Of the capital investment in a prop.
erty-a level already exceeded IL
thousands Of communities-real es.
tate is carrying an intolerable bur.
den, a report to the Federal Home
Loan Bank Board pointed out today
Property taxes were high priol
to 1880, but they did not represent
an obstacle to the sale of real estate
because real estate had the money
to pay for them," said the report
"Values were increasing and renta
income was at satisfactory level.
"But the history of the depression
records recession in the cost o1
nearly everything connected with
real estate except taxes. These have
become an unbearable burden on the
ownership of real estate, a depres.
SAINT on its value, a deterrent to its
sale and hazard to its economic
stability"
The report was made by F. B
Bourland, former Illinois State man.
ager for the Home Owners Loan
Corr. and recently assigned by the
COZ ooration to a STUDY of the real
eS' ate tax problem Coupled with
It's criticism of high taxes was a
condemnation of generalization o1
properties and lack of uniformity in
assessments, and a demand for
sounder appraisal methods.
Uncovered by Depression.
The forced cheerfulness" with
which property owners paid high
real estate taxes prior to 1890 OBJ
scured the evil until the depression
according to the report, but that the
evil existed is proved by the fact
that the H. o. L. c., in its $3,00O,-
100000 refinancing operations, was
forced to pay up $3.50 ,000, 900 in de-
linquent taxes for it's borrowers
almost as much as it had to make
up in delinquent interest.
1T does not seem faulty, then,''
the report concludes, ito reason
that this tax bill was almost equally
responsible with other factors for
the mounting rate OF foreclosures
which precipitated the advent of the
H. o. L. G. into the picture in 1888. -
The report is featured by numer-
Gus specific cases on tax inequal-
tiles. To illustrate the burden placed
on real estate, the following assess
ment of real estate and other prop
erty in an Illinois county is cited:
Home. Securities. Cash.
Assessed value
Annusl n S5a tx At ss 'ssSS 5oS tssS LOG
At 212 per cent.
The application of this rule in a
specific case works out as follows:
Assume in 1929 a home valued at
$4,000 was incumbered for $4,000.
The mortgage has not been reduced
and the home is now worth $4,000.
The owner is paying interest, taxes
and upkeep equal to or in excess of
the amount of the current rent level
The value of the owners equity has
been reduced to nothing, on which
his tax is 5000. On the mortgage of
$4,000 worth perhaps $4,000, on
which the investor is receiving $500
interest, the tax is $40. On $4,000
Of real cash in bank the tax is So.
Wisconsin Case Cited.
Many other examples are given in
the report. In one Wisconsin city
a study of over $50 sales of single
family residences revealed that IL
takes slightly in excess of three
months gross rent to pay the an
nual tax on the properties-and in
many instances five and six months
Another instance, illustrative of
countless cases, dealt with an old
home owned by the H. O. L. C. in
a city of 10000 population, rented
with difficulty at $65 per month.
The assessors valuation on this
property is $10,500, although the
H. o. L. C. has been trying in vain
to sell it for $500 and now is con-
sidering an offer of $500. Taxes on
the property are 1894 per year. An
other property in the same COM
munity is assessed at $3.50, costs
$345 a year in taxes, but the max
imum rent obtainable is $40 month
"a presumption Of high land value
still being retained by the assessor,
although the neighborhood long
since has gone into decline.
Wide Range Found.
Buttressing its claims of lack Of
uniformity in appraisal and assess
ments, the report cites conditions in
many communities. I'm one State,
the report says, "it was found that
on exactly comparable properties in
q $3,250 price range, the gross rent
available for each tax dollar varied
from 1851 in one community to
$7.53 in another. BY another COM
parison, 1t was found taxes on one
property valued at $500 were SIS
per year and on another nearby,
valued at 5000, were $12O. The
first property rented for $35 a month,
the second for $25. This distortion
resulted in the owner of the first
property getting $7.63 of gross rental
for each tax dollar, the second prop
erty owner paying 81 tax for each
$3.50 of gross rental"
The report finds that several
notable examples exist today to
prove that when real estate boards
and enlightened appraisal personnel
are employed in either an advisory
capacity or in actual valuations
commendable results follow. But
as q general matter, the philosophy
of assessment must change if the
inequalities and systematic over.
valuation of real estate that now