Multifamily

Not long ago, assessors’ student housing properties valuations generally struggled keeping pace with the rising market. College enrollment was high, rent growth outpaced expenses and student expectations lined up with most newer facility amenities. However, the COVID-19 pandemic and its fallout changed the game. Property taxes are often the single highest expense on a property’s profit and loss statement. When market changes make student housing less profitable, the tax burden should not be allowed to remain high. When this occurs, the assessor’s property valuation needs to be challenged and reduced. Projecting Income: Look Forward, Not Back Many jurisdictions assess student housing properties’ value using a cost approach. A computer system estimates the cost to build the property new, then deducts physical depreciation based on the property’s age. Due to skyrocketing construction costs, those depreciation deductions are outpaced by base cost increases. It is common to see cost-based values increase despite struggles facing the real estate market. Owners can combat increases by appealing the assessor’s value. When a student housing property owner files an assessment appeal, the appeal review board often evaluates the three prior years’ operating income. This allows the appeal board to develop an income model intended to represent …