Development pressures, higher taxes threaten to displace Black homeowners in SE Raleigh

On a near-perfect spring afternoon, a crowd of mostly Black retirees and senior citizens poured into Martin Street Baptist Church in Southeast Raleigh to learn about strategies to lower property taxes through Wake County’s appeals process. In their neighborhoods, higher property values have brought higher property taxes. That, in turn, has made it difficult for residents on fixed incomes to make ends meet.

Lemuel Sherman traveled across town from the city’s west side with wife, Barbara. “To see if there’s an opportunity for a property tax reduction,” Sherman said, when asked what brought him to the church. “The fact that they [taxes] go up every four years, regardless — for seniors and non-working people there’s no moratorium or way to stop that every-four-year increase.”

The Shermans were typical of the residents who attended the workshop led by the Wake County Property Tax Working Group, which called the meeting to offer residents an opportunity appeal property taxes they believe are unfair. The workshop came just weeks before the May 15 deadline to appeal tax appraisals in North Carolina.

The Working Group is made up of community members and organizations that include Men of Southeast Raleigh, Raleigh Village East and the Biltmore Hills Neighborhood Association with support from the Housing Coalition.

It was widely reported in January that Wake County property values increased by 56% between 2020 and 2024, which is the county’s most recent four-year re-valuation cycle. It was the largest such increase ever recorded.

Pressures mount of residents of historically Black neighborhoods 

Higher valuation and the ensuing higher taxes in Raleigh’s historically Black neighborhoods, particularly those near downtown facing development pressure from investors, are raising tough questions about what some residents believe is a systemically flawed method to value property.

In some cases, long-time residents in smaller homes pay more in taxes because their property carries a higher value than nearby new and larger homes, which sell for more.

And what’s happening in Raleigh is not unusual. Across the country, homes in Black neighborhoods are often under-appraised for sale or refinancing, but over-assessed for property tax purposes.

“What often happens is the older homes, and especially the smaller homes, get overvalued, they get pushed up and so they end up being over-assessed and paying more of the burden of property taxes,” said Hudson Vaughan, who works for the North Carolina Housing Coalition’s Community Justice Collaborative, a project that supports historically Black communities in fights against displacement and gentrification.

Racism is often cited as the cause when homes in Black neighborhoods are under-appraised for sale or refinancing. “Nationwide, when you have your home appraised for bank purposes, or to get a loan, there’s been so much documentation of Black people whose appraisal comes back and the home is way under-appraised,” Vaughan said. “If they take down the pictures in their house and make it a white family to pose, then they get a higher appraisal value.”

A 2022 report by the Brookings Institution using Federal Housing Finance Agency data found that Black neighborhoods are valued 21% to 23% below what their valuations would be in non-Black neighborhoods. It estimates that the cost of devaluation across the 113 metro areas in the U.S. with at least one majority-Black neighborhood is approximately $162 billion.

Tax inequities have big impact

Vaughan, who is white, knows about the inequities rendered by the property valuation process. In the historically Black, Northside neighborhood in Chapel Hill where Vaughan lives, his advocacy work uncovered substantial tax inequities between long-term Black residents and wealthy investors who were developing large student rental properties in the neighborhood.

The homes of Northside’s 100 longest-term Black residents had been so severely over-assessed that successful appeals reduced their property taxes by $500,000 collectively, Vaughan said. Meanwhile, he said, investors nearby had been significantly under-assessed, so much that when he appealed their property valuations, the investors began to see $100,000 and $200,000 increases in property valuations.

Vaughan brought receipts from Chapel Hill, sharing information with residents that showed a Black-owned 2,200 square-feet, three-bedroom home built in 1945 being appraised for tax value at $425,800 while a 3,400 square-foot, six-bedroom investor-owned student rental in the same neighborhood was appraised at $418,100.

Similar inequities are occurring in Raleigh and across the state, Vaughan said.

“There were definitely some folks who we suggested don’t have a strong case based on comparable sales, but there are a lot of folks planning to proceed with appeals.” Vaughan said, referring to workshop participants.

Vaughan cited another “strong example” of tax inequity on East Hargett Street in Raleigh where a 1,700 square-foot-home is assessed at $750,000, even though the comparable sales of newer homes around it sold in the $500,000 to $600,000 range.

“In fact, the only homes that sold for over $700,000 were right across the street and they were three-story, modern houses that all sold for $800,000 but were valued in the $700s just like hers [the owner],” Vaughan said, “so her house, based on comparable sales, is $200,000 to $250,000 overvalued.”

In addition, a house down the street from the East Hargett Street home is valued at $600,000, Vaughan said, but sold for $650,000. It’s been completely renovated and is larger but was appraised for $100,000 less, he said.

Vaughan acknowledged the East Hargett Street valuation is not typical. What is more typical in neighborhoods such as the city’s South Park, College Park and others near downtown, he said, is the over-valuation of smaller, older homes by $50,000 to $100,000. The amount depends on the condition of the homes, land inflation and other factors, Vaughan said.

Anthony Pope, who leads the Men of Southeast Raleigh, lives in a small, stone-front house on South Swain Street that his mother purchased for about $48,000 in the mid-1980s.

Pope said his mother paid about $400 in property taxes in 1986. Taxes have steadily increased, Pope said, since he moved into the house in 2010 after his mother’s death. He is now paying nearly $4,000 per year in taxes.

“I haven’t done anything to it [the house] since I renovated the inside back in 2010,” Pope said.

The tax increases are the “direct result” of several expensive, new housing developments that have sprouted up around him, he said, which includes several townhouses with asking prices of more than $1 million.

“That’s happening not only on my street but all over Southeast Raleigh,” Pope said. “These developers are coming in, buying up property and we’re being forced out or taxed out because the taxes have gotten so high that people can’t afford to pay them.”

Identifying causes and possible solutions

Vaughan concluded in a recent study entitled “Are North Carolina Property Taxes Fair and Equitable?” that the property valuations in the Northside community where he lives were not the result of “purposeful discrimination, individual mistake, or assessment malpractice but a systemic error following an approach to mass assessment common across the country that lends itself to inequity.”

“The county had, in fact, met basic sales ratio requirements and matched neighborhood averages to qualified comparable sales,” he wrote. “But things had still somehow gone awry.

There was not one easily identified problem, Vaughan said, but several issues came to light in the process:

• Attention hadn’t been paid to the variations of the neighborhood’s zoning restrictions and limitations.
• Houses built in the 1920s without major renovations were being compared to much bigger homes built or renovated in the last 20 years.
• Neighborhood delineations, which help determine land values, combined disparate property ages and types and yet divided the community in ways that separated off relevant sales that showed the range of the housing market. As a result, land values had been set for properties at higher amounts than some of the neighborhood home sales, even those in which the property value was clearly more than just the land itself.
• Data on many homes was inaccurate, especially on investor homes featuring work completed without permits.
• Averages and medians had been over-utilized, squeezing assessed values to the middle. There were fewer appeals from residents of low-wealth historically Black neighborhoods, which might have contributed to the lack of recognition to the detailed differences within the community.

Property tax inequities can be traced to the systems used to place values on property, Vaughan said.   

“It’s absolutely a problem with the tools itself and I think that’s really been clear,” Vaughan said. “It’s not like a bad actor in the system. I mean, they’re probably are people who do it more deliberately, but in my experience, especially in counties like Wake, they actually do a lot that’s progressive in how they try to do the assessment well.”

Vaughan recommends that the state increase the Department of Revenue’s ability to conduct oversight and accountability over county property taxation and to reduce the number of years between revaluations. Some counties conduct them every eight years.

“The housing market changes a lot over the course of eight years, even in rural counties,” Vaughan wrote in his study. “Infrequent reassessments tend to benefit property owners with rapidly rising values, as their market values rise each year while their assessed value remains the same until a reassessment year. Meanwhile, property owners with more stagnant values end up carrying the heavier burden of taxes. It should not be a surprise that this heavier burden most often falls on lower-income and minority communities.”