The collective impact of COVID-19 is in a constant state of flux—with the public and private sectors scrambling to adjust for this unprecedented event and implement measures to ensure the continued sustainability of daily operations. This is certainly the case when it comes to the Connecticut real estate market, with ongoing developments taking place concurrently from both a governmental and private real estate market perspective. With all of these changes, it can be challenging to stay up to speed when it comes to how certain changes will impact you and your business. Not to worry, here’s a brief overview of the latest key updates across the state of Connecticut so you can plan accordingly.
Tax Deferrals Offer Relief
Connecticut Governor Ned Lamont signed off on Executive Order No. 9R in mid-December permitting taxpayers to defer their second installment of real estate, personal property and supplemental motor vehicle taxes. The legislative action is intended to provide much-needed assistance to taxpayers seeking tax deferral as a result of widespread furloughs, layoffs, business closures or similar circumstances associated with the coronavirus pandemic that has led to financial stress for countless Americans. However, it depends on the individual town in which you reside as to whether the deferment will be interest free—which is the case in Suffield, South Windsor and Bloomfield—or at a reduced interest rate—3% or less to be exact in both Berlin and Enfield. It is also determined on a town-by-town basis whether or not you have to apply for deferment or if everyone is eligible for the deferment. To reference your specific location, a statewide index of municipalities in which blanket deferment or low-interest rates is accessible on the Office of Policy Management website.
At the pinnacle of the coronavirus pandemic in April 2020, Governor Lamont implemented Executive Order No. 7S, which mandated that municipalities had to either defer July 1 tax payments for three months with no interest from the time they were due or reduce the interest rate by 1.5% to 0.25% monthly. Per the latest executive order, the deferment and reduced interest initiatives are only applicable to new charges that were due starting January 2021 and does not provide amnesty for preexisting delinquencies. In places where taxpayers must apply for deferment, the household must prove a reduction in income of at least 20%, whereas a business must prove that its anticipated revenue will drop at least %30 over the course of the deferment period. For landlords, they must provide documentation proving that their properties will suffer a significant revenue decrease attributable to COVID-19 and are required to offer rent forbearance to tenants that is equal to the delayed tax and utility payments they receive.
Real Estate Market Update
Despite the chaos associated with the pandemic, the Connecticut real estate market has showed resiliency. With its sprawling, multi-million-dollar homes and pristine lawns, Greenwich, Connecticut has always been a refuge for wealthy hedge fund managers and the Wall Street elite. But the advent of the pandemic, a new influx of affluent New York City residents has flooded the town looking for more space and suburban security. Accordingly, Greenwich—which is less than an hour away from the heart of New York City—has experienced a dramatic uptick in property transactions, with brokerage firm Douglas Eliman reporting that the median home price is approximately $2.1 million, up 18% from this time in 2019. Even when the new real estate tax became effective in July that tacked on a 2.25% tax on the percentage of residential property sales totaling over $2.5 million, buyers at the top of the tax bracket appeared to be unfazed as the sales rate remained consistent over the summer and early fall months. Sales weren’t the only metric that experienced significant growth, with a strong demand for rental properties arising as the coronavirus continued to spread. Between March and August, there were over 60 residences in Greenwich that rented for over $20,000 per month, compared to under 20 going for the same rate last year.
Connecticut suburbs like Greenwich with car-dependent, luxury houses were largely stagnant when it came to sales activity during the financial crisis. Potential buyers at that time were focusing on walkability, wanting to be able to be within relative arms-reach of all daily essentials. But now in a pandemic setting, the priorities for buyers have shifted dramatically, with the emphasis now more on privacy and square footage. Real estate investors can expect this trend to continue well into the future with the rapid implementation of telework protocol and other risk mitigation factors that have considerably altered the ways in which people conceptualize their homes as joint residential and work/educational spaces.