The Cook County Assessor's Office (CCAO) recently clarified its policy on granting assessment reductions due to vacancy. Assessor Kaegi's current policy represents a dramatic departure from the practice of his predecessors. As of this year, vacancy-based assessment relief will be considered "only in the event of a casualty."
The CCAO elaborates:
Examples of a casualty include fire, flood, and other natural disaster events. No more than 24 months of full or partial vacancy reduction will be tied to an individual event.
This is in contrast to previous assessors’ policy of granting prorated relief based on the amount of time for which vacancy-driven rent disruption occurred. It appears that the CCAO will no longer consider the temporary hardship that arises from not being able to collect rent on units under renovation or that are uninhabitable due to non-casualty events.
The CCAO further fleshed out its policy in a recent Southside Builders Association town-hall by drawing a distinction between vacancy-based assessment adjustments and market value-based changes. The CCAO added:
_We’re asking property owners to provide us information on the operation of the property ….We’re sizing the extent of the reduction in assessed value much more closely to what would be the actual change in value tied to vacancy rather than what had previously been done…. What we’re really looking for is information on what’s happening at the property level and making a decision based on the facts of the individual property.
_View our interview with Cook County Assessor Fritz Kaegi and Deputy Chief Evaluation Officer Donald J. Meyer.
These clarification points from the CCAO require a refocusing of a vacancy-based assessment appeal. The shift from prorated relief to market value relief fundamentally alters the basics of the analysis, which now requires consideration of net income and lease arrangements instead of a calculation of the percentage of occupied space. This reduces the number of cases where a stand-alone vacancy appeal is the most beneficial strategy for the taxpayer. The vacancy approach may now serve as a useful complement to market value analysis, such as an income or appraisal analysis.
One potential benefit to the taxpayer from this change in assessment practice is the opportunity to leverage unfavorable area market conditions to augment its analysis of the specific income and expenses for a given property. The current CCAO administration applies a median level of vacancy in their income analyses, hovering near 10% across the spectrum asset classes.
An overly broad application of a generic level of vacancy invites the question of whether Assessor Kaegi’s vacancy relief is actually in alignment with market conditions. If it can be demonstrated that the level of vacancy for a particular asset class in a specific neighborhood or taxing district deviates meaningfully from the Kaegi’s proposed standard, the relief indicated in some instances could reach beyond the level of relief previously available.
Property assessments have two components: land value and building value. Historically, the premise underlying vacancy relief is to apply an occupancy factor to the building assessment only with no reduction in the land value assessed against the property. For properties for which the distribution of value between land and building is disproportionately weighted toward land value, even total vacancy has minimal impact under the vacancy policy of previous assessors.
Although such cases represent a minority of assessments, there are thousands of examples across Cook County. For these properties, substantially greater relief can be achieved through an income analysis that incorporates a median level of vacancy for the area to establish a fair market value for both land and building in the property. If the property you own falls in this category, a thorough and well-developed analysis of area vacancy could be critical to the fair assessment of your property.
Though the scope of available relief in vacancy-based appeals has significantly narrowed, this approach remains effective in numerous cases. We welcome the CCAO’s invitation to provide accurate and relevant data regarding specific neighborhood markets and given individual properties. We strongly believe that a fair assessment should be based on precise market data combined with a detailed understanding of the operation of the actual property in question.
At Siegel & Callahan, we pride ourselves on a thorough and exacting approach to our assessment analysis. Our strength centers on presenting a fact-based assessment analysis of your property via the income, appraisal, and vacancy approaches to value. We harmonize the market value opinions we derive via these separate approaches in our appeal to ensure we arrive at an accurate assessment and a well-established opinion of market value, often exposing limitations in the CCAO’s reliance on mass-valuation to tell the story of your property.