A group of landlords and property associations teamed up on a lawsuit targeting New Castle County’s new property tax bills.
The Delaware Apartment Association, Newark Property Association, Delaware Hotel and Lodging Association and First State Manufactured Housing Association filed the lawsuit Friday.
The plaintiffs want to see a House bill signed last month reversed.
The complaint named the state, Gov. Matt Meyer, New Castle County Executive Marcus Henry, New Castle County's CFO and all five superintendents of the county’s school districts.
The bill allows school districts to reset and split tax rates between residential and non-residential properties. Apartments and manufactured housing in many municipalities are considered non-residential.
Delaware House representatives passed the bill during a special legislative session after property reassessment shifted the tax burden more toward residential owners, causing many homeowners' tax bills to spike.
Districts quickly moved to split tax rates and reset the burden to what was previously seen for residential and non-residential properties.
But the lawsuit said the bill was a “hasty attempt to quell political backlash” from homeowners who disagree with the updated appraisals. It argued the changes shift the tax burden to low-income renters and manufactured community members.
The lawsuit filed by McDermott Will & Schulte LLP argued the House bill allows changes that are not reflective of the current market.
“In particular, residential properties in Delaware have appreciated in market value at a rate that outpaces other types of real estate and the overall residential market in the United States,” the lawsuit said.
The lawsuit also alleged the new rates are catastrophic for commercial property owners and their tenants who will see increases in rent if the new values remain.
One developer claimed he saw school taxes jump almost $100 thousand on a five-story apartment complex he’s converting.
“The School Board Defendants’ implementation of HB242 operates to shift tax burden away from wealthy and upper-middle-class homeowners, whose homes have drastically increased in market value, primarily onto the owners of multi-family buildings and other ‘non-residential’ properties who themselves had already sustained an increase in tax burden due to the reassessment,” the lawsuit said.
The suit also said some claim they are seeing tax bills more than triple compared to last year’s. The lawsuit says with the new rates, buildings with tenants are sure to see an increase in rent or a decrease in services.
“But renters generally have much lower incomes than homeowners and are less equipped to bear unexpected increases in housing costs,” the lawsuit said.
The lawsuit also includes declarations from two residents in manufactured communities. They said they won’t be able to afford the rent increases that will come if these tax rates stay in place.
Lorraine Burns lives on a social security income of $2 thousand per month.
“[She said] even a $45 increase in monthly rent would require cutting back on doctor visits, medications, and even food,” the lawsuit said.
