WOONSOCKET â Decorated with lush indoor plants and filled with the sweet scent of potpourri, David and Debra Lennoxâs property at 108 Parker St. has the cozy, warm feel of home.
Youâd never guess the two-family is a funeral parlor for the American Dream.
After purchasing it near the peak of the housing bubble in 2006, they now owe the bank more on their house than itâs worth. They struggled to keep a responsible tenant in the spare unit to help pay the mortgage, without much luck. But the last straw was a two-pronged round of tax hikes that will push their annual bill close to $5,000.
âWeâre hanging on by a thread,â says Mrs. Lennox. âWeâre done. Weâre so done. Itâs a shame, too, because you know, we both work. The cityâs beatinâ us up so bad. Friends of ours canât believe weâll be paying almost $5,000 in taxes next year. People say, âJust pass it onto the tenants.â Guess what? We tried that and now we donât have any tenants.â
The Lennoxes have reluctantly decided to sell the house â which will be a short sale, naturally, because the property will never change hands for a price that will satisfy the balance of the outstanding debt. Itâs been a very emotional reckoning for the couple, because the house, located on a secluded dead-end behind the South Main Street Armory, has been in the Lennox family for 75 years.
Built in 1899, the well-kept, townhouse-style duplex is also the first house David Lennox has ever owned, purchasing it from a relative at the age of 53.
It will also be his last. Perhaps, his wife says, other homeowners whoâve been in the market longer have had better experiences, but the financial tribulations of home ownership have left such a bitter taste in his mouth that he never intends to own a house again. Theyâll rent.
And it wonât be in this town.
âI want out of Woonsocket,â says Mrs. Lennox. âI donât like the direction this city is going in at all.â
Sadly, at least a part of the Lennoxesâ story, is not unusual. Itâs been playing out on the national stage since the overinflated housing market crashed in 2008, thrusting property values in many markets into the gutter â and the nation into one of its worst economic contractions since the Great Depression. The Lennoxes paid $240,000 for their property and the city now says itâs worth about $130,000. In 2007, just a year before home prices tanked, an appraisal of the Lennox home indicated the property could have been sold for $335,000.
But many homeowners like the Lennoxes, who bought in just prior to the collapse and didnât put much money down, got caught in the squeeze. They are now in a position many realtors call âunder water,â which means they owe more on their home than the bank says itâs worth. Such homeowners typically find it hard to refinance and banks can be notoriously reluctant to modify the terms of an existing mortgage because of changes in the market.
Though property values have begun to recover, HousingWorks RI says affordable housing is still beyond the reach of many in the Ocean State.
âThis is what we mean by housing cost-burdened, when people spend more than 30 percent of their income on housing,â says Nicole Lagace, spokeswoman for HousingWorks RI, an affordable-housing advocacy group.
âItâs just not sustainable and thatâs not good for the economy.â
While the flow of foreclosures has stanched a bit, the statistics suggest that the pace of the recovery is slower in Woonsocket than other parts of the state. The Housing Fact Book released by Housing Works RI two weeks ago says there were 544 foreclosures in the city between January 2009 and June 2013, including 261 multi-family properties. Thirty-one of those foreclosures took place during the second quarter of 2013, or .61 percent of the total mortgaged housing stock.
That was the highest rate of foreclosures in the state among the 39 cities and towns during the first six months of the year, and nearly three times the state median, according to HousingWorks RI.
Foreclosures for the first two quarters of 2013 were also up 9 percent over the same period a year earlier, which is nearly double the statewide average.
Overall, the state has the ninth highest rate of seriously delinquent loans in the country, another indication of mortgage stress in the region.
While the national trends are partly to blame for the Lennoxesâ housing woes, other factors are more local. Woonsocket is one of only two cities in the state that has ever operated under the control of a state-appointed Budget Commission. The panel was seated by Gov. Lincoln Chafeeâs administration in 2012 under a relatively new state law designed to keep fiscally unstable municipalities from teetering into the abyss of bankruptcy.
The commission adopted a comprehensive plan that called for a combination of tax hikes, departmental consolidations, and cuts in benefits for employees and retirees to right the cityâs fiscal ship. Some homeowners got hit with tax increases as high as 21 percent in fiscal 2014, not including a hefty 2013 supplemental tax bill. For many homeowners, the hikes were aggravated by a sharp rollback in the homestead exemption, which will probably be entirely phased out in the years ahead.
All of the changes were part of the commissionâs budget-balancing plan, which envisions future tax hikes at the maximum allowable rate under state law, about 4 percent on average, during each of the next four years.
In public hearings before the tax hikes were implemented, struggling property owners warned that the initial round of tax hikes alone would force some of them to sell their homes. Others said they wanted to sell their homes but complained of being trapped because the new normal of Woonsocketâs tax structure would make the city an undesirable place to live.
Despite the admonitions of taxpayers, some real estate experts see little evidence that the commissionâs tax plan has triggered a noticeable exodus of property owners.
âWe know people are having a more difficult time due to the economy of the city,â says Bob Martin, owner of the Century 21 Agency in the city and president-elect of the Rhode Island Association of Realtors. âBut we havenât seen a tremendous increase in the amount of listings due to tax increases.â
On Oct. 2, Martin said, the Statewide Multiple Listing Service had 168 single and multi-family homes for sale. He said that figure has held fairly steady for some time.
Houses are selling faster, and theyâre also more costly, in the suburbs of Cumberland, Lincoln and North Smithfield, but the market is hardly at a standstill in Woonsocket, said Martin. He said he has 18 closings pending, including multi-family properties that are being eyed by outsiders as long term investments. Housing prices may be a little depressed in Woonsocket, but some see that as a good thing.
Outsiders looking for a ranch off Diamond Hill Road can find a bargain in the city compared to an equivalent house located in, say, Cumberland, says Martin. Similarly, longtime city residents see the down market as an opportunity to move into a better neighborhood or a niftier home.
âPeople are still moving laterally or up within the city,â he says. âThis is where they get the most bang for the buck. Overall property in the city is still extremely affordable.â
But it doesnât feel affordable to Debra Lennox, and the tax burden is part of the problem. She says there are simply too few property owners to carry the burden that the city demands in taxes.
She and her husband could go on struggling to pay the mortgage and taxes, but whatâs the point?
âWe owe $240,000 on the house and itâs worth $130,000,â she says. âWeâd have to be knuckleheads to stay here when weâre $112,000 under water.â
Follow Russ Olivo on Twitter @russolivo