Assessment Inequity in a Declining Housing Market: The Case of Detroit

Abstract

We examine the degree to which assessment practices in the City of Detroit have created substantial inequities in property tax payments across residential properties. Two key contributions of this article include: (1) inequities created by assessment practices are examined in a collapsed real estate market, and (2) quantile regression techniques are used to determine how assessment practices have altered assessment distributions within and across property value groups. Results show that current practices have created a wide range of property tax payments across properties with similar value (horizontal inequity), and similar tax payments for properties of differing values (vertical inequity).

Is energy performance too taxing?

“…the narrow buildings resulting from the Dutch “frontage tax” and the constructive vandalism to render vacant buildings untaxable under UK Vacant Rating). The rationale of the ad valorem tax base has been to establish a uniform, fair and equitable sharing mechanism (McCluskey et al , 2013, Hodge et al , 2016). That said, taxation can be a very effective mechanism for behaviour modification and also as a revenue source to pay for the disamenity effect of the underlying undesirable activity (in this case use of energy inefficient buildings).…”

Assessment Growth Limits and Mobility: Evidence From Home Sale Data in Detroit, Michigan

“…Given that the estimated magnitude of the effect is larger than the earlier studies, we are cautious in drawing definitive conclusions, and examine the data further. As noted earlier, the work of Hodge et al (2015) demonstrates that city assessments over this period were much higher than actual market prices. It could therefore be that the coefficient estimate on our measure of effective tax rates defined as tax payment/(state equalized value/1000) is systematically affected by the inaccurate assessments.…”

“…However, Detroit has not sufficiently reduced assessments to fully match the housing value declines. As shown in Hodge et al (2015), assessed values of recently sold properties are much higher than sales prices; the average sale price of properties sold in 2010 was about $7,000 whereas average assessed value of these same properties is about $50,000. 15 Detroit property owners can individually file an appeal of their assessment with the Detroit Board of Review-Property Assessment and may further appeal an adverse decision to the Michigan Tax Tribunal.…”

“…In January 2015, Mayor Duggan announced the assessments were reduced by 10 percent on average across the city, while the city undergoes a full reassessment of property. While this reduction is a positive move, the work ofHodge, et al (2015) suggests that assessments should be reduced much further to bring assessment in line with market values.…”

‘It’s like they make it difficult for you on purpose’: barriers to property tax relief and foreclosure prevention in Detroit, Michigan

“…This fiscal stress led city officials to prioritize collecting tax revenue in the short term over preventing foreclosure, retaining population, and preserving tax collections in the long term (Miller & Hokenstad, 2014). During the last recession, tax relief could have alleviated excessive property tax burdens when home values fell, downward reassessment of property lagged, and many residents suffered income loss (Hodge et al, 2017;Payton, 2012). The recent wave of owner-occupied tax foreclosures demonstrates the severe and racially inequitable consequences of tax lien enforcement for poor and working-class homeowners, especially during periods of economic downturn (Atuahene, 2018;Jacobson, 2014;Kahrl, 2017;Rao, 2012).…”