The Effect of Property Assessment Reductions on Homeownership: A Quasi-Dynamic Economic Analysis

Author:

Alfaro Fernanda1,Paredes Dusan2,Skidmore Mark1ORCID

Affiliation:

1. Agricultural, Food, and Resource Economics, Michigan State University, East Lansing, MI, USA

2. Department of Economics, Universidad Catolica del Norte, Antofagasta, Chile

Abstract

This article evaluates the impacts of reductions in residential effective tax rates on homeownership in Detroit, Michigan. The decline in effective tax rates was driven by a citywide reassessment that significantly reduced effective tax rates. These estimates are used to infer the potential impacts of moving from a traditional property tax to a split-rate tax in which the tax rate applied to land is higher than the tax rate applied to structures. Using Detroit parcel-level data over the years 2012–2019, we find that tax reductions resulting from property reassessment generated a very small net decrease in homeownership. Our evaluation suggests that moving to a split rate tax would likely result in a minimal change in the homeownership rate in Detroit.

Funder

Lincoln Institute of Land Policy

Publisher

SAGE Publications

Subject

Public Administration,Economics and Econometrics,Finance

Reference19 articles.

1. Albanese M. 2019. “Markets at Risk for a Housing Crash in 2019.” MReport. (https://themreport.com/daily-dose/08-05-2019/markets-at-risk-for-a-housing-crash-in-2019).

2. Alfaro F., Paredes D., Skidmore M. 2020. “Split-rate Property Taxation in Detroit: A Quasi-dynamic Economic Analysis—Assessment of Property Tax Reductions on Tax Delinquency, Tax Foreclosure and Homeownership.” Lincoln Institute of Land Policy Report Prepared for the Office of the Chief Financial Officer of the City of Detroit.

3. Anderson, J. E. 1999. “Two-Rate Property Tax Effects on Land Development.” The Journal of Real Estate Finance and Economics 18 (2): 181–190.

4. Anderson J., Alfaro F., Allen N., Hawley Z., Hanson A., Paredes D., Skidmore M., Yang Z. 2022. Split-Rate Property Taxation in Detroit: Findings and Recommendations.” Lincoln Institute of Land Policy Report. (https://www.lincolninst.edu/publications/other/split-rate-property-taxation-in-detroit).

5. Can the land tax help curb urban sprawl? Evidence from growth patterns in Pennsylvania

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