Center for Municipal Finance Finds Inequities in Detroit Property Taxes Persist after 2017 Reappraisal

The Center for Municipal Finance at the University of Chicago Harris School of Public Policy has today released a review of property assessment within the city of Detroit between 2016-2018.   The study, conducted by Christopher Berry, the William J. and Alicia Townsend Friedman Professor at Harris Public Policy, finds that although average assessments have fallen since 2016, the Detroit property tax burden still falls disproportionately on the city’s lowest-income home owners.  

Previous analyses, including one co-authored by Professor Berry (here), have concluded that in the years between 2010 and 2015, the system was significantly regressive, meaning that lower valued homes in Detroit were assessed at a far higher percentage of their market value than higher value homes.  In effect, this created an unfair system, placing undue tax burden on property owners of lower value homes, and resulting in a large number of tax foreclosures. 

In response to such concerns, the City initiated a parcel-by-parcel reappraisal of residential property in 2014, the first in nearly 60 years.   The results of this reappraisal were put into effect starting in 2017.  To understand the effects of these actions, CMF undertook its analysis, released today, of Detroit property tax assessments between 2016 and 2018.

That analysis finds the following:   

• Average assessments in the City of Detroit have fallen each year since 2016.
• Overall regressivity – the over-assessment of low-valued properties relative to high-valued properties -- has gotten worse since the reappraisal.
•  Prior to the 2017 reappraisal, the lowest valued 10% of homes were assessed at a rate three times higher than the rates applied to the 10% of highest valued homes.  After the reappraisal, the bottom 10% is assessed at a rate four times the highest 10 percent.
• The proportion of homes assessed above the legal limit (50% of market value) has fallen from approximately one-half to one-third.
• Most lower-valued properties (less than $19,000 sale price) are still being assessed in excess of the legal limit.
• Assessments in Detroit did not meet industry standards for uniformity or regressivity. 

“Detroit clearly continues to place an undue property tax burden on homeowners who are the least able to afford it,” Professor Berry said.  “I hoped our analysis would show that the system had become more equitable since the reappraisal, but it hasn’t.  The City should take steps to fix it.”

The complete report prepared by the Center for Municipal Finance can be found here.

The findings of this report provide evidentiary support for the concerns expressed by the Coalition for Property Tax Justice. The Center for Municipal Finance is not involved with any legal matters concerning the Coalition for Property Tax Justice.

About Christopher Berry:  Christopher R. Berry is the William J. and Alicia Townsend Friedman Professor at the University of Chicago Harris School of Public Policy and the College. He is the academic director of the Center for Municipal Finance. His research interests include metropolitan governance, the politics of public finance, and intergovernmental fiscal relations.  His research showing the inequalities in the property tax assessment system in Cook County, led to significant reforms in Illinois.

About Harris Public Policy: For more than three decades, the University of Chicago Harris School of Public Policy has been steadfastly committed to advancing policy based on evidence, not ideology. Today, Harris represents the second-largest professional school at the University of Chicago, offering a full-range of undergraduate, graduate, and executive education programs designed to empower a new generation of data-driven leaders to make a real social impact in our city and around the world.

About the Center for Municipal Finance:  The Center for Municipal Finance (CMF) enables students and faculty to engage the major financial issues of the day facing state and local governments in the United States and around the globe. Some of the topical and enduring issues of municipal finance include financing infrastructure, the use of municipal bonds, privatization, pension liabilities and the efficacy of reform, tax base adequacy, and more.