A recent working paper released by the Washington Center for Equitable Growth (WCEG) —and covered by the Washington Post on July 2—found that Black and Hispanic homeowners pay a higher effective tax on their homes when compared to what white homeowners pay on comparable homes, because Black- and Hispanic-owned homes are assessed at higher values (relative to what these homes sell for). So even when Black and Hispanic homeowners pay the same tax rate as white homeowners, their real property tax burden would be a higher share of the market value of their homes.
The study looked at home sales across many jurisdictions in the U.S. by race of the seller and found that:
“…[w]ithin the same tax jurisdiction, Black and Hispanic residents bear a 10–13% higher property tax burden than white residents.”
How could this be? Most jurisdictions value residential housing using computerized mass assessment systems. And assessors rarely visit homes or know the race of the homeowner. How, then, could the assessment process result in a dissimilar treatment of owners of different racial and ethnic backgrounds?
The WCEG study authors offer two potential reasons why this might be the case. First, they note that Black homeowners are less likely to appeal their tax assessments than white homeowners, and less likely to be successful when they do appeal. If white homeowners are more likely to successfully appeal their assessments, over time, a one-time reduction in the assessed value for white homeowners could lead to a substantial reduction in the tax assessments of their homes. This is because, as noted, most assessments are computerized, and without significant changes in market conditions, year-to-year changes in assessments can simply be a matter of increasing last year’s assessment by a certain percentage. So, a small disparity in values in the first year will be compounded over time to create large disparities.
The second reason the WCEG study offers to explain racial disparities is that tax assessments are not sensitive to neighborhood amenities. While computerized assessments are good at valuing similarly-constructed homes (quality of the construction, number of bedrooms or fireplaces, etc.), they are not good at valuing neighborhood amenities like good schools, access to retail, or transportation. On the other hand, sale prices of homes are extremely sensitive to these hyper-localized amenities. If Black and Hispanic homeowners are more likely to be in neighborhoods that lack such amenities, which in turn depresses their sales value, the ratio of their assessed home value to the market value would be higher.
From what we could tell, the WCEG study did not include the District of Columbia. With that in mind, the D.C. Policy Center asked, are Black- and Hispanic-owned homes assessed at higher values in the District, leading to a higher effective tax for Black and Hispanic homeowners?
The D.C. Policy Center obtained race and ethnicity information on homebuyers in the District. These data show that of the 83,395 mortgage applications approved for the purchase of a owner-occupied homes in 1-4 unit buildings from 2007 to 2017, 4.8 percent were Hispanic or Latino, 14.8 percent were Black or African American, 55 percent were white, 22 percent had no reported information on the ethnicity of the applicant, and, measured separately, 25 percent had no information on the race of the applicant. White homebuyers were more concentrated west of Rock Creek Park and in and around Capitol Hill, while Black homeowners were more concentrated east of the Anacostia River and along the northeast boundary of the city. Hispanic and Latino homeowners were more concentrated along the city’s central corridor, between 16th Street and Georgia Avenue.
Read Full Article at www.dcpolicycenter.org