Topic: impuesto a la propiedad inmobiliaria

Property Tax Development in China

Chengri Ding, Julio 1, 2005

The Lincoln Institute’s China Program was established several years ago, in part to develop training programs on property taxation policy and local government finance with officials from the State Administration of Taxation (SAT). The Institute and SAT held a joint forum on international property taxation in Shenzhen in December 2003, and more than 100 participants attended another course held in China in May 2004. In January 2005, 24 Chinese tax officials from 15 provinces visited the United States for additional programs; many of them are developing property tax systems in six pilot cities. The Institute also supports the Development Research Center (DRC) of the State Council to research property tax assessment in China, and they jointly organized a forum in February 2005.

Economic growth and institutional reforms in China over the past two decades have created profound changes within the society. The central authorities now need to set forth new policies and procedures for modern governance to address devolution of certain authority to local governments, rapid urban and rural development, and changes in land uses and land and fiscal policies. The national government’s commitment to further modernization is most evident in the effort to develop and implement a new property taxation system.

This article describes the current system and discusses issues and challenges that must be overcome to implement a successful property tax policy in China. Given the complexity of this endeavor and the huge variation in economic development across the country, a gradualist approach, which has proved effective in China’s modernization process, may be the best way to initiate property tax reform and development.

Current Taxation System

China collects 24 types of taxes. The central and local governments share the value added tax (VAT) and business tax revenues; the former tax is the primary revenue source for the central government, whereas the latter is the most important tax for local governments. Two other important tax sources for the central government are the consumption (excise) tax and the personal income tax. Twelve taxes are related to land and property, but most do not generate significant revenues. The business tax accounted for 14.41 percent of total central and local government revenues in 2002, but only a small portion of that amount was generated from property-related sources. The reason is that business and income taxes are collected only when land or property is rented or sold, and thus do not provide a steady stream of revenue. It is hard to imagine that any of the 12 property-related taxes could play a key role in resource allocation and local government finance over the long term.

An evaluation of the current tax system reveals additional concerns.

  • The tax structure is out of date. The urban real estate tax was developed in 1951 and several other taxes, including the farmland occupation tax, the urban land use tax and the housing tax, were institutionalized in the late 1980s. Given the tremendous advances in economic and institutional reform since then, China’s tax system needs to be updated to function effectively within this new context.
  • Domestic and foreign entities operate under differing tax bases and rates. The Chinese government offers tax incentives to foreign entities to attract foreign direct investment that domestic investors do not receive. In addition, domestic land users pay the urban land use tax and housing tax, whereas foreign land users pay the urban real estate tax. Furthermore, structures used for commercial or industrial purposes in rural areas do not pay any land- or property-related taxes. As a result of these differing tax policies, the overall tax rate for foreign enterprises is generally 10 percent lower than that for domestic enterprises.
  • Several of the taxes are redundant. For example, the business tax and housing tax are both based on housing rental income; the land value incremental tax, enterprise (corporate) income tax and personal income tax are all based on the net rental or transaction income from property.
  • Land and property taxes are levied on transactions rather than asset holdings. This arrangement produces a market-dependent revenue stream and is vulnerable to fluctuations over time.
  • The tax base is narrowly defined. Properties used for commercial purposes are subject to certain taxes, but residential properties are exempt.
  • The tax system is not well equipped to address the complexities of emerging market development. For instance, current land and property taxes impede the development of real estate markets for mortgaging, re-renting and subleasing transactions.

The shortcomings in the current taxation system have resulted in major fiscal problems for the central government, such as declining revenue mobilization and ineffective use of tax policy to leverage macroeconomic policy (Bahl 1997). When the government conducted tax reform in 1993 to overcome some of the problems, one of the largest initiatives shifted responsibility for urban and public services to local governments.

This measure was successful in improving the central government’s fiscal condition; however, the revenue share for local governments was not increased at a level commensurate with their increased responsibility. Consequently, many local governments face increasing budgetary deficits. Figure 1 illustrates the financial deficit for local governments after the 1993 tax reform. More than one-third of county-level governments have serious budget problems and over half of the local governments directly below the provincial level have budgets that merely cover the basic operations of public entities.

Public Land Leasing

One of the means by which local governments increase revenues in the absence of an effective taxation system is through public land leasing. In the late 1980s and early 1990s, the state introduced market principles into the decision-making process regarding land use and allocation by separating land use rights from ownership. This separation promotes the development of land markets, which in turn have created tremendous impacts on real estate and housing development, urban land use and land allocation. Except for a short yet dramatic drop in the early 1990s due to a macroeconomic policy designed to prevent the national economy from overheating, the prices for access to land use rights and public land leasing rates have been increasing steadily.

Despite the significant number of land leasing transactions, the government closely regulates and controls the amount of land being leased by maintaining a monopoly on land supply (Ding 2003). Most land in rural areas still belongs to the collectives, and urban construction is prohibited on rural land unless it is first acquired by the state. Land developments that occur on collectively owned rural land are considered illegal, and administrative efforts such as monitoring and inspecting have been implemented to eliminate these violations.

General land use plans and regulations to preserve cultivated land further control the amount of land available for urban development. The land use plans determine the total amount of land that can be added to existing urbanized areas through an annual land supply quota. At the same time, China’s preservation policy for cultivated land influences both land supply and the location of land available for urban development. The Land Administration Law specifies that at least 80 percent of cultivated land should be designated as basic farmland and prohibited from land development. Land productivity is the dominant factor used to delineate the boundaries of basic farmland. Since most cities are located in areas with rich soil resources, farmland protection designations commonly exist in urbanizing areas. Thus farmland protection inevitably results in urban sprawl and leapfrog development patterns requiring costly infrastructure investments and land consumption.

Financing Local Government. As a result of the government’s regulations and monopoly on selling land use rights, local authorities use the public land leasing system to increase their revenues through land use conveyance fees. For instance, Hangzhou City, the capital of Zhejiang Province with a population of almost four million, is among the top five in per capita national income and GDP. The city generated land conveyance fees of more than six billion YMB in 2002, more than 20 percent of the total municipal government revenues.

Interestingly, these fees were generated largely from selling to commercial users the right to access the state-owned land, yet commercial land development represented only 15 percent of total land uses in newly developed areas. The rest of the land was allocated to users through negotiation in which the sale price either barely covered the costs of acquiring and improving the land, or land was offered free to generate competition for businesses and investments.

Local governments can raise enormous revenues from limited-market transactions of land use rights, in part because land conveyance fees represent lump-sum, up-front land rent payments for a leasing period and in part because local governments exercise their strong administrative powers to require farmers to sell their land at below-market rates. When the government later resells the land at market rates, the price could be more than 100 times the purchase price. After considering the costs of land improvement, however, net revenues may be only ten times the total cost of the land.

Rising land prices resulting from the government monopoly allow local governments to use the land as collateral to borrow money from banks. These loans plus the revenue generated from conveyance fees accounted for 40 to 50 percent of the Hangzhou municipal government budget in 2002. In turn these revenues were used to fund more than two-thirds of the city’s investments in infrastructure and urban services.

Hangzhou City specializes in textiles, tourism, construction and transportation, and generates substantial revenue from business and value-added taxes, although the city’s share of income generated through the public land leasing system is also large. Many smaller cities and towns with fewer commercial and business resources use land leasing directly through land conveyance fees or indirectly as collateral to support up to 80 or 85 percent of their total investments in urban initiatives. These smaller cities must turn to land to generate revenues to fuel economic growth, launch urban renewal projects, and provide infrastructure and urban services that were neglected for a long time prior to the reform era. Land-generated revenue is also used to improve the overall financial environment, attract businesses and investments, and support the reform and reallocation of state-owned enterprises.

Negative Consequences. Despite the importance of public land leasing for income generation, the practice of using this tool to finance local governments may have serious consequences in the long run. The fiscal incentives that compel local governments to control and monopolize the land markets will negatively impact real estate and housing development, industrialization and land use. Furthermore, land is a fixed resource and ultimately there will be no more land left to lease for revenue.

Increasing pressure to protect the rights of farmers also makes it more difficult and costly to acquire land from farmers. As a result, local governments must increase land prices or face reduced revenues from land leasing. Finally, not only does land scarcity and farmer compensation pose a challenge to income generation, but recent policy reform now permits land owned by a collective to enter the land market directly. This change will prevent local governments from acquiring collective lands and exacting conveyance fees for these transfers.

Taxation Reform: Principles and Challenges

The fiscal deficits experienced by local governments and the problems with the resulting public land leasing system provided the impetus for the central government to restructure the entire taxation system. That reform is based on four guiding principles: (1) simplify the tax system; (2) broaden the tax base; (3) lower tax rates; and (4) strictly administer tax collection and management. The central authorities in charge of tax policy and administration offer several specific goals with respect to property-related taxes.

  • Unify the tax system so that domestic, foreign, urban and rural entities are treated similarly.
  • Terminate taxes at odds with efforts to foster the emergence of healthy land and real estate markets, such as the farmland occupation tax.
  • Merge the housing tax, urban real estate tax, and urban land use tax into a single property tax, and treat domestic and foreign entities equally in levying this tax.
  • Adopt a value-based property tax.

Considerable debate exists over the merits of the proposed property-related tax reform. Despite the lack of consensus as to the best option, the costs and benefits must be assessed to effectively guide the development and implementation of a new property tax system. In addition, several outstanding issues need to be resolved in order to implement the proposed land and property tax reform.

  • What are the existing laws and statutes relevant to property rights and taxation, how will they be amended and how will new laws be developed to legislate the new system?
  • What role will property taxation play in intergovernmental fiscal relations and local government financing?
  • What will the objectives of property taxation be as a fiscal and land use tool?
  • How should land and property taxation be tied to the concept of achieving value capture and financing urban infrastructure and services?
  • How will the land and property tax system relate to and be consistent with land policy reforms such as public land leasing, land acquisition, and the development of land markets in urban and rural areas such as agricultural farming?

The implementation of a value-based tax also will require the assembly and cataloguing of massive quantities of data, which historically have not been collected systematically. Furthermore, the data that have been collected are stored in different locations and in paper format. The Ministry of Land and Resources records and handles land-related data and information, whereas the Ministry of Construction is in charge of structure-related information. Matching related records from different ministries and digitizing this data will take years if not decades and will require a huge investment of resources.

The Chinese public has limited understanding of property taxation systems, so education will be required to avoid potentially significant political resistance. Capacity building within the Chinese government also will require professional training in appraisal, evaluation, appeals and collection to achieve effectiveness and efficiency in the new tax system.

Conclusions

Despite these unanswered issues and challenges, the Chinese government appears committed to implementing property taxation reform. The application of the widely used and successful gradualist approach for implementing policy and institutional reforms will ensure that the development and institutionalization of the property tax system proceeds on course. For example, data for industrial and commercial structures is more complete and of higher quality than data for residential structures. Furthermore, newer structures tend to have better records than older structures, and records are more complete for structures in urban areas than in rural areas. Thus, applying the property taxation system first to commercial and industrial structures, newly developed land with residential structures, and urban areas will allow the system to take hold before attempts are made to implement change in the areas with greater obstacles to overcome.

References

Bahl, Roy. 1997. Fiscal policy in China: Taxation and intergovernmental fiscal relations. Burlingame, CA: The 1990 Institute.

Development Research Center. 2005: Issues and challenges of China’s urban real estate administration and taxation. Report submitted to the Lincoln Institute of Land Policy.

Ding, Chengri. 2003. Land policy reform in China: Assessment and prospects. Land Use Policy 20(2): 109-120.

Liu, Z. 2004. Zhongguo Suizi Gailan. Beijing: Jinji Chuban She. (China’s taxation system. Beijing: Economic Science Publisher).

Lu, S. 2003. YanJiu ZhengDi WenTi TaoShuo GaiKe ZhiLu (II). Beijing: Zhongguo Dadi Chuban She. (Examination of land acquisition issues: Search for reforms (II). Beijing: China Land Publisher.)

Chengri Ding is associate professor in the Department of Urban Studies and Planning at the University of Maryland, in College Park. He specializes in urban economics, housing and land studies, GIS and spatial analysis. He is also special assistant to the president of the Lincoln Institute for the Program on the People’s Republic of China.

Message From the President

Evaluating Assessment Limits
Gregory K. Ingram, Octubre 1, 2008

Perfil académico

Sally Powers
Julio 1, 2011

Will a Greenbelt Help to Shrink Detroit’s Wasteland?

Mark Skidmore, Octubre 1, 2014

It is difficult to overstate how ongoing population loss has devastated Detroit. Between 1900 and 1950, when the rise of U.S. automobile manufacturing made the city one of America’s premier industrial and cultural centers, the population spiked from 300,000 to 1.85 million. Beginning in 1950, however, it began to fall. And its decline has been continuous to the present day, plummeting to just 700,000 in 2010, at a rate of descent nearly as swift as the rate of ascent in the first half of the 20th century.

Despite Detroit’s decades-long effort to keep pace with population loss by removing dilapidated housing stock, roughly a quarter of its 380,000 parcels are now abandoned, managed by the city or other public entities. As of July 2014, 114,000 properties have been razed, and 80,000 more are considered blighted (Austen 2014).

While the downtown is recovering and the suburbs remain vital, the “unfathomable dissolution of [the] built landscape” in vast areas of the city may shock the unsuspecting visitor (Austen 2014).

The first installment in a two-part series, this article considers the fiscal causes and repercussions of Detroit’s surplus of housing and vacant property: from the extent and location of abandoned homes and lots throughout Detroit to the downward spiral of house price declines leading to overassessment, property tax delinquency, and foreclosures; the public acquisition of that property; the pattern of land values across the city; and, finally, some potential ways to reconcile the remaining number of people with the amount of vacant and publicly held property. These measures range from targeting densely populated neighborhoods for redevelopment to establishing a greenbelt and reclaiming vacant parcels for public use as parks, forests, industrial buffers, retention ponds, and other open space (Austen 2014).

Factors Behind the Fall

The reasons for Detroit’s demise are numerous and perhaps too familiar. Federally subsidized transportation infrastructure, such as the Interstate highway system, facilitated rapid suburbanization, which was further enabled by permissive development codes. Racial tension, global economic forces, and corruption corroded what remained of the city proper. In the early stages of the malaise, higher-income residents, most of them Caucasian, left for the suburbs in search of a better quality of life, as shown in table1. By 1990, the African-American population had peaked as well and began to drop in the first decade of the 21st century. Beginning in the 1960s, Michigan auto manufacturing began its long, precipitous decline, disproportionately impacting Detroit and Flint. The loss of well-paying middle-class jobs further harmed the urban demographic and economic base, as households sought new employment opportunities elsewhere. Rising crime rates and continued erosion of public services induced another wave of exits.

Table 1 illustrates this downturn in the city’s demographic and economic conditions from 1950 through 2010. By 2012, according to government sources, median household income was just $25,000, less than half of the national median income. Poverty and unemployment rates were 38 and 27.5 percent, respectively. The labor force participation rate was 54 percent (compared to 63 percent nationwide), and for every 6.35 employed workers, there was one person receiving Social Security Disability benefits (compared to 1 of 12 nationwide). More than 34 percent of the city’s population received food stamps, and 81 percent of children in the Detroit Public Schools qualified for the Free and Reduced Lunch Program. Revenue streams became increasingly dependent on external sources, including nonresidents, as discussed in box 1. In 2013, when the city finally succumbed to the weight of accumulating fiscal challenges and declared bankruptcy, its debt and unfunded liabilities amounted to $18 billion—or $68,000 per household, which is about 2.7 times the median household income (Turbeville 2013).

The Failed Housing Market

The enormous excess supply of housing that accumulated over decades as a result of winnowing demand in Detroit corroded the value of that property. The real estate crisis of 2007–2008 dealt the final blow, resulting in the near-complete breakdown of Detroit’s housing market. By 2010, the average price of a residential property had plummeted to about $7,000 from $57,000 in 2006 (Hodge et al. 2014a). Detroit’s current excess of land and housing would likely suppress real estate price recovery in the coming years even if the population were to stabilize.

Property Tax Delinquency, Abandonment, and Public Acquisition of Property

Tax officials have not recalibrated assessment values to reflect house price declines. The resulting overassessment is as high as 80 percent (Hodge et al. 2014a), contributing to a general unwillingness to pay taxes, according to Alm et al. (2014). Their research also shows that additional factors such as high statutory tax rates and limited services such as public safety worsen this delinquency as well.

In the midst of the real estate crisis, property tax delinquency reached an alarming 50 percent (Alm et al. 2014). Figure 2 (p. 13) shows delinquency rates by neighborhood across the city in 2010. Property tax collection depends on a jurisdiction’s ability to impose sanctions for nonpayment of taxes, as noted by Langsdorf (1973). When real estate values collapse, taxing authorities have no workable enforcement mechanism; homeowners’ savings from nonpayment of property tax are greater than the value of the house they own and would lose in the instance of foreclosure. Further, proceeds from the sale of low-valued tax-foreclosed property are insufficient to cover back taxes owed and the government costs of initiating foreclosure proceedings.

Widespread failure to pay property taxes and the subsequent abandonment of homes has resulted in the public acquisition of thousands of properties throughout Detroit. Fifteen percent of the parcels within the 139-square-mile city are now empty, and nearly 25 percent of Detroit’s land area is now nontaxable, owned and managed by the city or some other public entity (Sands and Skidmore 2014), as illustrated in figure 3.

The Downward Spiral of Foreclosures

Currently, the number of properties flowing into public hands via tax foreclosure far outpaces the number of publicly held properties being purchased back by private taxpaying owners.

In Michigan, delinquent property taxes are subject to a 4 percent administration fee and 1 percent monthly interest on the delinquent amount computed at a non-compounded rate, beginning in the first month of nonpayment. After one year of delinquency, the city forfeits the property to county government, and the owner becomes subject to an additional 0.5 percent monthly interest charge. During this two-year period, owners may redeem their properties by paying all outstanding taxes and fees.

If property taxes go unpaid for more than two years, the Wayne County Treasurer initiates foreclosure proceedings. After a show cause hearing in the Circuit Court, the County Treasurer publicly auctions the foreclosed parcels. The starting bid equals the unpaid property taxes plus interest and penalties, and the proceeds are distributed proportionately to the taxing jurisdictions. If the property doesn’t sell at the first auction, the county lowers the minimum bid to $500 and holds a second auction. This procedure has led to further tax evasion, as some homeowners elect to ignore their tax bills with the expectation that they will be able to repurchase the parcel for $500 at the second auction.

Property that doesn’t sell at either auction may be transferred to a public body (city or state) or to a state or local land bank, or it may be held for a subsequent auction. County records indicate that 80 percent of the parcels sold to private buyers at auction over the past two years are once again delinquent on taxes (MacDonald 2013). Given that the tax delinquency rate is 67 percent for non-homestead property owners (Alm et al. 2014), it seems likely that a significant proportion of buyers at auction are absentee landlords who intend to reduce their operating expenses and increase their net rental income by never paying property taxes.

Property taxes are effectively optional on low-valued parcels as well. To minimize the backlog of tax-delinquent lots (MacDonald 2013), the county does not foreclose on homeowners who owe less than $1,600 in taxes and penalties in aggregate, effectively rendering these debts optional.

Expected revenue from the sale of low-valued parcels is insufficient to cover legal expenses associated with tax foreclosure and unpaid property tax balances. The end result is an increasing rate of delinquency and a growing inventory of unwanted property that ends up in the public sector, where it generates no revenue for the city.

Where to Go from Here?

Another wave of property tax-related foreclosures is expected in late 2014 and early 2015. What can be done to stabilize the situation?

Curbing Property Tax Delinquency

As mentioned, delinquency will abate when tax payers perceive that they receive commensurate returns for their money. Thus, improving the tax-service package by upgrading core services such as public safety will reduce evasion and lateness (Alm et al. 2014). Under the leadership of recently elected Mayor Mike Duggan, city government is taking steps to improve basic public service provision and put its fiscal house in order. For example, just 35,000 of 88,000 streetlights currently work, so Duggan plans to install 2,400 functioning streetlights per month (Austen 2014). He also increased the number of operating buses from 143 to 190, and improved snow plowing during the particularly harsh winter.

Lowering tax rates would modestly reduce delinquency as well (Alm et al. 2014). Roughly double the regional average, Detroit tax rates are at the state’s maximum of 67 mills and 85 mills per assessed value for homestead and non-homestead properties, respectively. While a reduction would improve the competitive position of the city relative to other communities in the region, currently there is no discussion of reducing property tax rates.

Aligning assessed values more closely with actual market conditions will also reduce delinquency. Mayor Duggan recently promised to lower assessments by 5 to 20 percent across the city to reconcile them with state guidelines. However, Duggan’s promised reductions are just a small fraction of the 80 percent cut needed to bring assesment to market levels, according to Hodge et al. (2014a).

Removing Land from the Market

In the absence of robust demand for land, which seems unlikely in the near future, the excess must be removed from the market for a period of time in order for real estate value to improve broadly across the city. Given that public entities now hold so much property, it is within the power of government authorities to credibly remove it from the market. Without this type of policy action, the possibility that these parcels could be quickly transferred to the private sector serves to hamper price recovery.

Currently, public lands are held by many public entities. Authorities from the City of Detroit, Wayne County, and state government are working to consolidate these parcels under a single entity that can manage them more effectively. Detroit Future City (2010) details the extent of the fragmented ownership of public lands:

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Public land in Detroit is held by many separate agencies, including city, county, and state agencies, as well as autonomous or quasi-governmental entities such as the Detroit Public Schools, the Detroit Housing Commission, and the Detroit Economic Growth Corporation. Few other cities have such fragmented holding of their public land inventory. There is no consistency of policy, procedure, or mission among these agencies, while many are hamstrung by burdensome legal requirements and complex procedures. The Department of Planning and Development controls the largest number of properties, yet its ability to do strategic disposition is constrained by procedural obstacles, including the need to obtain City Council approval for all transactions, however small and insignificant from a citywide perspective.

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While this consolidation process is necessary, it is not sufficient. Financial resources are required to remove blight and implement land use plans. City leaders are focused mainly on strategies to return these parcels to private ownership. If they can stimulate greater interest in Detroit property, this approach might be viable.

Indeed, opportunities for private ownership are emerging in the central business district (CBD). Daniel Gilbert, founder of Quicken Loans, has moved his headquarters to downtown Detroit and invested $1.3 billion in city real estate (Forbes 2014). And downtown renewal has led to substantial rental price increases (Christie 2014).

Land values are very high in the CBD, as depicted in figure 4 (p. 16) by the black parcels, which represent the very highest land values on the map. Detroit’s land value gradient is very steep, however. While several areas within the donut around the CBD have retained some worth, land values plunge rapidly as distance from the CBD increases, though they rise again near the city’s border, probably because amenities such as shopping are available in the nearby suburbs.

Given the weak demand outside the CBD, it may be more effective to determine which publicly held properties should return to private taxpaying parties, which properties should be taken off the market for a decade or two, with the option of returning land to the market should conditions change, and which should be permanently removed from the market.

The 2012 master plan, as outlined by Detroit Future City, calls for the reclamation of land for parks, forests, industrial buffers, greenways, retention ponds, community gardens, and even campgrounds (Austen 2014). Full implementation of this ambitious proposal requires significant financial resources. But consider how state and federal authorities intervened in the last major episode of mass tax foreclosure. During the Great Depression, many homesteaders on marginal agricultural lands in Michigan, Minnesota, and Wisconsin were unable to pay their property taxes, and this default resulted in a mass wave of tax delinquency, foreclosure, abandonment, and eventual forfeiture. In these states, county governments frequently became the owners of thousands of acres, much of which was eventually sold to the state and federal governments. The six national forests in Minnesota, Wisconsin, and Michigan, as well as the region’s numerous state forests, all have origins in this mass land abandonment of the Depression Era, as state and federal authorities pieced together a patchwork of adjacent lands purchased from counties eager to sell off their tax-forfeited property.

Today, state and federal authorities have no taste for a Detroit “bailout.” But history suggests that state and federal governments could help Detroit regain fiscal viability by purchasing patchworks of unwanted parcels, making payments in lieu of taxes, as is typical for other publicly owned lands, and then using the land for the benefit of the general public. Potential uses are mapped out in the aforementioned city master plan which the second installment of this series will explore. A federal, state, and local government partnership to reclaim these properties could help stabilize the land market and generate a revenue stream for the city and the other overlying taxing jurisdictions (including the state government via the state education tax). Property value recovery in combination with downtown reinvestment, continued efforts to improve Detroit’s tax-service package and remove blight, and long-run investment in Detroit’s human and social capital are essential elements of a sustainable Detroit recovery.

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Box 1: Targeting Nonresidents for Revenue

Detroit’s revenue streams have become increasingly dependent on external sources, including nonresidents, as its population and economic base have declined. This shift occurred in part because over time Michigan state legislatures empowered the City of Detroit to use tax-exporting strategies to help shore up weakening fiscal conditions and deal with massive structural changes to the regional economy. While there were periods during which it appeared that Detroit was on the cusp of recovery, various forces prevented “escape velocity.”

Today, the City of Detroit relies on the income tax, property tax, casino wagering tax, state revenue sharing, a utility user’s tax, federal grants, and various fees and licenses to fund public services. Of these, the casino wagering tax and the city income tax were adopted to bolster fading revenues from more traditional sources.

The casino wagering tax, based on gamers’ winning receipts, has become particularly important to the City of Detroit over the last decade, as shown in figure 2, which summarizes trends in the city’s major revenue sources from 1960 through 2012. The state legislature authorized casino gaming activity and the wagering tax in Detroit in 1996, to help the city address its fiscal challenges. By 2001, casino construction had been completed. The $180 million in additional annual revenues helped to stave off financial pressures even as other sources, such as income taxes and state shared revenues, were in decline. Up to 85 percent of gamers at the three major Detroit casinos are nonresidents, according to recent reports and interviews with gaming experts (Miklojcik 2014).

Since 1963, the city income tax has represented Detroit’s largest and, for a number of years, fastest-growing revenue source. At the time of adoption, the majority of the income tax was paid by city residents. As Detroit’s population has declined, however, the income tax on nonresidents who work in the city has become an increasing share of the city income tax base, composed of wages and salaries earned at a city-based job. The tax rate is 2.4 percent for city residents, whereas nonresidents pay 1.2 percent. While corporations and partnerships also pay an income tax, it is a very small portion of total revenues collected. According to Scorsone and Skidmore (2014), about half of the city income tax revenue in Detroit is paid by nonresidents.

State revenue sharing continues to play a critical role in Detroit’s finances, though population loss has diminished even this income source. In Michigan, state government collects a statewide sales tax and then shares a portion of the proceeds with municipal governments. Sales tax revenues are allocated to local governments based on constitutional provisions as well as state statute. The constitutional portion of revenue sharing is based on each jurisdiction’s share of the total state population. Given the dwindling number of Detroit residents, this portion of state revenue sharing has been falling for decades. The city experienced significant growth in total revenue sharing funds through the 1970s and 1980s, due to increases in statutory revenue sharing, which is distributed by formulae that have been changed by legislators many times in recent decades. But new changes to the statute combined with stagnation in the sales tax led to declining growth and eventual decline in revenue sharing for cities across the entire state in the 1990s. As Michigan entered a decade-long recession, this decline continued for most local jurisdictions, including Detroit, through the 2000s.

Some have pointed to revenue sharing reductions as a major source of stress for the City of Detroit, and a major catalyst for the bankruptcy. However, these declines affected all cities that received revenue sharing in Michigan; while cuts to revenue sharing likely influenced the timing of Detroit’s bankruptcy, they were not the ultimate cause. Further, it is important to note that revenue sharing for Detroit represents a net positive transfer of funds from the rest of the state to the city. According to the 2007 economic census, retail sales in the City of Detroit were $3.2 billion, or about 2.9 percent of the $109 billion in the State of Michigan.

In 2012, total state revenue sharing to all municipalities in Michigan was about $1 billion, and Detroit’s share of the total was $172 million, or 17.2 percent. Given that Detroit represents just 3 percent of total state retail sales in Michigan, one can conclude that the majority of state revenue sharing that flowed to Detroit originated from retail transactions that occurred outside the city.

As of 2014, the City of Detroit had approximately a $1 billion General Fund, considerably lower than in 2002 when revenue peaked at $1.4 billion. A 30 percent drop in revenues over time without a commensurate cut in expenditures led to the Detroit fiscal crisis and the eventual declaration of bankruptcy in 2013. By 2012, Detroit had borrowed more than $1 billion in an attempt to stave off default and a liquidity crisis (Michigan Department of Treasury 2013).

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About the Author

Mark Skidmore is professor of economics at Michigan State University, where he holds the Morris Chair in State and Local Government Finance and Policy, with joint appointments in the Department of Agricultural, Food and Resource Economics and the Department of Economics.

References

Alm, J., T. Hodge, G. Sands, and M. Skidmore. 2014. “Detroit Property Tax Delinquency—Social Contract in Crisis.” Lincoln Institute of Land Policy Working Paper.

Austen, B. 2014. “The Post-Apocalyptic Detroit.” New York Times, July 13. http://nyti.ms/1mFu3Jn

Center for Educational Performance and Information. Accessed in July 2014 from www.michigan.gov/cepi/0,4546,7-113-21423_30451—,00.html

City of Detroit. 2013. Comprehensive Annual Financial Report. www.detroitmi.gov/Portals/0/docs/finance/CAFR/Final%202012%20Detroit%20Financial%20Statements.pdf

Christie, Les. 2014. “I’ve Been Priced Out of Downtown Detroit.” CNN Money, May 27. http://money.cnn.com/2014/05/27/real_estate/downtown-detroit/index.html

Detroit Future City. 2010. Detroit Future City Strategic Framework Book. http://detroitfuturecity.com/framework

Forbes. 2014. “World’s Billionaires.” www.forbes.com/profile/daniel-gilbert

Hodge, T., D. McMillen, G. Sands, and M. Skidmore. 2014a. “Tax Base Erosion and Inequity from Michigan’s Assessment Growth Limit: The Case of Detroit.” Lincoln Institute of Land Policy Working Paper.

Hodge, T., G. Sands, and M. Skidmore. 2014b. “The Land Value Gradient in a (Nearly) Collapsed Urban Real Estate Market.” Lincoln Institute of Land Policy Working Paper.

Landsdorf, K. 1973. “Urban Decay, Property Tax Delinquency: A Solution in St. Louis.” The Urban Lawyer 5: 729–748.

MacDonald, C. 2013. “Half of Detroit Property Owners Don’t Pay Taxes.” The Detroit News, February 12.

Michigan Department of Treasury. 2013. Supplemental Documentation of the Detroit Financial Review Team. www.michigan.gov/documents/treasury/Review_Team_Report_Supplemental_2–19-13_411866_7.pdf

Michigan Department of Treasury. 2010. Real Property Tax Forfeiture and Foreclosure. www.michigan.gov/taxes/0,4676,7-238-43535_55601—,00.html

Miklojcik, J. 2014. President of Michigan Consultants. Information shared in personal interview with Eric Scorsone.

National Public Radio. 2014. “Chinese Investors Aren’t Snatching up Detroit Property Yet.” www.npr.org/2014/03/04/285711091/chinese-investors-arent-snatching-up-detroit-property-yet

Sands, G. and M. Skidmore. 2014. “Making Ends Meet: Options for Property Tax Reform in Detroit.” Forthcoming in Journal of Urban Affairs.

Scorsone, E. and M. Skidmore. 2014. “Blamed for Incompetence and Lack of Foresight and Left to Die.” Response to William Tabb’s “If Detroit Is Dead Some Things Need to Be Said at the Funeral.” Forthcoming in Journal of Urban Affairs.

Turbeville, W. 2013. “The Detroit Bankruptcy.” Demos, November 20. www.demos.org/publication/detroit-bankruptcy

Property Tax Classification in Cook County, Illinois

Scott Koeneman, Enero 1, 2000

Conventional wisdom and basic economic principles would suggest that an area subject to higher commercial and industrial property taxes than its nearby neighbors will suffer reduced economic development in comparison to those neighbors. On the other hand, any effort to reduce such unequal or “classified” property tax rates will produce a revenue shortfall. Raising taxes on homeowners to equalize rates and recover this lost revenue will encounter enormous and obvious political resistance.

This is the situation currently facing Cook County and the city of Chicago, and was the subject of a conference led by Therese McGuire of the Institute of Government and Public Affairs (IGPA) at the University of Illinois at Chicago. Held last September and cosponsored by the Lincoln Institute, the IGPA, and the Civic Federation of Chicago, the program brought together more than a hundred business and civic leaders, academics and practitioners to consider alternative methods of addressing the problems presented by the Cook County classification system.

In Illinois, the use of a property tax classification system by Cook County has been blamed for the economic decline of Chicago and the inner suburbs. The classification system is also seen as a barrier to reforming school funding and the state’s tax system. Are these charges valid? Does the classification system put Cook County at an economic disadvantage compared to its rapidly growing adjacent “collar counties”? If classification has so many shortcomings, why was it instituted in the first place? If we are only now recognizing those shortcomings, what steps can be taken that are both economically and politically feasible to overcome the problems?

Overview of Tax Classification

Illinois has long operated under the twin principles of uniformity and universality for both real and personal property, and both principles were incorporated into the Illinois Constitution of 1870. However, de facto or administrative classification of real property developed in Cook County as a response to the difficulty in taxing personal property in the same manner as real property. By the 1920s, the Cook County assessor publicly acknowledged assessing residential property at 25 percent of real value and business property at 60 percent.

A 1966 Illinois Department of Revenue report noted that Cook County was using 15 different classification groups. Despite the fact that classification was clearly in violation of the 1870 Constitution, the Illinois Supreme Court had refused to confront the issue. By the late 1960s, however, the court was prepared to overturn the existing system, and the 1970 constitutional convention faced the potential threat of court intervention.

The convention was the product of numerous reform efforts in Illinois during the previous decade. The state had failed to find a compromise redistricting plan after the 1960 census, causing the entire Illinois House to be elected as at-large members in 1964. That election brought many reformers to office, and a House-created commission charged with recommending constitutional reforms subsequently called for the 1970 convention.

Several delegates on the convention’s revenue committee were passionately in favor of uniformity, and they had considerable support from experts who opposed classification as a matter of economic policy. On the other hand, the Chicago delegation was adamant in demanding that the new constitution legalize classification. It was generally believed that without legalization, the new constitution would not have the support of Chicago Mayor Richard J. Daley and his delegation, in which case it would fail to pass.

As a result, the 1970 Illinois Constitution allowed counties with a population greater than 200,000 to classify property for taxation. The extension of classification to these large counties was also allowed for the collar counties because many taxing districts crossed those county boundaries. Cook County’s system was thus guaranteed, but the Constitution gave the General Assembly the power to apply limitations because of concerns there would be a crazy quilt of classifications should the collar counties adopt that system. Nevertheless, no collar county has done so.

Today, Cook County’s classification system is considered by many to be an impediment to Illinois’ attempts to deal with a variety of social and economic issues. Politically, classification is believed to be partly to blame for the failure to reform education funding in Illinois. In 1997, then Governor James Edgar led an unsuccessful attempt to convince the General Assembly to gradually shift the burden of education funding from property taxes to income taxes. One of the strongest arguments against the effort was that it would be a windfall for businesses and corporations, whose property taxes would be shifted to individual taxpayers. That shift would have even been greater in Cook County, which has more than 47 percent of the state’s entire assessed value and where businesses pay property taxes at a rate double that of homeowners.

Impacts on Economic Development

In terms of economic development, some observers believe that classification puts Cook County at a disadvantage in the eyes of business people who might consider locating in Illinois or expanding their operations in the state. While there are obviously other factors involved, the concern is that classification would cause these companies to look more favorably at locations in the collar counties or other states.

Recent research has shown that high property taxes do have a negative effect on the market value of property and do deter businesses from locating in the affected areas. Studies of property tax differences in the Boston, Phoenix and Chicago areas have shown that, because higher property taxes mean higher rents and lower market values, real estate development shifts from the high-tax area to the low-tax area over time. Other studies have shown that manufacturers seeking to relocate are very sensitive to local property tax rates. New construction and retail trade are also affected negatively, although the service sector is not as influenced by high property taxes.

Is this the case in Cook County? A recent study by Richard Dye, Therese McGuire and David Merriman, all affiliated with the IGPA, found that the effective tax rate of Cook County (5.52 percent for commercial and 5.78 percent for industrial property) is higher than in the collar counties, which have an average rate of 2.54 percent on all property. Furthermore, they found that four measures of economic activity-growth in the value of commercial property, the value of industrial property, the number of establishments and the employment rate-were measurably lower in Cook County than in the collar counties. But is that the end of the story?

No, according to the study’s authors. A multifaceted national trend is dispersing population, employment and business activity away from metropolitan centers to outlying counties. To determine if it is this national trend or specific property tax differences that is causing slower economic growth in Cook County, the study examined the characteristics of 260 municipalities in the Chicago metropolitan area. The researchers used two samples of municipalities-one metro-wide and the other limited to those near the Cook County border, where the effects of higher tax rates should be most potent.

The researchers presented their results, at the conference finding, “weak evidence at best that taxes matter.” Once other influences on business activity were factored out, the researchers determined that, for the entire six-county region, employment was the only economic activity that seemed to be adversely affected by property taxes, although in the border region the market value of industrial property was also affected. “The bottom line is that the evidence is mixed and inconclusive,” said McGuire. “There is no smoking gun.”

Another participant in the conference challenged this interpretation of the results. Michael Wasylenko of Syracuse University, who had been asked to review the study in advance and discuss it at the conference, said he was convinced that the researchers did find significant effects because the employment measure is a better measure of economic activity than the others. “I think the weight of the evidence suggests that these results are consistent with previous findings that property tax differentials will have a substantial effect on employment growth within a metropolitan area.”

If the employment factor, then, is the one to be given the most weight and Cook County’s property tax classification system is economically disadvantageous, in addition to being a political roadblock to reform, what is to be done? “It comes down to whether the economic gains that might be realized if you went to a non-classified tax are worth the political battles. Are the economic development advantages enough to want to do this,” said Wasylenko.

The economic and political stakes in this decision are high, since Cook County currently levies more than 50 percent of all property taxes in the state. The county cannot rapidly shift a large part of the tax burden among classes of property, but neither can it ignore concerns that the tax burden on businesses located there place it at an economic disadvantage with regard to its nearby neighbors. Any solution must be approached as a component of the overall tax system, be grounded in verifiable data, and have significant support from the public, the media and business interests. The September conference sought to contribute to that process of informed public debate on a crucial fiscal topic.

In early December, the Cook County assessor proposed reducing the assessment ratio (the ratio of assessed value to market value) for certain types of business property: from 36 to 33 percent for industrial properties such as factories and distribution facilities; from 33 to 26 percent for large investor-owned residential property; and from 33 to 16 percent for multiuse storefront businesses with apartments on upper floors. The assessor’s hope is that more favorable treatment of business will lead to even more rapid growth of the tax base over time. While these recommendations came out of several different tax studies, any changes in assessment rates must by approved by the Cook County Board before they can be implemented.

Scott Koeneman is communications manager at the Institute of Government and Public Affairs (IGPA) of the University of Illinois in Urbana, Illinois.

References

Dye, R., T. McGuire and D. Merriam. 1999. “The Impact of Property Taxes and the Property Tax Classification on Business Activity in the Chicago Metropolitan Area.” Lincoln Institute of Land Policy Working Paper.

Giertz, J.F., and T. McGuire, “Cook County, Ill., Assessor Proposese Changes in Assessment Levels,” State Tax Today. Dec. 7, 1999.

Man, J. 1995. “The Incidence of Differential Commercial Property Taxes: Empirical Evidence,” National Tax Journal, 48: 479-496.

McDonald, J. 1993. “Incidence of the Property Tax on Commercial Real Estate: The Case of Downtown Chicago,” National Tax Journal, 46: 109-120.

Wheaton, W. 1984. “The Incidence of Inter-jurisdictional Differences in Commercial Property Taxes,” National Tax Journal, 37: 515-527.

Source: Illinois Department of Revenue

Local Property Tax Reform

Prospects and Politics
Joan Youngman, Julio 1, 1996

To what extent are problems of distressed urban areas attributable to the property tax, and how can changes in property taxation help remedy urban decline? Political leaders, policy analysts and public finance experts gathered to discuss this complex and controversial issue during a Lincoln Institute seminar in New Haven on March 15.

John DeStefano, Jr., now in his second term as Mayor of New Haven, opened the session with a strong indictment of the property tax as a cause of urban ills. Described by the New York Times as “a leading spokesman for a growing number of people who believe Connecticut’s reliance on the property tax is harming not just the state’s cities, but its entire economy,” Mayor DeStefano argued that high relative property taxes in Connecticut were a direct cause of the state’s decline in population and jobs. From 1990 to 1995 Connecticut lost over 12,000 residents, while New Haven and Hartford suffered the two steepest population declines of any U.S. cities during that period.

His concern was shared by representatives from the Capital Region Council of Governments, the Regional Growth Partnership of South Central Connecticut, and the Connecticut Conference of Municipalities, which distributed a report stating that overdependence on the property tax was “reducing quality of life in all of Connecticut’s cities and towns.”

How can this widespread assumption linking property taxes to urban ills be tested, and what changes in the sources of local revenue could encourage urban revitalization? It may be that shifting demographic and economic patterns, such as the large defense industry cutbacks that have reduced Connecticut’s supply of high-wage jobs, have more to do with employment and population loss than does the property tax. If so, changing the property tax will not address the underlying causes of urban decline. Property taxes in Connecticut are not as far from the national average as a percentage of personal income as they might appear in absolute dollars (see chart).

Will lowering property taxes enhance economic growth if it is accompanied by an increase in other forms of taxation? Meeting growing needs in urban areas with a declining economic base is a problem of dependence on locally based taxation, not a problem of property taxation alone. Shifting from one local tax to another will not necessarily assist the neediest cities that have the least amount of revenue to draw upon.

Alternative Revenue Sources

What revenue sources can offer alternatives to the property tax as it is currently structured? The property tax base in the U.S. initially included real property and personal property, tangibles and intangibles alike; the restriction to land and buildings was the result of nineteenth-century reform efforts. Seminar speaker C. Lowell Harriss urged that these two portions of the property tax base be considered separately. The first, a tax on land values, deserves even more intensive use than it is getting, he argued, whereas the second, a tax on man-made capital such as buildings, machinery and inventories, warrants even more condemnation than it receives.

Donald Reeb of the State University of New York at Albany examined the actual process of obtaining state and local support for such a shift. He described successful efforts to permit Amsterdam, New York, to change from a single-rate property tax to a graded tax with a higher rate on land than on building value.

Robert Schwab of the University of Maryland discussed his own study of Pittsburgh’s two-rate tax, with buildings taxed five times as heavily as land. This case has particular interest for the issue of causality–whether or not the tax itself deserves credit for improving the local economy. Schwab drew a subtle distinction between finding that the tax had caused an increase in building and investment and that the tax had not impeded development. Although he felt that his study could not support the first proposition, he endorsed the second and emphasized its importance. This led to discussion of the special nature of a tax on land, which avoids the excess burden caused by most other forms of taxation in terms of lost efficiency.

Ronald Fisher of Michigan State University challenged the perception that heavy property taxation alone was the main problem for Connecticut’s economy. He pointed out that the state presents a complex mix of high personal income, relatively modest governmental expenditures, low income taxes, and consequent reliance on sales and property taxes. Connecticut only introduced a state personal income tax in 1991, and that tax has been the object of intense political protest and repeal efforts. In discussing various revenue sources, including local income taxes, local sales taxes and user charges, Fisher also questioned whether the absence of effective regional government in Connecticut could be partially responsible for the disparities between distressed central cities and prosperous suburban areas.

Tax-base and Revenue Sharing

Further discussion probed options for tax-base and revenue sharing as ways to reduce the tax burden on urban residents while meeting city revenue needs. The Connecticut Property Tax Reform Commission has recommended simply increasing state aid. Another option would reduce unfunded mandates in areas such as welfare and education.

A third alternative uses state funds to allow property taxes to serve as a credit against income taxes for low-income homeowners–and a refund to those with no income tax liability. Termed a “circuit breaker,” it is designed to prevent property taxes from exceeding a fixed proportion of income. The credit sometimes extends to renters as well. Over half the states provide some form of circuit breaker, but most are limited to senior citizens.

Lee Samowitz, a Bridgeport state representative, presented a proposal for regional service districts financed by a portion of the commercial and industrial tax base. Direct tax-base sharing of this type has its longest history in the Minneapolis-St. Paul region, which for 25 years has pooled 40 percent of the growth in the industrial and commercial property tax.

Yet such programs face formidable political hurdles, in part because most areas have fragmented or weak regional governments. According to economists Howard Chernick and Andrew Reschovsky, “Despite its success in Minnesota, the prospects for the establishment of tax-base sharing plans in other metropolitan areas are poor. The political representatives of those communities that would be net ‘losers’ under a tax-base sharing plan, or who believe they will be net losers at some point in the near future, will oppose tax-base sharing.”

Political obstacles have impeded plans for tax-base sharing in recent years in a number of states. However, the discussion in New Haven made it clear that property tax reform will become increasingly important as an element in the search for regional solutions to urban problems.

Joan Youngman, senior fellow at the Lincoln Institute, is an attorney and expert on legal problems of valuation for property taxation. She develops and teaches courses on land taxation and regulation issues.

References

Chernick and Reschovsky. “Urban Fiscal Problems: Coordinating Actions Among Governments,” Government Finance Review, vol 11, no. 4 (August 1995) p. 17ff.

Connecticut Conference of Municipalities. Property Tax Relief and Reform, Public Policy Report #96-03. March 1996. 900 Chapel St., 9th floor, New Haven, CT 06510-2807. 203/498-3000.

Fisher, Ronald C. State and Local Public Finance. Chicago: Irwin, 1996.

From the President

Gregory K. Ingram, Octubre 1, 2005

The Lincoln Institute has long been involved in international activities that deal with land policy and land taxation issues. In the 1970s those activities focused mainly on training and education. For example, Institute faculty have taught joint courses in land and tax policy issues with the International Center for Land Policy Studies and Training (formerly the Land Reform Training Institute) in Taiwan for nearly 30 years. Sponsorship of international congresses on land policy in the 1980s involved the Lincoln Institute in the dissemination of research and analysis by colleagues from both industrial and developing countries. This work heralded further international expansion in the 1990s involving both the Institute’s training programs and its support for research and analysis, particularly in developing countries.

Over the past ten years, the Institute has expanded its program of training and research in Latin America that deals with planning, property taxation, urban development, and land markets. Its program in China, begun in 2001, involves government officials, academics, and researchers with a focus on urban land markets, land taxation, and city expansion issues. The Institute has been active in many Eastern European countries, where it has been involved mainly in training on tax policy and administration. It also has contacts and modest levels of involvement in other countries, including Cuba and South Africa, which face particularly demanding or unique land and tax policy challenges.

The initial motivation for the Institute’s international work was to share its knowledge and expertise in land policy issues with others, as in transition economies seeking to establish land markets and property tax regimes. The Institute provided training in land market fundamentals and policy issues, and in the technical requirements of databases containing cadastral, ownership, and development information.

As the Institute expanded its activities abroad, academic and policy research on urban development and local public finance documented many commonalities across countries in the development patterns of large cities, in the behavior of households and firms, and in the tradeoffs households and firms face when making decisions about location, transport, space consumption, tenure choice, and local services. Predictions based on urban economic theory proved to be robust across both rich and poor countries.

The consequence of this commonality of problems and behavior is that the flow of knowledge is no longer in one direction. Solutions to problems in one city can help inform policy makers in other cities about new approaches that have worked elsewhere. For example, experience with new ways to use benefit charges to finance infrastructure, design exclusive bus lanes, structure new development, or reform housing in one country is of great interest to others. International experience also reinforces old lessons, such as the advantages of property taxation as a local revenue source or the impact of infrastructure on development.

In sum, the Institute’s international work has enriched its own knowledge and expertise as much as it has benefited those who have participated in our training and research programs.

Developments in Value-Based Property Taxation in Central and Eastern Europe

Jane Malme and Joan Youngman, Octubre 1, 2008

The development of new land and tax systems in countries in political and economic transition in Central and Eastern Europe reflects a unique array of historical, social, political, and economic circumstances. While all transitional countries seeking admission to the European Union (EU) have initiated comprehensive reforms to encourage free markets and democratic governments, the three Baltic nations—Estonia, Latvia, and Lithuania—made privatization and restitution of property rights a prime objective immediately after their independence in the early 1990s. These actions, together with a desire to stimulate real estate markets and capture tax revenues for improved public services, made them the first of the transitional countries to introduce value-based taxation of real property.

Faculty Profile

Sally Powers
Julio 1, 2011

Sally Powers has been a visiting fellow in the Department of Valuation and Taxation at the Lincoln Institute of Land Policy since 2009. She was director of assessment for the City of Cambridge for thirteen years until 2001, when she became an international consultant. That work has taken her to Kosovo, Montenegro, South Africa, the Kyrgyz Republic, and Turkmenistan, among other countries, where she has participated in projects on property taxation, market value revaluations, and establishment of a valuation profession for a transition economy.

Her career as an assessment administrator and consultant has involved all aspects of property taxation: legal framework, property appraisal, value defense, local government finance, tax policy, project planning and execution, public information, software specification and testing, cadastral/GIS (geographic information systems) mapping and analysis platforms, and tax collection and enforcement. Her research interests focus on mass appraisal, specifically the application of econometric techniques to analyze market activity and develop models to estimate the market value of properties that have not sold. She has written on topics as diverse as appraisal modeling, implementation of the local property tax in Kosovo, and property tax collection strategies.

Powers received her bachelor’s degree in anthropology from the University of Chicago, and she holds a Master of Science degree from the Boston College Carroll School of Management.

LAND LINES: How does your work fit within the research and education program of the Lincoln Institute?

SALLY POWERS: The Lincoln Institute is a leader in property tax policy, and its work influences the local government officials responsible for the property tax in thousands of jurisdictions across the United States and internationally. The Department of Valuation and Taxation presents a variety of conferences, seminars, and courses for property tax professionals, and I have served as faculty for a number of these programs since the 1990s. I’m also involved in working directly with local tax practitioners and in research projects that will continue to challenge the conventional wisdom about the property tax.

LAND LINES: What are some of your current projects?

SALLY POWERS: One major project deals with a joint venture between the Lincoln Institute and the George Washington Institute of Public Policy to create a free, downloadable property tax database for all 50 U.S. states and the District of Columbia. The Significant Features of the Property Tax Web site was launched in June 2009, and the information is updated every year to keep current with changes in the legislation that regulates the property tax in each state.

We regularly expand the subject matter to be included, and have made the site a central access point for information about the property tax from a variety of federal, state, and scholarly sources. For example, the only nationwide study of effective tax rates is published by the Minnesota Taxpayers Association, and this publication is now available for downloading from the Significant Features site. The next topic we plan to organize for presentation on the Web site is the various forms of property classification for tax purposes.

LAND LINES: Can you clarify what an effective tax rate and classification mean, and why they are important aspects of this database?

SALLY POWERS: The property tax rate by itself does not explain much about the property tax burden in a particular community or provide any basis for comparison across jurisdictions. A high tax rate may simply reflect low property values, and a low tax rate may reflect very high values. Effective tax rates are calculated by comparing the amount of the property tax bill for a property to its market value, which may or may not be the same or even close to its assessed value. Effective tax rates, where they are available, thus make it possible to understand the impact of a tax bill intuitively and to make better informed cross-jurisdictional comparisons.

Classification of property is undertaken by many states, either legislatively or in the state’s constitution, to identify property categories based on use, the most common uses being residential, commercial, and industrial. In some states the classifications are applied for identification and reporting purposes only. However, it is employed more frequently to tax favored classes at lower rates than other classes. The most favored classes are generally residential and agricultural uses.

LAND LINES: Based on your research, how well is the property tax holding up as a primary local revenue source during the current recession?

SALLY POWERS: There are two major components to a property tax bill: the property value and the tax rate, as discussed above. In states where local tax jurisdictions are not encumbered with extreme limits on tax rates, the property tax can be quite resilient, because when values decrease the tax rate may be increased. In addition, the value always represents an assessment as of a specific date prior to the issuance of the tax bill. It is not unusual for this assessment date to be a year and a half or more before the date of issuance of tax bills. This “assessment lag” gives local jurisdictions a cushion in times of rapidly changing markets, with time to plan for the eventual change in the level of assessed values and to investigate other local revenue sources. To date, research on property tax revenues during the current down-turn has borne out these features of the property tax.

LAND LINES: It’s clear that the American property tax is a complex affair. How does this compare to your experience in other countries?

SALLY POWERS: International experience with the property tax varies greatly, depending on the maturity of the property tax system, the culture, and the legal underpinnings for the tax. The projects I worked on in Eastern Europe were introducing a market value based property tax. Political leaders and central and local public officials had no difficulty with the concept of market value. Valuation methods were uncomplicated and directly related to sales. A common theme in the U.S. and many other countries, however, is the desire to make the burden of the property tax smaller for residences than for businesses. Some of the proposed formulas to provide tax relief are extremely complicated, such as relating property value to household size and ages of household members.

LAND LINES: How widespread is the property tax?

SALLY POWERS: It is quite surprising how many countries assess some form of tax or fee on property or property rights. Another Lincoln Institute project I am working on is the African Tax Institute (ATI), a joint venture with the University of South Africa at Pretoria. More than ten research fellows at ATI have visited one or more of 38 countries to develop in-depth reports on the various forms of tax on property (Franzsen and Youngman 2009). Most of those reports and supplemental appendices are posted on the Lincoln Institute Web site as working papers. In every country studied the researchers found some sort of tax or fee on ownership or use of property. In many countries all land is owned by the government, but the rights to use the land are owned by individuals and companies that pay fees and taxes on their use rights.

In countries of the former Yugoslavia, for example, the property tax is a familiar concept. In the early 1990s, the Federal Republic of Yugoslavia established a privatization program that transferred ownership of government-owned apartment flats to individual owners. An annual tax was assessed on the owners, based on the characteristics of the property.

LAND LINES: Can you describe more about your interest and experience in econometrics applied to property market data.

SALLY POWERS: I was plunged into multiple regression analysis on my very first property tax job for the City of Boston in 1982. I was part of the team hired to use statistical analysis to develop models (formulas) that could be applied to property data to estimate market value. I was fortunate because the city hired some of the top experts in this emerging field to train us in these methods. Since then, both as an assessor and later as a consultant, I have continued to use econometric tools to estimate market value for property tax application.

It has been fascinating to participate in the increasing sophistication and effectiveness of CAMA (computer assisted mass appraisal) to generate AVMs (automated valuation models). The biggest leap in this technology takes advantage of GIS capabilities to analyze location and property value. I am looking into an econometric tool for CAMA application that analyzes data around median values rather than the mean. This is interesting because the current statistical standards for value accuracy and uniformity are calculated around the median because, compared to the mean, it measures average value with less bias from extremely high or low values.

LAND LINES: Do you have any other observations about the Institute’s work in the current volatile realm of property taxation?

SALLY POWERS: As a visiting fellow at the Lincoln Institute, I have found it especially gratifying to see the increasing public interest in the Significant Features of the Property Tax database. The Web site has been cited by many scholars in the field of local public finance, and the authors of two papers presented at recent Institute seminars used data from the site for their analyses.

Adding to its Web-based resources, the Lincoln Institute has produced more than 10 online courses on such diverse topics as property tax policy, modern valuation technologies, property tax reform in Massachusetts, and introduction of the property tax in transition economies. The IAAO (International Association of Assessing Officers), the leading membership organization for tax assessors and other property tax professionals, has recognized the value of these courses, and now its members can receive continuing education credit for taking them.

Finally, the Institute has inspired more economists to become interested in property tax valuation and equity issues. For example, economists from the University of Illinois and Florida State University are conducting studies of assessment equity that introduce contemporary econometric tools to both display and analyze patterns of overvaluation and undervaluation of property in assessing jurisdictions.

Visiting fellow Dan McMillen (2011), working with a rich data-set that includes the City of Chicago, will present his analysis and conclusions at the next annual conference of the IAAO. I will be on hand to help make his innovative findings accessible not only to the statistical analysts in the audience, but also to property tax assessors who are interested in improving values in their own jurisdictions.

References

Franzsen, Riel C. D., and Joan M. Youngman. 2009. Mapping property taxes in Africa. Land Lines 21(3): 8-13.

McMillen, Daniel P. 2011. Assessment regressivity: A tale of two Illinois counties. Land Lines 23(1): 9-15.

Significant Features of the Property Tax. www.lincolninst.edu/subcenters/significant-features-property-tax

Regímenes privados en la esfera pública

Cómo optimizar los beneficios de las comunidades de interés común
Gerald Korngold, Febrero 1, 2015

Una caricatura de Jack Ziegler en la revista New Yorker refleja la ironía esencial de participar en condominios, cooperativas y otros tipos de asociaciones de propietarios. Un automóvil está ingresando en un camino que conduce hasta un grupo de casas adosadas a lo lejos, con un cartel en la entrada que proclama “Bienvenido a Condoville y la ilusión de ser propietario de su propia vivienda” (Ziegler 1984).

A pesar de esta ambigüedad, aproximadamente un cuarto de la población estadounidense vive ahora en viviendas gestionadas por asociaciones, conocidas en su conjunto como comunidades de interés común (CIC). La figura 1 muestra el impresionante aumento de las CIC en las últimas décadas. Entre 1970 y 2013, la cantidad de unidades de vivienda en este tipo de comunidades pasó de alrededor de 700.000 a 26,3 millones, mientras que la cantidad de residentes se multiplicó por más de 30, de 2,1 millones a 65,7 millones.

Con su creciente popularidad, las comunidades de interés común han generado desafíos políticos y problemas legales que exigen constante resolución. Estos conflictos en general tienen que ver con preocupaciones externas de que las CIC segregan a los ricos del resto de la sociedad, o desacuerdos internos entre los propietarios individuales y los órganos de gobierno de sus asociaciones. Este artículo examina algunas de las controversias asociadas al modelo de CIC y su sistema de gobierno, y sugiere medidas para aumentar los beneficios de las comunidades de interés común, tanto para los propietarios como para la sociedad en general.

El aumento de las comunidades de interés común

La creciente industrialización que se produjo en el siglo XIX, causó contaminación, tráfico, ruido y enfermedades, lo que llevó a muchos planificadores y ciudadanos a favorecer la separación de usos residenciales, comerciales e industriales. (La zonificación como herramienta de planificación no había surgido todavía, y no sería legitimada por la Corte Suprema de Justicia de los Estados Unidos hasta 1926). Algunos emprendedores residenciales impusieron por lo tanto “servidumbres” (convenios, restricciones y derechos de acceso en predios ajenos) sobre sus proyectos de subdivisión. Las servidumbres generalmente restringían las propiedades a usos residenciales y frecuentemente creaban derechos compartidos para el uso de instalaciones y servicios comunales, a cambio de aranceles. Los compradores de lotes aceptaban estas servidumbres y, una vez que las restricciones se habían registrado, los compradores subsiguientes estaban legalmente obligados a respetarlas. El derecho consuetudinario resultó ser un vehículo efectivo para crear áreas residenciales de alto nivel, como Gramercy Park en Nueva York (1831) y Louisburg Square en Boston (1844).

Después de una desaceleración durante la Gran Depresión y la Segunda Guerra Mundial, la construcción de CIC comenzó a crecer a fines de la década de 1960, y la Administración Federal de Viviendas (FHA) reconoció el condominio como un vehículo de propiedad asegurable, seguido de leyes legislativas estatales en el mismo sentido. Los seguros hipotecarios de la FHA animaron a los emprendedores a construir condominios para la clase media, que ganaron aceptación en el mercado como consecuencia del movimiento llamado “new town” (nuevos pueblos), ejemplificado por las primeras comunidades planificadas, como Reston, Virginia (1964) y Columbia, Maryland (1967). La aprobación de la Propuesta 13 en California, una iniciativa que limitó la tributación a la propiedad en 1978, y de medidas similares en otros estados, también impulsó el crecimiento de las CIC, ya que los gobiernos locales, necesitados de fondos y bajo creciente presión para suministrar más servicios, ya no estaban dispuestos a absorber los costos de infraestructura y servicios de nuevos emprendimientos. Por esta razón, tendieron a aprobar solamente nuevos emprendimientos en forma de CIC, donde los costos estaban cubiertos por el emprendedor (y en última instancia por los propietarios).

Hoy en día, los propietarios de CIC están sujetos generalmente a una variedad de restricciones sobre sus unidades privadas, desde limitaciones sobre la diagramación y el diseño de los edificios y el tipo de materiales de construcción utilizados, hasta restricciones en las decoraciones visibles, estructuras auxiliares y el paisajismo. Frecuentemente existen controles sobre la conducta de los propietarios y el uso de la propiedad, que está normalmente limitado a ocupación residencial. También se pueden imponer reglamentos sobre ruido, estacionamiento y tráfico, junto con restricciones vehiculares. En algunos casos también se prohíben carteles políticos, distribución de volantes y actividades asociadas.

A cambio de las cuotas de asociación, los propietarios tienen acceso a infraestructura común, como calles y áreas recreativas, y a servicios privados, como seguridad, recolección de basura, limpieza de calles y remoción de nieve. En general, la CIC es administrada por un gobierno residencial privado y varios comités, que son elegidos por los propietarios y están sujetos a las leyes que rigen contratos civiles, no al derecho público administrativo y constitucional (ver recuadro 1).

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Recuadro 1: Modelos de comunidades de interés común

Las CIC normalmente tienen un gobierno privado elegido por los propietarios para administrar y hacer cumplir los contratos, y para promulgar reglas que beneficien los intereses de la comunidad. Aunque la forma exacta de la estructura de gobierno puede variar, los conceptos básicos son similares.

Asociaciones de propietarios
Los propietarios de cada unidad –en general una vivienda unifamiliar o adosada– poseen el título de propiedad de la misma. La asociación posee el título de las áreas comunes y otorga a los propietarios derechos de servidumbre para poder usarlas. Éstas se pueden crear por derecho común o, en algunos estados, bajo derecho legislado. Las asociaciones de propietarios constituyen más de la mitad de las asociaciones comunitarias del país.

Condominios
Los propietarios de cada unidad poseen el título de propiedad de la misma, más un porcentaje de las áreas comunes. La asociación administra las áreas comunes, pero no posee el título de las mismas. Los condominios pueden ser verticales (edificios de apartamentos) u horizontales (viviendas unifamiliares o adosadas) y se crean exclusivamente bajo leyes estatales. Los condominios representan entre el 45 y 48 por ciento de las asociaciones comunitarias.

Cooperativas
Una corporación cooperativa es dueña del edificio, y los propietarios reciben acciones en la corporación y un contrato de alquiler de largo plazo, automáticamente renovable, sobre sus unidades individuales. A diferencia de los condominios y las asociaciones de propietarios, la corporación puede transferir el control de los contratos de alquiler y las acciones de los propietarios de la cooperativa. Sólo entre el 3 y 4 por ciento de las asociaciones comunitarias está organizado en cooperativas.

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Beneficios económicos de las CIC

Las CIC aportan beneficios económicos sustanciales a sus propietarios y a la sociedad en general. Los residentes que compran propiedades en estas comunidades han llegado a la conclusión de que las instalaciones compartidas, como las áreas recreativas, son, un mejor valor que, por ejemplo, las piscinas personales y otras instalaciones privadas. De manera similar, aquellos que se han unido a las CIC han llegado a la conclusión de que ciertas restricciones (como la prohibición de estacionar casas rodantes en las entradas de vehículos) aumentan el valor de su propiedad.

Estas comunidades también ayudan a lograr un uso eficiente del suelo. Los costos de organizar y administrar una comunidad residencial privada son menores que los de un sistema público (Nelson 2009). Los costos de transacción y captación de rentas por medio del sistema político también se reducen. Finalmente, como está libre de restricciones legislativas y constitucionales, una comunidad privada tiene mayor flexibilidad para crear sus propias reglas y operaciones, liberándola de la necesidad de cumplir con pautas públicas cuando firma contratos con proveedores de servicios y abastecedores.

Los tribunales estadounidenses han validado estos beneficios en eficiencia al reconocer los contratos de CIC y la participación de sus propietarios en los mismos. En opinión de un tribunal: “Es un hecho reconocido que [los convenios] aumentan el valor de la propiedad subdividida y crean un incentivo para que los compradores adquieran lotes dentro de la subdivisión” (Gunnels vs. No. Woodland Community Ass’n, Tex. Ct. App, 17013 [1978]).

Preocupaciones externas: Secesión de la comunidad general

A pesar de estos beneficios, varios comentaristas han argumentado a que los servicios e instalaciones privadas de las CIC están solamente disponibles para aquellos que tienen el dinero suficiente, y que sirven para separar a los ricos del resto de la sociedad. El resto de la municipalidad donde se encuentra la CIC se ve obligado a vivir sin estos privilegios, creando un sistema permanente de dos niveles de vivienda. Los críticos también argumentan que la privatización de infraestructura y servicios aísla a los residentes de las CIC y reduce su interés en temas comunales generales.

De acuerdo a esta lógica, los residentes de las CIC están menos dispuestos a participar con el gobierno público en asuntos cívicos, y son mucho más propensos a oponerse a los aumentos de impuestos, ya que los servicios son proporcionados por la CIC y no por el gobierno municipal. Cuando las asociaciones comunitarias forman parte de los emprendimientos suburbanos, el aislamiento del centro urbano puede agudizarse. Estas preocupaciones se centran frecuentemente en el miedo a sufrir segregación económica y de clase. El ex Secretario de Trabajo Robert Reich escribió en un artículo para el New York Times, titulado “Secesión de los exitosos”: En muchas ciudades y pueblos, los ricos han retirado de hecho su dinero del mantenimiento de los espacios e instituciones públicas compartidas por todos y han dedicado sus ahorros a sus propios servicios privados… Los condominios y las omnipresentes comunidades residenciales presionan a sus miembros a realizar trabajos que los gobiernos locales con fondos escasos ya no están en condiciones de hacer bien (Reich 1991).

Libertad de elección

Esta caracterización de las asociaciones comunitarias, sin embargo, contradice los valores estadounidenses fundamentales de libertad de contrato y libertad de asociación. Es un valor compartido por todos que la gente puede gastar su dinero y firmar contratos de la manera que quiera, siempre que sus fines sean lícitos. La ley sólo interfiere con la libertad de contrato ocasionalmente, cuando se ponen en juego consideraciones políticas importantes. Los tribunales han reconocido que la libertad de contrato es un elemento importante para sostener los acuerdos de servidumbre privados: Comenzamos con el supuesto de que las personas privadas, en el ejercicio de su derecho constitucional de libertad de contrato, pueden imponer las restricciones que quieran sobre el uso del suelo transferido a otro (Grubel vs. McLaughlin, D. Va. [1968]).

Las CIC también son un reflejo de la creencia estadounidense en la libertad de asociación, ejemplificada por una larga tradición de comunidades utópicas y otras redes basadas en creencias. Los residentes de las CIC modernas podrían compartir intereses comunes, como los propietarios que viven en comunidades ecuestres o de clubes de golf. Otros residentes pueden simplemente compartir el deseo de vivir con tranquilidad o de gozar del carácter del barrio. En Behind the Gates (Detrás de las puertas), Setha Low sugiere que las CIC permiten a las “familias de clase media establecer sus paisajes residenciales con “amabilidad”, de manera que puedan reflejar su propia estética de orden, constancia y control” (Low 2004). Cualquiera que sea la razón, las asociaciones comunitarias son congruentes con la observación de Tocqueville sobre las interacciones entre estadounidenses: Los estadounidenses de toda edad, condición y disposición están constantemente formando asociaciones.No sólo tienen compañías comerciales y de manufactura, de las cuales todos forman parte, sino también asociaciones de miles de otros tipos: religiosas, morales, serias, fútiles, amplias o restringidas, enormes o diminutas (de Tocqueville 1835).

Más aún, las pruebas disponibles demuestran que los residentes de CIC están generalmente contentos con su elección. En 2014, en una encuesta realizada por Public Opinion Strategies para el Instituto de Asociaciones Comunitarias, el 64 por ciento de los propietarios dieron una opinión positiva sobre su experiencia general, y el 26 por ciento dieron una opinión neutra. Si bien el 86 por ciento de los encuestados indicaron que preferiría menor regulación gubernamental o, por lo menos, que no quería ninguna regulación adicional, el 70 por ciento opinó que las reglas y restricciones de la asociación protegen y aumentan el valor de su propiedad.

El problema de doble tributación

Si bien el auge de las CIC se debe a una variedad de factores, uno especialmente clave fue la constricción financiera de las municipalidades después de las revueltas tributarias de la década de 1970. De hecho, una narrativa distinta sobre el tema de “la secesión” es que algunos de los propietarios en comunidades de interés común creen que el gobierno municipal los abandonó a ellos.

Los propietarios de CIC pagan impuestos sobre la propiedad a la misma tasa que otros ciudadanos, aunque a título privado servicios como recolección de basura, limpieza de calles y seguridad, como parte de las cuotas de asociación comunitaria. Esto equivale a una doble tributación, porque los propietarios de asociaciones pagan por un servicio que no reciben.

Si hubiera una política de no proveer de servicios efectivamente antes de que el propietario comprara una unidad en una CIC, teóricamente el comprador podría ofrecer un precio de compra más bajo que reflejase la falta de servicios municipales y el efecto de la doble tributación. El propietario de la unidad estaría protegido, y el emprendedor absorbería la pérdida. Pero si una municipalidad reduce los servicios pero no los impuestos después de la compra de la unidad, el propietario sufre una pérdida no compensada. Este resultado sería una mala política, pues supondría posibilitar la captación de rentas al permitir que una mayoría los ciudadanos de un pueblo seleccionara a un grupo de residentes para que soporte una carga tributaria adicional sin crear costos adicionales. Esto pervierte la noción de ecuanimidad y eficiencia, y es antitética a la construcción de comunidad y confianza cívica.

Es especialmente importante que las legislaturas eviten el uso de la doble tributación como política, dado que las acciones judiciales al respecto tienen poca probabilidad de tener éxito. Los pocos tribunales que han examinado ataques contra la doble tributación han sido indiferentes a los argumentos de que viola el proceso de derecho debido, viola la cláusula de protección igualitaria de la Constitución, o que equivale a la toma de una propiedad sin compensación. Si bien la doble tributación puede ser una mala política, no es inconstitucional. Los tribunales no deberían revocar estas decisiones legislativas, porque son esencialmente decisiones políticas que el público debería rechazar en las urnas.

La cuestión de desigualdad

El argumento de “secesión de los ricos” parece estar basado en la noción de que sólo los propietarios de mayores ingresos con viviendas de mayor valor son los que viven en comunidades de interés común. Los datos disponibles, sin embargo, no apoyan este supuesto con claridad. Como se indica en la figura 2, los precios de condominios y cooperativas –que suman la mitad de las unidades en CIC del país– son inferiores a los de todas las viviendas existentes (que incluyen condominios, cooperativas y viviendas unifamiliares dentro y fuera de asociaciones comunitarias). Si bien estas estimaciones no están segmentadas en profundidad (por ejemplo, no desglosan las viviendas unifamiliares dentro y fuera de las CIC), demuestran que los valores de condominios y cooperativas concuerdan con los valores de las viviendas en general.

El acceso a viviendas a un precio asequible es un desafío importante en los Estados Unidos, pero las asociaciones comunitarias no son necesariamente la causa de estos problemas arraigados y complejos. Antes de que las CIC se hicieran populares, los gobiernos locales ya habían impuesto la zonificación en forma de requerimientos de lotes de una gran superficie mínima, lo que frenaba a los emprendedores a construir viviendas de interés social. De hecho, se ha demostrado que las CIC han reducido los costos de la compra de vivienda. Las viviendas multifamiliares, como los condominios y las casas adosadas, son más económicas que las viviendas unifamiliares, porque recortan el costo del suelo, la infraestructura y la construcción (Ellickson & Been 2005). Las cooperativas de viviendas de interés social permiten restricciones a los precios de reventa y el nivel de ingresos del propietario, asegurando que las familias de bajos ingresos tengan la oportunidad de acceder a la vivienda. Con este propósito, los emprendedores que operan bajo requisitos o incentivos municipales frecuentemente designan como de interés social ciertas unidades de condominio dentro del proyecto.

Por lo tanto, es simplista y contraproducente considerar que las asociaciones comunitarias son un campo de batalla entre ricos y pobres.También el uso peyorativo del término “comunidades enrejadas” para describir las CIC con acceso público limitado no contribuye a comprender el problema. De hecho, una cooperativa de ingresos moderados con su puerta principal bajo llave por razones básicas de seguridad caería en la definición de “comunidad enrejada”.

Principios rectores

¿De qué manera debería la crítica de la “secesión de los exitosos” afectar nuestra comprensión, aceptación y autorización de las comunidades de interés común? El tema es complejo y no se presta a elecciones binarias. Por el contrario, es cuestión de acomodar intereses contrapuestos de acuerdo a los siguientes principios:

  • La aceptación del modelo de CIC ha aumentado con el tiempo. Estos tipos de modalidad de vivienda representan la libre elección de muchas personas, y la ley hace cumplir sus contratos en la mayoría de los casos.
  • Los propietarios que viven en CIC deberían relacionarse con el gobierno municipal y la estructura de la CIC bajo lo que se podría denominarse como “federalismo aumentado”. Bajo esta óptica, los residentes tienen deberes contractuales adicionales hacia la CIC, pero estas obligaciones no los excusan de sus deberes y su participación en los gobiernos federal, estatal y local. Como contraparte, los legisladores deberían basar sus decisiones políticas relativas a los propietarios de CIC sobre consideraciones de ecuanimidad, eficiencia y construcción de comunidad.
  • El acceso asequible a la vivienda requiere soluciones integrales. Estos temas se tienen que discutir y debatir en forma directa, y el proceso político debería determinar el curso de acción. La consideración de estos asuntos como un problema de las CIC no se justifica y no llevará a resultados efectivos.

Conflictos internos: Propietarios individuales vs. la comunidad

En su libro pionero Privatopia: Las asociaciones de propietarios y el ascenso de los gobiernos residenciales privados (1996), Evan McKenzie advirtió: Las CIC tienen una forma de gobierno privado que expresa una preferencia norteamericana por la propiedad de viviendas privadas y, con demasiada frecuencia, se convierte en una ideología de privativismo hostil. El objetivo social más importante es la preservación de los valores de la propiedad, y todos los demás aspectos de la vida comunitaria están subordinados a él. El cumplimiento rígido, intrusivo y frecuentemente mezquino de las reglas es una caricatura de… la gestión benigna, y la creencia en la planificación racional se distorsiona al poner el énfasis en la conformidad por la conformidad misma.

Los conflictos entre los residentes y las asociaciones o juntas de las CIC frecuentemente se centran en torno a dos temas: el sentido de las restricciones y los procedimientos para hacerlas cumplir (ver el recuadro 2). La disputa puede enfocarse en una gama de temas que va desde restricciones de paisajismo a la cobranza de cuotas. En efecto, el 24 por ciento de los residentes de CIC que respondió a la encuesta de Public Opinion Strategies de 2014 había experimentado un problema o desacuerdo personal importante con su asociación. De este grupo, el 52 por ciento quedó satisfecho con las resoluciones y el 36 por ciento no; en el 12 por ciento de los casos, el problema todavía no se había resuelto.

Existe sin duda el riesgo de que las asociaciones comunitarias se excedan en el contenido y cumplimiento de las restricciones, pero estas preocupaciones políticas sustanciales y de procedimiento se pueden resolver por medio de legislación y supervisión judicial.

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Recuadro 2: Los conflictos son buenos para los medios

Mientras que los siguientes titulares omiten las múltiples interacciones positivas entre los propietarios individuales y las asociaciones, sí señalan algunas de las interacciones difíciles que se pueden producir.

  • “Padres de infante de marina demandados por un cartel de apoyo en su jardín de Bossier City [La.]”. El cartel de 90 x 180 centímetros mostraba una foto de su hijo en uniforme, antes de ser destinado a Afganistán, con una leyenda que decía: “Nuestro hijo defiende nuestra libertad” (Associated Press, 25 de julio de 2011).
  • “Mujer del condado de Bucks multada por la asociación de propietarios por luces de Navidad de colores”. Los miembros de la asociación habían votado previamente permitir sólo luces blancas (CBS Philly, 2 de diciembre de 2011).
  • “Ciudadano de Dallas demanda a un vecino rabino que usa su casa como sinagoga”. El demandante argumentó que el uso de su casa para una congregación de 25 personas violaba la restricción residencial (KDFW Fox4 Online, 4 de febrero de 2014).
  • “Un abuelo está encarcelado por ignorar la orden de un juez en una disputa sobre la siembra de césped en su jardín”. La asociación obtuvo un fallo de US$795 contra el propietario, quien argumentó que no tenía dinero suficiente para volver a sembrar el césped que se había secado. Cuando el propietario no pagó lo que le correspondía, el tribunal lo encarceló por desacato (St. Petersburg Times, 10 de octubre de 2008).
  • “Residente de la Plantación de Hilton Head disputa el arancel de puerta por cuotas impagadas”. Un propietario demandó a una asociación que impuso un arancel de US$10 para entrar en el barrio a los propietarios que estaban en mora con su cuota anual de asociación (Island Packet, 29 de agosto de 2014).

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Libertad de elección

Como se dijo anteriormente, los individuos ejercen su libertad de elección al comprar viviendas en CIC y aceptar sus reglas. La vida en una asociación puede no ser para todos, pero en general se deben respetar las expectativas de la gente que elige vivir en una CIC, y no deben verse frustradas por alguien que después trata de violar el contrato. Los tribunales generalmente coinciden con esta opinión, como indica esta sentencia de 1981:

Las restricciones [originales] están revestidas de una presunción muy fuerte de validez, que deriva del hecho de que cada propietario individual de una unidad la compra sabiendo y aceptando las restricciones que se imponen sobre las mismas… [Una] restricción de uso en una declaración de condominio puede tener un cierto grado de irracionalidad, pero a pesar de ello resistir un ataque en los tribunales. De no ser así, el propietario de una unidad no podría confiar en las restricciones estipuladas en la declaración… ya que dichas restricciones podrían estar potencialmente en un estado de cambio continuo (Hidden Harbour Estates vs. Basso, Fla. Ct. App. [1981]).

Hay varias situaciones, sin embargo, en las que los propietarios no tendrían ninguna libertad de elección. Primero, es posible que las únicas viviendas nuevas disponibles para los compradores estuvieran en CIC, es decir, que los emprendedores ya no construyan viviendas fuera de asociaciones. Efectivamente, un informe reciente concluyó que en 2003 el 80 por ciento de todas las viviendas en construcción en ese momento eran en asociación (Fundación para la Investigación de Asociaciones Comunitarias, 2014). Además, un gobierno municipal podría requerir que los emprendedores crearan asociaciones como condición para la aprobación de una subdivisión. (La reciente legislación promulgada en Arizona que prohíbe esta práctica es señal de que todavía ocurre.) Finalmente, algunos tribunales han sugerido que, si bien las reglas en vigor al momento de la compra se deben hacer cumplir, una regla promulgada posteriormente por la asociación o junta bajo una competencia reservada no se tiene que hacer cumplir si un propietario puede demostrar que “no es razonable”. Otros tribunales no están de acuerdo: No se debe considerar la reclamación de un propietario cuando la asociación de propietarios enmienda la declaración conforme a una cláusula registrada en la declaración de convenio inicial. Cuando un comprador adquiere una unidad en dicha comunidad, la compra se efectúa no sólo sujeta a los convenios expresos en la declaración, sino también sujeta a las disposiciones de enmienda… Y, por supuesto, un comprador potencial que esté preocupado por el gobierno de la asociación comunitaria tiene la opción de comprar una vivienda que no esté sujeta al gobierno de una asociación… Por esta razón, declinamos someter dichas enmiendas… a la prueba de “racionalidad” (Hughes vs. New Life Development Corp., Tenn.Sup.Ct. [2012]).

Directrices para la protección de la autonomía personal

Las restricciones impuestas por las asociaciones de propietarios generan una preocupación cuando amenazan la autonomía personal y los derechos individuales fundamentales de sus miembros. Las restricciones de este tipo podrían incluir la prohibición de carteles o mensajes políticos, y la restricción de ocupación a familias “tradicionales”.

Los tribunales deberían hacer cumplir las restricciones si limitan los efectos colaterales (también llamados “secuelas” o “externalidades”) de un propietario hacia el resto de la comunidad. Sin embargo, no deberían dejar cumplir las restricciones que limitan la naturaleza o el estado de los ocupantes o el comportamiento dentro de una unidad que no cree externalidades. Esta metodología se basa en la teoría de que el propósito fundamental de los regímenes de las CIC es aumentar el valor económico y fomentar los intercambios eficientes. Por lo tanto, si el propietario no genera externalidades, los tribunales no deberían hacer cumplir prohibiciones de ciertos comportamientos. Más aún, algunos valores de autonomía personal son demasiado importantes y tienen prioridad sobre las reglas usuales de contrato. Por ejemplo, no permitimos contratos de esclavitud o la venta de órganos humanos.

Según este norma, una regla que limite el ruido o prohíba fumar (debido a la propagación de olores) en unidades multifamiliares sería legítima, pero las restricciones basadas en el estado civil de los residentes no. Algunas situaciones son más complicadas: por ejemplo, las restricciones sobre mascotas. Según las directrices sugeridas, en general sería legítimo prohibir las mascotas debido al ruido potencial y la renuencia de algunos residentes a compartir áreas comunes con ellas. No obstante, en el caso de animales de servicio, la salud del propietario de la unidad puede tener prioridad sobre las preocupaciones comunitarias.

Los temas relacionados con la Primera Enmienda presentan desafíos especiales. La libre expresión –por ejemplo, los carteles políticos o sobre un tema conflictivo, la distribución de volantes, demostraciones u otro tipo de manifestación– puede causar efectos colaterales, como ruido, interferencia estética y perturbación del ambiente general de la comunidad. Al mismo tiempo, sin embargo, la libre expresión es fundamental para nuestra forma republicana de gobierno, ya sea en el ámbito mayor del gobierno público o del gobierno privado. En casos de expresión, los tribunales podrían tener en cuenta la doctrina de larga tradición que prohíbe convenios que violen políticas públicas, y rechazar las prohibiciones totales de libertad de expresión a favor de restricciones razonables de horario, lugar y modo. De esa manera, se podría permitir la expresión pero limitar, pero no eliminar, sus efectos colaterales sobre la comunidad.

Otro valor fundamental para los estadounidenses es la libertad de culto. Las restricciones a la colocación de una mezuzá en el marco de la puerta o la exposición de pesebres, figuras de santos y luces de Navidad limitan la libre expresión del culto. Ponerse a hacer equilibrios para determinar la importancia religiosa de las luces de Navidad de colores frente a las blancas, en contra de las normas de la CIC, abriría una caja de Pandora, y sería apropiado que los tribunales impusieran una norma general de adecuación razonable sobre los reglamentos de la CIC que afecten a prácticas religiosas.

Finalmente, en el desarrollo y cumplimiento de los reglamentos de asociaciones, los propietarios de las CIC tienen el derecho a esperar cierto comportamiento por parte de las asociaciones y juntas. Esta expectativa deriva de la obligación de que todas las partes de un contrato actúen de buena fe y de forma ecuánime. Por lo tanto, un propietario debería tener el derecho a procedimientos imparciales, con las notificaciones pertinentes y la oportunidad de ser escuchado; de ser tratado de la misma manera que otros propietarios en circunstancias similares; y a no sufrir prejuicios, animadversión y decisiones de mala fe por parte de la junta y sus miembros.

Conclusión

Las comunidades de interés común cubren una gran parte de la superficie residencial de los Estados Unidos, y actualmente alojan a un cuarto de la población del país. Aunque las CIC ofrecen grandes ventajas económicas a sus residentes y a la sociedad en general, estos tipos de modalidad de vivienda requieren interacciones cuidadosas entre la asociación comunitaria y el gobierno municipal, y el reglamento de la asociación puede afectar la autonomía personal de sus miembros. No obstante, hay estrategias disponibles para mitigar, si no superar, estos problemas. Estas estrategias pueden hacer que la propiedad de una vivienda en una CIC sea menos ilusoria y más real.

Sobre el autor

Gerald Korngold es profesor de derecho en la Facultad de Derecho de Nueva York y visiting fellow del Instituto Lincoln de Políticas de Suelo. Enseña y escribe sobre temas de propiedad y derecho inmobiliario.

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