How Homestead Exemptions Can Counteract Regressivity in Property Tax Assessments

Evidence presented in several recent academic studies using national datasets indicates widespread regressivity in property tax assessments. This can be due to statutory limits on assessment levels or a failure to reassess properties regularly. However, a review of assessments in Boston, Massachusetts demonstrates that regressivity may be an issue even when sound assessment practices are applied. Technological advances in mass appraisal tools and improving the data used in the valuation process may reduce or eliminate regressivity in assessments. However, implementing these measures may be both time consuming and costly, and some of the technology may be beyond the reach of smaller assessment jurisdictions.

Homestead exemptions are a common property tax relief tool that reduce the assessment of taxpayers who own and occupy their property. Homestead exemptions when formulated as a flat dollar amount provide more proportional relief to lower value homes. This feature can be a tool to redress the impacts of regressive assessments and make property tax incidence more equitable.