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Assessment of Property Tax Reductions on Tax Delinquency, Tax Foreclosure, and Home Ownership

Fernanda Alfaro, Dusan Paredes, and Mark Skidmore

January 2021, English


In this report, we provide an evaluation of the impacts in Detroit of reductions in residential effective tax rates on tax delinquency, property tax foreclosure, and homeownership. The decline in effective tax rates was driven by a citywide reassessment, which significantly reduced effective tax rates. These estimates are used to infer the potential impacts of moving from a traditional property tax to a split-rate tax in which tax rate applied to land is higher than the tax rate applied to structures. Using parcel level data from Detroit over the years 2012–2019, we find that tax reductions resulting from the property reassessment generated meaningful improvements in tax compliance as well as increases in homeownership. Our evaluation also suggests that moving to a split-rate tax would improve property tax compliance and increase homeownership in Detroit.


Keywords

Appraisal, Housing, Land Value Taxation, Tax Reform