The Hidden Problems of Property Taxes
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One morning Joe Minicozzi, founder of the data analytics firm Urban3, opened his mail to find his property tax bill. To his surprise, he found a stark increase in the amount due. Joe lives in a modest historic home in Asheville, North Carolina, and when he got this bill he knew there had to be a mistake. Out of curiosity, he began striking up conversations with his neighbors and his next-door neighbor, who had recently renovated areas of her home, yet had seen no change in her bill. After talking with more of his neighbors, Joe knew something was fishy about the assessment process.
Many people don’t really think about their home assessment, and most people do not understand the assessment process. It's typical for homeowners to just get the bill and pay it, not considering how the amounts are determined or who determines them. This opacity in the assessment system has led to stark disparities in the valuation outcomes.
This brings us to Urban3’s most recent passion project: diving into assessment inequities in Buncombe County, North Carolina. Buncombe County has recently declared a mandate on achieving reparations, so analyzing systems that could be decreasing the wealth and prosperity of low-income minorities is an important task, aligning with the County’s goal.
Urban3’s initial finding was that the assessments in Buncombe County were very subjective. Homes are broken up into “tax neighborhoods,” where value is assessed as a group. The neighborhoods are determined by features that could affect the value of the home on the market. For example, homes near amenities such as a lake or mountain views would be grouped together for valuation. This kind of makes sense, right? But in practice, there’s a lot more going on under the hood.
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Let’s compare 158 Kimberly, a home in a wealthy neighborhood with mountain views and underground utilities across from a golf course, with 68 Courtland, a home in a working-class, majority-minority neighborhood. When looking first at the land value alone, the numbers make sense, but when you consider the tax value per acre, many questions begin to arise. How is it that a home in a working-class neighborhood is paying more in their county taxes per acre than a home on a golf course?
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This example is just one comparison to demonstrate a pattern that is playing out across the county. Let’s throw in a third home in prime mountain-top real estate, complete with a private tennis court: we still find the same pattern. The more expensive households are being undervalued in their county tax per acre, and working-class and even poor households are picking up the slack.
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This chart shows the cost of housing in Buncombe County. As we can see, a lot of the housing is stacked toward the middle, with the majority of the housing stock being within the $250,000 to $300,000 range. We do not see the same trends on the tail ends of the value spectrum; there are few houses on the lower-value end and even fewer on the higher-value end.
For those homes on either end of the spectrum, it may be more difficult to accurately approximate the home values in the reappraisal process. This is because appraisal math is primarily conducted using means such as “average price per square foot,” or “average price of a two-bedroom home in a specific neighborhood.” For the expensive and cheap homes, there are simply fewer sales to use for approximating true-market values. We don’t see the same issue in the center of the spectrum; the reassessments come out to be more accurate because there are plenty of sales to compare with when assigning market value.
Putting this all together, we have uncertainty at either end of the spectrum, influenced by the use of averages in the assessment math, resulting in each end of the home-value spectrum being pulled toward the middle. Lower-value homes are being pulled up to the middle and higher-value homes are being pulled down.
To help understand this better, if we take the price the home was sold for and divide it by the assessment price, we get what Urban3 calls a “J curve”:
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This graph shows the “ratio gap” of sales prices to assessed values of homes in Buncombe County. As we saw in the chart before, lower-cost homes are being pulled up, and higher-cost homes are being pulled down. In the graph above, 1.00 represents homes being sold exactly at the assessed value. You can see that homes being bought in the $200,000 range are right in the sweet spot, where they’re being assessed fairly close to the sales price. But looking at the other portions of the graph, you’ll notice that homes above $200,000 are being assessed for well below their selling price, and homes below $200,000 have a much higher sales-to-valuation ratio. In other words, higher-income households are getting a break in county taxes, while lower-income households are getting inflated assessments and seeing their taxes increase.
This analysis revealed a systemic issue in the reassessment process in Buncombe County. The error is not in any one assessor’s actions but in the math and processes of the assessments. These disparities create a compounding problem, where low-income households are under more of a burden to pay higher taxes, which means they have less money left over to pay for basic needs. Meanwhile, when a wealthy person ever gets an inflated assessment, they just call up their attorney—a resource most low-income people don’t have.
The moral of the story is that the people buying the high-cost homes need to be paying their fair share into the tax system. While Buncombe County is effectively subsidizing wealthy, sprawling neighborhoods, it’s expecting low-income neighborhoods to pick up the slack. At the end of the day, most places need more resources to pay for community-wide needs, such as infrastructure updates, so it’s unsustainable to continue letting wealthy households get this discount on their county taxes.
Thanks to Urban3’s work, we know the scope of the problem in Buncombe County, but this is not the only place with obscure and obfuscated assessment practices. It is likely that inequities such as this can be found in many counties across the United States. Maybe your property tax bill skyrocketed this year, even though you haven’t made any major home improvements. It’s worth taking a deeper look into how your county or city does their assessments...
Meanwhile, we’ve got more to share from Buncombe County. This is the first story in a series of articles coming soon from Strong Towns, in partnership with Urban3. In future articles, we'll talk about how tax neighborhoods came to be, learn how this is impacting people on the ground, and discuss some potential solutions to address the assessment inequities.
Read part two of this series here!
Sarah was the Strong Towns 2021 Summer Intern, in partnership with Urban3. Sarah graduated with a bachelor's degree in Urban Planning & Design from the University of Missouri–Kansas City in May of 2021. She is passionate about neighborhoods and advocating for the individuals within them. Her goal is to use her planning education to support practices that help strengthen communities. She also enjoys traveling, hanging out with her dogs, and experimenting with vegan baking.