Assessment Inequities Hurt Black Households
In part one of this series, which covered property assessment equity, we posed this question: What forms of unfairness might be present in the tax assessment process? The process is so opaque and subjective that the county you live in may be systematically overtaxing some properties and under-taxing others, and you might not even know it.
The above article took a look at property assessments in Buncombe County, North Carolina. Thanks to data from the geoanalytics firm Urban3, we were able to identify stark inequities along economic lines in the assessment outcomes in Buncombe.
As indicated in the graph above, low-income households were getting inflated property assessments while higher-income households were getting a break in their valuation. This inequity leads to compounding issues. Most notably, it leaves the low-income communities paying more, as a percentage, into public services that everyone uses and benefits from. Not only does this further the racial wealth gap, it also means that wealthier households are not paying their fair share in property taxes to our counties and municipalities.
Nearly every county in the United States has its own J-curve wherein lower-value homes are assessed at higher rates, in proportion to their actual market value, and more expensive homes get a break on their taxes.
Assessment ratios in counties and municipalities across the United States. (Image via New York Times.)
This issue was brought to light on a national scale by Christopher Berry, of the University of Chicago. Berry published a groundbreaking analysis that took a look at hundreds of counties across the United States, to see exactly how deep the assessment inequity issue went. After analyzing millions of data points on home sales and assessments across the nation, he found the same patterns Urban3 discovered in Buncombe County. He concluded that low-priced properties were facing an assessment level, as a proportion of price, twice as high as expensive properties, on average.
The assessment inequity issue is a compounding one for many communities of color. On top of historic federal programs that disproportionately advantaged white Americans over Black Americans (such as Urban Renewal, the GI Bill, and, most obviously, Jim Crow Laws), Black Americans still have to face subtle inequities hidden in opaque systems, as seen in property assessments.
Overvaluation in property assessments result in property owners being more burdened by their property taxes, and as such, many families hurt by these costs are having to make critical decisions about whether they can afford other necessities, like medications or groceries.
Dr. Dorothy A. Brown has also been an active voice in bringing attention to inequities baked into tax systems. In her recent book, The Whiteness of Wealth: How the Tax System Impoverishes Black Americans—and How We Can Fix It, Brown shines a light on all the dark spots in our financial systems and gives data to back up the anecdotal experiences so many black Americans are familiar with.
Referring back to those historic racist policies, Brown notes that “by the end of the 1950s, 98 percent of homes built with F.H.A. support after World War II were occupied by white Americans.” Despite Black Americans paying into this program at equal percentages, they were left behind at a great disadvantage.
A Black neighborhood in Detroit, 1950. (Image via Detroit Public Library Digital Collections.)
Also during the 1950s, a tax policy was created to ensure that homeowners would not be taxed on gains if they sold their home when purchasing a new home of equal or higher value. This policy provides its greatest gains to the homeowners who buy and sell higher-cost homes, who are disproportionately white.
A family sits outside of their home in Columbus, Ohio, 1950. Image via Museum of Fine Arts, Boston.
Along with being left out of the many programs designed to give Americans a hand up in homeownership, inequities are built into the places Black Americans were able to build. Black neighborhoods are still seen as less desirable in the eyes of the appraisal process, even when controlling for how wealthy or poor a neighborhood is.
(A word here about appraisals versus assessments: Appraisals are typically done by banks based on the market value of the home for the purposes of determining the amount the bank will lend for a mortgage. Assessments are done by a governmental body to assess a home’s taxable value.)
During the redlining era and continuing to this day, simply the presence of Black families is often enough to cause the neighborhood to be appraised by banks at lower rates than a similar all-white neighborhood.
Taking all of this together, low-income Black householders are often at a disadvantage because they are being overvalued in their tax assessments, raising their property tax burden. Meanwhile, higher- and middle-income black householders are being disadvantaged in the appraisal process, where their home may be undervalued by a bank. Such structural and systemic inequities as these are why, despite so much social progress being made in the United States, the average white family has eight times the wealth of a typical Black family.
This is a problem happening across the nation, a problem that is so glaring that the federal government felt they needed to step in to help generate solutions. In July of this year, the Biden Administration established the Interagency Task Force on Property Assessment and Valuation Equity, under the umbrella of HUD’s policy development and research department.
Ultimately, though, these unfair practices are occurring in thousands of local banks and tax assessors' offices, and so reform will need to happen locally, as well.
Though this can be hard to learn for many people, regardless of race or status, it is important to shine a light on these opaque, confusing practices that strongly affect the wealth-building potential of any individual. If we want to live in a free and equitable society where everyone has the potential to succeed and experience prosperity, we have to look back and understand where the inequities begin—whether in the banks or the government.
For the next article in this series, we will be taking a look at potential solutions to this issue of tax assessment discrepancies, some of which are already in development in some communities. We will also investigate examples of places that have found more equitable ways of conducting property assessments.
Read part three of this series here!
A 2020 study revealed that areas around streets named after Martin Luther King Jr. are more segregated and poorer than the United States average. Now, data shows property values in these areas are affected, as well.