A new working paper has found that Black and Hispanic homeowners face a 10 to 13 percent “higher tax burden for the same bundle of public services ” than white homeowners due to racial biases in how homes are assessed for property tax purposes.
The assessment disparity translates into an extra $300 to $390 that Black and Brown homeowners must pay in property taxes. In the most extreme cases, the average Black homeowner in a county where the racial assessment gap is widest “would pay an extra $790 annually in property taxes,” the authors argue.
The paper, published in June by economists Troup Howard of the University of Utah and Carlos Avenancio-León of Indiana University, is called “The Assessment Gap: Racial Inequalities in Property Taxation.”
Howard and Avenancio-León analyzed 118 million homes in the U.S., and specifically analyzed 3.4 million property tax appeals in Cook County.
The authors conclude that the assessment gap is due to two main factors.
“First, property assessments are less sensitive to neighborhood attributes than market prices are,” which generates a tax burden even within jurisdictions that correlates with the race of homeowners.
“Second, appeals behavior and appeals outcome differ by race,” they write.
The authors found that in Cook County, minority homeowners are “less likely to appeal their assessment,” “less likely to win” if they do appeal and, if their appeals succeed, “typically receive a smaller reduction than nonminority residents.”
Assessor Kaegi’s assessment
In a Zoom call with area publishers last month, Cook County Assessor Fritz Kaegi spoke about the dramatic correlation between historic racial inequities in housing and property tax assessments.
“Our assessment system, if it’s working perfectly, is reflecting market prices for property,” Kaegi added. “We should always remember that all these structural determinants that create segregation and disparity in values are embedded in them.”
We get racial bias in property assessments, Kaegi said, “if we have a system that depends on appeals and who works the system best? People with money, people with power, people who have the most access. They whittle down their share when it comes to the expense of everyone else.”
You can also get racial bias when you don’t factor foreclosure sales into the assessment process, he said.
“In the past, our office oftentimes excluded foreclosure transactions, because they weren’t considered arm’s length transactions,” Kaegi said.
Foreclosures are rampant in Black and Brown communities, but Kaegi’s predecessor, Joe Berrios, wasn’t apparently taking them into consideration in the assessment process, at least not systemically, resulting in cases like that of North Lawndale native Anthony Travis.
Travis, a south suburban homeowner, was profiled by the ABC 7 I-Team in 2018, just as Berrios was preparing to leave office after his loss to Kaegi.
“When Travis was going through foreclosure, his home was being auctioned for $24,000,” the I-Team reported back then. His tax attorney put the market value at $39,000. But the 2017 reassessment of his home’s value (done solely to determine how much he should pay in property taxes) was $78,000.
In other words, Travis was expected to pay taxes on his $39,000 house as if it were worth $78,000.
“Makes me want to cry,” Travis told the I-Team. “Cause I keep trying to figure out where do they get these prices from? When I look at other folks properties in this area — how do they reach that conclusion?”
“He eventually got the value down to $61,000, but Andrea Raila, the president of the Training Research Advocacy and Education Network (TRAEN) told the I-Team that $61,000 was still too high.
“Qualified sales show the market value should be $39,000 not $70,000 not $65,000 but $39,000,” Raila said.
When the I-Team asked Berrios’ office about the disparity, it told him that foreclosures and short sales aren’t considered “fair-market … transactions.” But out of the other side of its mouth, the office said it takes into account “foreclosures in high-volume foreclosure areas.”
There’s a state law, the I-Team explains, that requires assessors to “look at these foreclosure sales, when they rank 25 percent of the neighborhood or greater.” At that point, they “need to incorporate them in [their] new modeling of assessments so they have fair, more accurate assessments and fair or more accurate property taxes.” It just doesn’t apply to counties with more than 3 million people.
Ultimately, Kaegi said, fixing the assessment gap “requires getting it right the first time.”