'Assessing' Discrimination: The Influence of Race in Residential Property Tax Assessments

SSRN Electronic Journal 07/2010; 20. DOI: 10.2139/ssrn.520242


In this Article, I document evidence that residential property in majority-minority neighborhoods is assessed at higher effective rates than like property in majority-white neighborhoods. I examine data on sales price and assessed value for more than fourteen hundred homes sales in New Haven, Connecticut from 2000-2001. My chief finding is that residents of minority neighborhoods - namely, African American and Latino - face assessments that are significantly higher than the market value of their residences, while residents of majority white neighborhoods are assessed at significantly less than market value. As a solution to assessment discrimination, I propose that assessments be meted out not on the purported market value of the underlying residence as is the case currently in most jurisdictions, but based on the actual cash costs of making home purchases.

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    • "Surprisingly, we find that Caucasians pay a higher percentage of their income in property taxes than other ethnicities, all else equal. Previous studies have found that the lower property values in the predominately minority neighborhoods of inner cities tend to be " over-assessed " (Harris and Lehman, 2001; Harris, 2004). Therefore, we expected that minorities might pay a higher percentage of their income in property taxes because of this fact. "
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    ABSTRACT: What impact does a forced sale have upon a property owner's wealth? And do certain characteristics of a property owner such as whether they are rich or poor or whether they are black or white, tend to affect the price yielded at a forced sale? This Article addresses arguments made by some courts and legal scholars who have claimed that certain types of forced sales result in wealth maximizing, economic efficiencies. The Article addresses such economic arguments by returning to first principles and reviewing the distinction between sales conducted under fair market value conditions and sales conducted under forced sale conditions. This analysis makes it clear that forced sales of real or personal property are conducted under conditions that are rarely likely to yield market value prices. In addition, the Article addresses the fact that judges and legal scholars have utilized a flawed economic analysis of forced sales in cases that often involve property that is owned by low- to middle-class property owners in part because those who are wealthier own their property under more stable ownership structures or utilize private ordering to avoid the chance that a court might order a forced sale under the default rules of certain common ownership structures. The Article also raises the possibility for the first time that the race or ethnicity of a property owner may affect the sales price for property sold at a forced sale, resulting in a "double discount," i.e. a discount from market value for the forced sale and a further discount attributable to the race of the property owner. If minorities are more susceptible to forced sales of their property than white property owners or if there does exist a phenomenon in which minorities suffer a double discount upon the sale of their property at a forced sale, then forced sales of minority-owned property could be contributing to persistent and yawning racial wealth gaps.
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