One of the biggest inequalities in this country is the disparity in homeownership. According to a 2021 report from the Census Bureau, black home ownership is only 45.1% of all black households. Compare that to the national average of 65.6% and white America’s 73.8%, and you get some sense of the magnitude of the problem. This is one example of the need to correct the generational wealth gap between black Americans and the rest of the country.
So, the goal is clear, isn’t it? We all work together, push our representatives and our President to pass legislation that helps end discriminatory practices and provide assistance to put homeownership in reach for many black Americans. Problem solved, scratch another item off the very long list of how systemic racism continues to harm POC, we all go out for ice cream to celebrate before moving on to the next issue.
Well, you probably won’t be surprised to learn that homeownership itself is the next issue. Once black Americans find themselves in their own homes, they’re now subject to another new problem: regressive property taxes that leave their wallets empty and their cities struggling.
Buckle up, this is a long and math-heavy one.
This was also posted to my website, Toro Blanco Media.
Property taxes are the largest source of revenue for American local governments, responsible for the vast majority of municipal funding. Every aspect of municipal infrastructure is affected by this source of revenue: schools, roads, trash pickup, water, and so on. The more the city brings in, the more it can spend to maintain and improve these things. The less brought in, the more residents suffer from inadequate funding.
In theory, property taxes are a nice, neutral way of bringing in revenue: taxes are based off property values, so the more valuable your home, the more you pay. Unlike with income tax, where the rich can avoid paying their share thanks to a variety of financial sleights-of-hand, property tax is a lot more straightforward. If you have an expensive home, you have a higher property tax bill. If you own a lot of land, you pay more than someone that owns less land in the same area.
The problem is it doesn’t work out that way in practice. A thorough paper by Christopher Berry from the University of Chicago examines the problem in detail (and is well worth the time to read), but the gist of it is simple: lower values homes are routinely over-assessed in value, while higher value homes are under-assessed in value. This means that homeowners with low-value homes are being charged higher taxes than they should be paying, and wealthier homeowners are underpaying (since assessment is how your property taxes are determined).
Berry’s paper makes the case that this is a regressive situation wherever it occurs. However, the disparity of the problem afflicting black America is clear when you compare the situation to white homeowners.
There’s a lot of complex relationships here, but the central and most obvious issue is over-assessment (over-valuing a home, causing an unfairly high tax bill) and under-assessment (under-valuing, resulting in an unfairly low bill). The simplest measure of this is Sales Ratio, which is the assessed value of the property divided by sale price. Example: Your home was assessed as worth $100,000; if you sell it for $100,000, your ratio is 100%; if you sell it for $50,000, your ratio is 200% (your value for taxation is double the home’s actual market value); if you sell it for $200,000, your ratio is 50% (your value for taxation is only half the actual market value). The higher the percentage relative to differently priced homes in your area, the more unfair your property tax burden. All things being equal, some houses would be over-valued, some under-valued, and all houses in the same area, regardless of price, should average out to approximately the same percentage. Still with me? Groovy.
Using data from the University of Chicago’s Center for Municipal Finance, I examined the disparity between the most valuable and least valuable homes in American cities/counties with the largest African-American populations and the cities/counties with the largest Caucasian populations (county data was used where city data was not available), then compared them side by side (using data on houses sold from 2001-2017, to avoid single-year anomalies). The results are unsurprising: poor white and poor black homeowners are paying more than their fair share, but predominately black communities have it much worse. The following table shows some of America’s whitest and blackest cities (their exact percentage of population listed below), sales ratios, and the difference in how much more the poor were overvalued, both in percentage points and a multiplier:
Sales Ratio Differences
|San antonio, tx
Cities marked with an asterisk used their county data, city data was not available.
On average, majority-black cities saw their lowest value homes a full 79.26 percentage points higher than their highest value homes. On average, the lowest value homeowners in majority-black cities are having their lowest value homes assessed THREE TIMES as high, proportionally, as their wealthier counterparts, meaning they are paying massively more proportionally than the wealthiest homeowners.
On average, majority-white cities saw their lowest value homes 21.36 percentage points higher than their highest value homes, less than a third of the disparity with majority-black cities. On average, the lowest value homeowners in majority-whites cities are having their lowest value homes assessed roughly 1.67 times as high, proportionally, as their wealthier counterparts, meaning they are paying more proportionally than the wealthiest homeowners, but their situation is only about half as bad as their majority-black, low-value counterparts.
Detroit and Columbus are both major outliers, but the situation doesn’t change when you drop them and go off the other four: majority-black cities still see the lowest value homes overvalued by 34.95 points (compared to 14.43 for majority-white cities), and their low value homes are assessed twice as high as the highest value, proportionally (compared to 1.18 times as high for majority-white cities).
Even with outliers removed, majority-black cities see their least wealthy homeowners hurt substantially more by this practice than majority-white homeowners in the bottom 10%. The situation is so egregious, you can use maps of these disparities to pinpoint majority-black communities:
I could do an entire series of pieces on exactly how closely these values line up with modern-day segregation (and I will, if there’s interest).
While it’s clear that the Fair Housing Act has failed black America (the current homeowner rate of approximately 45% is only 3 points higher than in 1970), it is also clear that our current property tax assessment system is completely broken. The ten cities above are from all across the country, and clearly show that all of America’s poorest homeowners are taking on an unfair share of their tax burden, but black Americans are especially oppressed by this regressive taxation. Until we change this, increasing the percentage of black homeowners will do little good.
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