The Effect of Property Assessment Reductions on Homeownership: A Quasi-Dynamic Economic Analysis

Abstract

This article evaluates the impacts of reductions in residential effective tax rates on homeownership in Detroit, Michigan. The decline in effective tax rates was driven by a citywide reassessment that significantly reduced effective tax rates. These estimates are used to infer the potential impacts of moving from a traditional property tax to a split-rate tax in which the tax rate applied to land is higher than the tax rate applied to structures. Using Detroit parcel-level data over the years 2012–2019, we find that tax reductions resulting from property reassessment generated a very small net decrease in homeownership. Our evaluation suggests that moving to a split rate tax would likely result in a minimal change in the homeownership rate in Detroit.