Appeals vs race and education

Who’s Filing All These Property Valuation Appeals?

Every Spring in Minneapolis, Nextdoor.com blows up when the annual property assessments went out. Many neighbors ask questions and give tips on how to convince the City of Minneapolis and Hennepin County that the real estate they own is actually less valuable than the assessor thinks. I should probably point out that there are some good questions about taxes that I won’t tackle here because they have been ably answered elsewhere on Streets.mn: “What are property taxes?”“How are they calculated?”, and “Why are they so high?”

For my purposes, the main thing that matters is that the assessed value of your property is used to determine what portion of the property tax levy you, the owner, should pay for. If you can convince the assessor that your property is worth less (by successfully appealing the assessment), then you save money on your tax bill.

Last month, the City Council heard a presentation (PDF) from the Local Board of Appeal and Equalization, which is an appointed group of knowledgeable volunteers who hear from property owners who would like to pay less taxes. One slide of the presentation showed a map of all the appeals that had been filed. I’m a curious guy, so I asked the City Clerk’s Twitter account if they would make that data public, and they graciously indulged me. So let’s start by just looking at a map. Each dot represents one appeal of a property value assessment.

Appeals Map2

I see some concentration! Why are there so many appeals for properties in Downtown, Near Northeast, and around the chain of lakes? One reason why a lot of people in one part of town might appeal their valuations is because the assessor said that their values are growing abnormally fast. Hypothetically, if homeowners in ward 13 in southwest Minneapolis were seeing 10 or 15 percent increases in their assessed value, and homeowners in wards 4 and 5 in north Minneapolis had increases of only 5 percent, that might make sense to see more appeals in southwest.

To figure out how fast values were rising on properties that had filed appeals, I cross-referenced the data with the assessor’s data from 2018 and 2019. I found out that the value of the average residential property in Minneapolis grew by 8 percent last year. Most appeals filed in wards 3 and 7 were for an increase of less than 7 percent, and most appeals from wards 11 and 13 were for an increase of less than 5 percent. The wards filing the most appeals were challenging valuation hikes that were growing much more slowly than the city-wide average.

Appeals

Looking closer, the chart below shows the average property value growth, broken down by whether the owner appealed the valuation, in each ward. As indicated in the chart above, the average appeal in wards 3, 7, 11, and 13 was for a valuation hike much smaller than the 8 percent city-wide average. In wards 4, 6, and 9, values are rising faster than average but owners aren’t filing as many appeals. Here, half or more of the assessments that went unchallenged actually grew faster than average.

Appeals Bar

We have a system where we determine tax burden based on your real estate wealth. There are better possible worlds, but property taxes are generally good. The assessment process should be accessible and transparent. Right now, the assessment appeals process isn’t being used by people whose property is skyrocketing in value. In fact, there appears to be a pretty strong negative correlation between the rate of property value growth and the prevalence of appeals, which is the opposite of what I would have expected.

So I took one more swing at explaining the pattern. Navigating complicated bureaucracies like this appeals process takes political connections and familiarity with (even affinity for) paperwork. Basically, filing an appeal is a less daunting task if you happen to be a white person with a college degree. So, I found the percentage of white college graduates in each ward and graphed it against the number of property value appeals filed in each ward. I found that more than three-quarters of the variation in appeals can be explained by racial composition and educational attainment, and that roughly, you should expect to have one more appeal for every 42 more white residents with bachelor’s degrees.

Appeals vs race and education

 

This seems like a problem! Can we design a transparent and accessible property tax system that isn’t manipulated disproportionately by one group of advantaged people? What would it look like?

Scott Shaffer

About Scott Shaffer

Scott Shaffer works for a nonprofit community development corporation in Minneapolis. He has a master's degree in urban and regional planning from the University of Minnesota. He and his wife live in the Powderhorn Park neighborhood with their daughter and two Siamese cats.

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