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?

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31 Responses to Who’s Filing All These Property Valuation Appeals?

  1. Elizabeth Larey July 10, 2019 at 2:44 pm #

    I didn’t even need to finish the article to know where this was going. Those rich white peoples scammed the system again. I have two friends who sold their southwest Mpls houses this past year. They were both on the market for almost a year. They both sold for less than the assessed value. And yes, they were both beautiful homes.
    Maybe before you make assumptions such as — all the valuations in the expensive neighborhoods are accurate —, you might want to dig in a little more thoroughly before you stick your neck out.

    • Adam Miller
      Adam Miller July 10, 2019 at 2:57 pm #

      You might try reading it again. Next time you might be offended that there appear to be barriers that skew who gets property tax relief via the existing process.

    • Scott Shaffer
      Scott Shaffer July 10, 2019 at 9:59 pm #

      I didn’t assume that all valuations in the expensive neighborhoods were accurate.

  2. Adam Miller
    Adam Miller July 10, 2019 at 2:55 pm #

    It’s also a little disturbing that assessed values are growing well above the city average in Wards 5, 6, and 9 and at the average in 8.

    • LM Moran July 11, 2019 at 4:30 pm #

      Is it possible that the rates of property value increase are cyclical? That is, can the 5% increase be after a series of 10% increases that simply sent the homeowner over the edge? I live in Ward 7 and have for 30+ years. In the first 10 years I lived there my property taxes tripled. Since then, not so much. I also know someone who is buying a home in ward 13 for about 15% less than the assessed value. Should they appeal the current valuation? A house is worth what someone is willing to pay for it so it seems to make sense that they should appeal the assessed value. How often does that happen?

  3. Dawn July 10, 2019 at 3:49 pm #

    Were the appeals successful?

  4. Elizabeth Larey July 10, 2019 at 3:52 pm #

    I guess you are implying we should change the process because some people can’t read? Or write? Or be bothered with going through the process that everyone else goes through? Should they have an interpreter? Should the government hire an interpreter, or a lawyer at government expense? Should the government be required to notify these people in advance? When you receive your property tax statement it clearly states what the appeals process is. You know what works Adam? Pick up the phone and talk to the assessors office. I do it in Ramsey County. They are very helpful, and I was going to appeal until they showed me what similar houses were. Here’s the rub with the process. They look at your next door neighbor. They look at your beautiful landscape. They look at your view. None of this has anything to do with the value of the house. And that was not the original intention of how to do assessments. And that is straight out of the mouth of a 30 year assessor in Ramsey County.

    • Alex Schieferdecker
      Alex Schieferdecker July 11, 2019 at 1:03 pm #

      Let’s leave the anecdotes behind and look at the data. What Scott is showing is that property valuation appeals are primarily being used by wealthier homeowners to contest relatively small increases in value.

      This analysis should cause people to question if this is the intended process, or if this process needs change. Are there parts of the process that could be simplified? Are there restrictions that might be needed on how big of an increase you can appeal? Should there be some kind of automatic appeal if an increase is above a certain percentage?

      These are all questions worth asking because of this analysis. Perhaps the answers will come out one way, perhaps another. But I think a kind of reflexive defense of the status quo isn’t great.

  5. Trent July 10, 2019 at 4:35 pm #

    So what you are saying is that a person of color with a non college education could figure out the paperwork to buy a house, and pay their insurance and taxes every year and the rest of adult life obligations, but somehow filling out this simple appeal form is a barrier they are less able to overcome because they aren’t white and college educated? Do you realize how offensive that premise is?

    • Andrew Evans July 10, 2019 at 4:47 pm #

      Yup!

      The letters are pretty obvious, seemed easy enough to read, and if I remember correctly the timeframe to file an appeal is pretty generous.

      I said it below, but a 5% bump on a $500k+ house is going to be a little more than that same price bump on a $130k house.

      A simple calculator out there has the rate at 1.345%. So on a $130k house that’s $1748 a year, and $6725 on a $500k house, then what, $13k for a million dollar house. Bump those values up 5% and now it’s $136500, $525000, and $1050000. The taxes go to $1836, $7061, $14122.

      I’d file a free appeal for a $300-400 difference. It wasn’t really worth the difference for the $100 it went up, and honestly I still think they have my home under valued so I wouldn’t want to appeal and have it go up that much more.

    • Christa Moseng
      Christa Moseng July 10, 2019 at 10:36 pm #

      Maybe they don’t have time, friend.

      • Andrew Evans July 11, 2019 at 9:28 am #

        Pretty sure the form was extremely simple, and all a person had to do was send it in. Also sure this wasn’t something that needed to be done in person, as really all it does is ask the county or city to take a closer look at the property.

        As I’ve pointed out, my house to me seems undervalued for taxes and I’d run the risk of them increasing the amount. Judging from North social media groups I’m not alone in that thinking, or alone in thinking the value is in line with what it should be.

        • Eric Anondson
          Eric Anondson July 11, 2019 at 9:44 am #

          “Pretty sure the form was extremely simple, and all a person had to do was send it in. Also sure this wasn’t something that needed to be done in person, as really all it does is ask the county or city to take a closer look at the property.”

          No one knows the form is simple until they have the time to find, then go actually find it. Much less bother to because you lack trust local government process will care about you.

          • Andrew Evans July 11, 2019 at 1:40 pm #

            I know the form was simple because I received a copy, read it, asked my partner if we wanted to file an appeal, we decided against it, and that was that.

            If we wanted to appeal the form did a good job laying out what our next steps would be.

            I’m not sure what more could be done.

  6. Andrew Evans July 10, 2019 at 4:36 pm #

    The map makes sense. A lot of those appeals are from areas that have higher housing values. A 5-15% bump in property tax is going to make much more of a difference on a $500k house than a $100k one.

    Assessments, at least where I’m at in North, seemed to lag behind the market over the past 5 years. I don’t remember specifically, and this is the final number with the homestead discount, but I believe my house was valued around or under $100k when I bought it about 5 years ago. It hovered around that mark for a few years before going up to $114k last year, this year it’s around $120k, and I believe it’s going up next year.

    My homested discount or whatever is about $25k this year, so the total is more around $145k. Market value, taking the lazy way and looking at current sales that are comps and price per square foot, gets it up to around $170-200k. That’s a pretty big difference, and I think a lot of us in North realize that and don’t want to raise a stink and cause the value to go up.

    I don’t know the market in South as much, but I’d guess they weathered the recession a little better and their values are more in line with market rates. Or, as I said before, those owners stand to gain more from a reduction than I would or others in North.

    IMO

  7. Mike July 10, 2019 at 4:57 pm #

    One of the most important points of this data, which the author ignores, is that by ward, on 9/13 wards the people who filed appeals had increases higher than the people in their ward who did not appeal. In the others there was no difference. When valuation notices come out, people don’t look at the city wide rate and decide if they are up or down appropriately – they go on Nextdoor, they look at last years statement, they talk to their neighbors – so it should not surprise anyone that if for example you are seeing an increase way higher than your neighbors, you will appeal.

    On top of that you have a population who wished they had appealed last year when their neighbors did who are playing catch-up in the wards that got big increases last year. This graph doesn’t capture that multi-year increase adequately.

    Property rates are progressive, so not only would the absolute $ amount of tax increase rise with higher value house but the higher rates applied to the upper range homes amplify this impact. A 5% increase in your home at $750k will raise your taxes a lot more than a 5% increase on a $200k home in dollars and percentages (assuming this change is altering your share of the total city tax burden).

    This feels like the author wanted to show that entitled rich white people are exploiting the system and they should be ashamed, and worked hard to get the data to fit that conclusion.

    • Eric Anondson
      Eric Anondson July 10, 2019 at 8:06 pm #

      Or maybe we have designed a system that the privileged are best able to work to an advantage.

      Maybe that’s an unjust thing.

    • Scott Shaffer
      Scott Shaffer July 10, 2019 at 10:26 pm #

      “so it should not surprise anyone that if for example you are seeing an increase way higher than your neighbors, you will appeal”

      What’s your take on wards 3 and 11, where the average appealer had a growth in value that was equal to or lower the non-appealers in the same ward?

      I didn’t try to shame anyone in the article. I pointed out that rates of property value appeals don’t correspond with rates of property value growth, but correspond very closely to race and educational attainment.

  8. Christa Moseng
    Christa Moseng July 10, 2019 at 10:34 pm #

    A lot of weirdly defensive comments on having this data analyzed. The ones that are offended on behalf of the underrepresented population are my favorites. They seem genuine.

    One might also consider the college education data a proxy for job type. The more white collar workers in a ward, who might, say, have the luxury of filling out forms and contemplating their positive net worth during their workday, with a lot of automomy, internet access, and little to no supervision, the more appeals you’ll see.

    Which is to say that is is not about intelligence at all, as the defensive comments want to infer—its about the day-to-day privileges of whiteness, wealth, and education.

    Having privilege pointed out can be uncomfortable, but instead of lashing out with defensive comments, introspection is probably called for…

    • Mike July 11, 2019 at 7:15 am #

      It may be convenient to dismiss any criticism of this analysis as merely defensive lashing out but I think in the interest of avoiding the echo chamber dynamic that sometimes permeates forums like this.

      Race and education have a strong proven correlation to wealth and income. Wealth and income have a strong correlation to the price of home people buy. Most of the appeals come from some of the most expensive parts of the city where % increases in valuation lead to disproportional increases in tax due to the progressive property tax scheme. There are other demographic variables that also correlate which weren’t discussed here that, if you simply drew a correlation plot as shown above could also lead someone to assume causation vs coincidence.

      The demographics around race and education level used in this article don’t distinguish between residents and property owners. Renters (remember our city is now 50% renters) can’t appeal property assessments.

      Lastly the repeated assertion that an assessment appeal is some onerous process that only the privileged can tackle is bunk. I ‘ve done it once myself. It was a simple on-line form, submitted, and then wait for a letter from the city a month later. The idea that this represents some massive barrier to participation, a slant to the privileged, is a gross exaggeration of the facts.

      The Strib did a much better analysis of this dynamic and included insights from previously depressed wards where valuation increases are seen as a positive sign of growing owner equity, of increased household wealth. That along would be a depressor to appeal and try to drive that down. If your house is a smaller % of your household wealth or you are already largely above water you may not see that value increase as a positive.

      • Bill Lindeke
        Bill Lindeke July 11, 2019 at 8:42 am #

        Here’s the article Mike mentions:

        http://www.startribune.com/challenges-to-home-valuations-surge-in-minneapolis/510946182/

        “The appeals represent about 1.4% of the 125,000 property assessment notices. Most of these appeals came from central and southwest Minneapolis; the fewest came from north Minneapolis.

        One reason could be that homeowners on the North Side were happy for their property values to balance out with the rest of the city, Todd said. Landlords and multiunit owners, he said, are also less likely to appeal their assessment than owners of single-family homes.

        “In some of these areas, finally having equity in your house is a good thing,” Todd said. “It might go up 10 or 11 or 15 percent, but you’re not underwater anymore.”

        As for the large number of appeals in southwest Minneapolis, where estimated values barely changed, Palmisano said homeowners there could still be feeling the effects of jumps from previous years.

        “It was a market adjustment,” Palmisano said. “It still hurts and it’s going to hurt for a while.”

        The assessor’s office made reductions in the estimated market value for 697 of the properties that contested their assessments.

        About 940 cases were escalated to the Hennepin County Board of Appeal and Equalization, where about half have received reductions. There were 361 open cases in the county process as of Wednesday.

        • Anton Schieffer
          Anton Schieffer July 11, 2019 at 9:59 am #

          I think this is a good point. In North, a higher valuation may mean that your investment is finally paying off. In Southwest, your investment has paid off so well that it “hurts” because you have to pay a higher property tax. The hurting obviously stops when you sell for 3x what you paid for the property 20 years ago (often above the assessed value, of course). That doesn’t happen in North, or in much of the city really, yet we continue to hear that home ownership is the best way to build wealth.

      • Christa Moseng
        Christa Moseng July 11, 2019 at 10:03 am #

        “It was a simple on-line form, submitted, and then wait for a letter from the city a month later.”

        This understates the commitment needed to have a successful appeal, which involves submitting evidence that the valuation is incorrect. And understanding what that looks like, and gathering it, can be daunting and laborious enough that it deters people who would benefit from an appeal.

        But even accepting that “they like valuation increases” is the entire explanation for the difference, that implies a perhaps mistaken understanding of the relationship between assessed values, market values, and tax allocation that the city could do more to address. If people think their assessed value has any bearing on whether or not they are underwater, or have equity, they are playing themselves.

        The question is: should the city’s tax allocation rely on a system where certain populations are systematically disenfranchised—due to misunderstanding or circumstance—while other groups do not, for whatever reason.

        • Elizabeth Larey July 11, 2019 at 1:43 pm #

          Its a simple process. If you buy a house and have a mortgage, you have to take responsibility to know what that entails. It’s about personal responsiblity, the gov does not have to bend over backwards for you. The form is simple. Follow directions

        • Andrew Evans July 11, 2019 at 2:06 pm #

          Again you’re off assuming that there would be much of a benefit for those who are living in homes valued under $200k. The amount of tax increase I had, in North, was maybe $120 a year. Taxes maybe went up that much more the year before. I think we started around $1400 and now are more around $1800, over 5 years.

          Someone having a home that’s valued over $500k would see more of an impact to a 5% to 10% value hike and would have more to gain from an appeal. Simple math. Also that the values in other parts of the city, namely those areas with a lot of appeals, had higher values through the recession and up to this point.

          If we follow your train of thought, then, you’re looking down on me for not filing my appeal, and really the whole neighborhood. You’re thinking that we don’t know enough to keep up on our responsibilities as home owners, and need to have parental figure above us make sure we’re ok. That or worse, you think areas of the city should be exempt from value hikes, and artificially kept at a lower value…

          I’m sorry to say but this is one of the easier things about owning a house. It’s a simple letter. There is no lawnmower to go use, no sidewalk to shovel, no home appliance to go back or replace, and no leaky roof. A home in general is a bunch of hundred to thousand dollar bills just waiting to happen. If you can’t give someone that amount of responsibility to read and digest a simple letter, how in the world do you expect them to be a homeowner? I’m not saying there can’t be resources to help them, but at some point someone is going to have to be deemed responsible for their house and property.

  9. Matt Brillhart July 11, 2019 at 11:29 am #

    As noted in a comment above, there may be a bit of a “hangover effect” at play in terms of why some homeowners filed appeals this year, even though their %increase was less than the %increase in the prior year when they did not file an appeal.

    I’d guess that newer/younger homeowners unfamiliar with the process probably don’t file an appeal in their first or second year of ownership, but after the 3rd consecutive 10-15% increase, a person is more likely to follow through with an appeal. Also, the spike in appeals got a bit of press in 2018, so more people who didn’t file one last year probably had it top of mind when the notices came out earlier this year.

    I successfully filed an appeal this year, here’s why:
    I bought my house in late ’16, and the first valuation notice I got in spring ’17 was simply adjusting up to what I paid (a 10% increase over prior year value). In spring ’18, the valuation notice included an eye-popping 15% increase, saying my house was worth $34k above what I had paid just 18 months earlier. But I was not experienced enough to know that I had just a few short weeks to contact the appraiser’s office and file an appeal, so I missed the window for 2018 and spent the rest of the year kicking myself. When 2019’s notice came with yet another >10% increase (now saying my 2BR/1BA house was worth $65k above what I paid <2.5 years prior, despite no improvements), this time I was ready to file an appeal quickly.

  10. J July 11, 2019 at 4:23 pm #

    My hunch is that this is exactly like the boost in 401k enrollment you see when it is opt out vs opt in.

    If you want a system that works for everyone equally, make it the default that the property value would be appealed rather than something someone would have to seek out.

    But that’d create a lot more bureaucratic waste than the 401k opt out situation, so unfortunately the squeaky wheels will probably continue getting the grease.

    The real problem is that properties aren’t assessed right in the first place and that this dumb appeal option has to exist in the first place. If the county adopts logical and transparent criteria for valuation, gets a consensus that it is fair, then says no more appeals, then our problem here is solved.

    Those who find their tax bill too high will adjust their spending (and residence) choices accordingly.

  11. William Hunter Duncan July 11, 2019 at 8:27 pm #

    Minneapolis and Hennepin county say my 1bedroom, 700 sq/ft house in SE Minneapolis is worth $226,000. I might get $180,000, if I could find someone who wanted to live here. More like $150,000 for a tear down.

  12. Brian July 11, 2019 at 10:01 pm #

    I actually did an appeal this year though in Ramsey County. Value notice had dates and times listed on it about two months out from receipt. I went in and had a 10 minute chat with the assessor about my reasoning, an appointment was setup to revisit my home and that was another 10 minutes. Letter a week later with a more favorable number.

  13. Mark Snyder July 17, 2019 at 10:00 am #

    One small thing that may be being overlooked as to why so many appeals came from Ward 13 is that Ward 13’s council member literally instructed homeowners to appeal their assessments in her ward newsletter, as reported by WedgeLive.

  14. Bruce Brunner
    Bruce Brunner July 20, 2019 at 11:36 am #

    Every homeowner gets a tax statement that gives instructions on how to appeal. anyone can do it. It’s not that difficult. I usually spend about 10-15 minutes doing mine including time to look up near by sales. You actually have to take the time/with some effort to do it and as the stats show, it’s worthwhile. If you can save $100-300 in taxes, you’re actually making a lot for your time involved. You can even just call the assessor and have them out and they might reduce it/negotiate on the spot- have done that as well.

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