Minneapolis Fed: Black, Hispanic homeowners see higher tax assessment rates

Nationwide, Black and Hispanic homeowners are taxed 10 to 13 percent higher than white homeowners, according to a new report from the Minneapolis Federal Reserve Bank.

It says that property tax assessments tend to be blind to neighborhood amenities such as parks that raise the market value of homes. So a home across the street from a park could be assessed at the same value as one on a busy thoroughfare, even though it would sell for more.

“In areas that have predominantly white homeowners, assessments are lower than they should be [and] homes in communities which have a relatively large proportion of the population that’s Black or Hispanic end up being over-assessed,” said Troup Howard, co-author of the study.

He said relatively similar homes that sit side by side are also more likely to be assessed differently if their owners are different races. He and his colleague, Carlos Avenancio-León, found Black and Hispanic homeowners are less likely than white homeowners to appeal their assessments. And when they do, they’re less likely to win, or they receive smaller adjustments than white homeowners who appeal.

“There is little reason to think that assessors would know this. Assessments are typically not done through an assessor showing up with a clipboard and inspecting a home and even having an opportunity to observe the race or ethnicity of the homeowner. Rather, assessments are typically computed by an analyst,” Howard said.

“So a difference in appeals behavior and appeals outcomes can explain this inequality that persists within even the same block or two,” he said.

The analysis found the disparity is slightly smaller in Minnesota, where Black and Hispanic homeowners are overtaxed 8 to 10 percent.

Howard said municipalities can overcome the disparity by using a more local home price index and by using the home’s most recent sale as a baseline for its value.

He spoke with MPR News host Tom Crann. Hear their conversation using the audio player above.

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