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Opinion: Despite Duggan's claims, Detroit still overtaxes homeowners

Christopher R. Berry

On Tuesday, city councilors will vote on Mayor Duggan’s proposal to provide compensation to property owners who were overtaxed between 2010 and 2013. While acknowledging the city’s history of unconstitutional, regressive taxation is a step forward, the resolution is in fact based on a lie. It’s a lie that’s been repeated so often that even those who know better might start to believe it. The lie? The lie is that the problem has been fixed.

The resolution does not provide compensation for years after 2013 because, the Duggan administration asserts, a citywide reappraisal initiated in 2014 has righted the ship. Even if that were true — it isn’t — the reappraisal didn’t go into effect until 2017, so the compensation period should have extended at least until then. But the more important truth, one that every Detroiter needs to know, is that the reappraisal was a failure. Unconstitutional, inequitable property taxation continues to this day in Detroit.

Protestors attend a press conference at the Coleman A. Young Municipal Center, in Detroit, February 13, 2020, to announce a class action lawsuit against the city for the over assessment of home values for thousands of home owners.

The failure of the citywide reappraisal is well documented in an evaluation that I, together with my colleagues from the University of Chicago’s Center for Municipal Finance, released in February. The report is available for all to read. City, county, and state officials were briefed on it at a hearing organized by City Council President Pro Tempore Mary Sheffield.

Our research shows that while average assessments have declined since the reappraisal, overall regressivity — the over-assessment of low-valued properties relative to high-valued properties — has only gotten worse. How can this be? It is because most of the assessment reductions have gone to higher-priced properties.

Recently, city officials have acknowledged that the average market value estimated by the assessor was higher than average Zillow sales values between 2010 and 2013, but claimed that the assessor’s values were reduced thereafter. Both points are true. But by focusing on average values, city officials are engaged in a sleight of hand that dodges their responsibility for ongoing inequities.

The city’s response calls to mind an old joke that makes the rounds in statistics courses every year. Three statisticians are hunting and come across a deer. The first one fires, but misses, by a few feet to the left. The second one fires, but also misses, by a few feet to the right. The third statistician doesn’t fire but declares triumphantly, "On average we got it!"

The city is declaring “on average we got it” based on the same sort of misfires — over-assessing those on the bottom while under-assessing those at the top. The Michigan constitution mandates that no property be assessed at more than 50% of its market value. Since the reappraisal went into effect, properties in the bottom half of sale prices (under $28,000) have been assessed at 65% of their market value, on average. Properties in the top half (over $28,000) have been assessed at only 31% of their market value, on average.

Combining all the properties, the average is 48%. Like the confused third hunter, the city is claiming that assessing those at the bottom too much while assessing those at the top too little amounts to hitting the target. Such a mistake is humorous in the form of a joke, but anything but humorous to the tens of thousands of Detroiters — those who can least afford it — who continue to be exploited by the city’s inequitable assessments. And remember, I’m talking about what’s been happening after the reappraisal.

Part of the enduring appeal of the joke is that even someone with no training in statistics can see the absurdity of the third hunter’s declaration. It is surprising, therefore, to see the Duggan administration peddling the same absurdity and betting that city councilors and everyday Detroiters won’t see through it. If you buy the city’s argument, the joke’s on you.

Christopher R. Berry is the William J. and Alicia Townsend Friedman Professor at the University of Chicago Harris School of Public Policy and the College. He is the Director of the Center for Municipal Finance.