Local property taxation and evidence of structural racism Mitchell: Switching gears now to another area that I know you’ve done a lot of research in—property taxation. I think this is similar, in some ways, in that you have clearly chosen a topic where the government has a lot of power; in this case, shaping what rates of tax folks pay. It’s not a naturally occurring market in that regard. The government is setting the rules, which is highly determinative of the outcome, so it’s similar to voting rights. Can you say a little bit about what drew you to the property tax issue and then explain a bit about what you found? Avenancio-León: Sure. The backstory is that I’m always engaged in legal community service. I like to participate in that service.
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Local property taxation and evidence of structural racism
Mitchell: Switching gears now to another area that I know you’ve done a lot of research in—property taxation. I think this is similar, in some ways, in that you have clearly chosen a topic where the government has a lot of power; in this case, shaping what rates of tax folks pay. It’s not a naturally occurring market in that regard. The government is setting the rules, which is highly determinative of the outcome, so it’s similar to voting rights. Can you say a little bit about what drew you to the property tax issue and then explain a bit about what you found?
Avenancio-León: Sure. The backstory is that I’m always engaged in legal community service. I like to participate in that service. And during my time in the Bay Area, I was working as a volunteer for an organization that would give legal assistance to people facing evictions. We wouldn’t participate directly. We would just advise them. A large part of the problem I was facing is many of these people didn’t speak English so they just couldn’t understand what was going on.
A large part of my job was just translating, legally, to make sure they understood that they had 10 days to reply to a problem. But then, in the process of having those conversations, I would start realizing that a lot of things were happening. And one of those things was people were losing their properties because of their inability to pay their taxes. Not always directly—it’s not like you’re losing the property to the government—but they were unable to pay their mortgages in addition to their property taxes.
And I heard the constant complaint that the tax bills were just way too high. And they were way too high, relative to the experience that my colleagues, my academic colleagues, and my lawyer colleagues were facing. It was a completely different experience. And that’s what drove me to study this issue. There was the suspicion, perhaps from the perspective of empirical academic research, but not suspicion from the perspective of the community folks, locally speaking, that this was a widespread problem.
And the question that I and Troup Howard [an assistant professor of finance at the David Eccles School of Business at the University of Utah], my friend and co-author, were trying to figure out was how widespread were these high property tax assessments, and what were the drivers? We wanted to understand whether this was a case of intentional racism targeting these communities or an institutional feature that was actually driving the inequality.
This is why I like to focus a lot of my research on institutions. I think you don’t need persistent forms of discrimination or racial bias in order to find systemic racism embedded in the system. Even if you have Puerto Rican county assessors, even if you have Black folks leading the systems, many of those structures were designed in a time when they were not intended to help minority property owners. We have lost track of the way the system was designed, so by just forgetting the roots of the institutions, we may be participants in a system that is still amplifying those inequalities.
Let me tell you what my co-author and I find in the system of property taxation. What we find is that the main reason why there are higher property taxes for minority homeowners is because assessments are too high for these communities. Assessments can be too high for a few reasons, but one of the main reasons is that the characteristics of the home—such as the number of bathrooms, the number of bedrooms—those are well-assessed by the county assessors. They do a very good job at valuing the physical characteristics of a home. But then, there are the less tangible characteristics of a property, such as the location or the level of amenities, such that there’s a mismatch between how the market values it and the evaluation of the assessors. That difference is systematically overvaluing Black-owned properties.
If you own a house in a place that is poor or that is far away from transportation, then the market will reduce the value of that property because it doesn’t have all these amenities. But the assessors won’t do that. Conversely, in wealthy White neighborhoods, where people are very close to public transportation, with parks to enjoy and other amenities, the property is undervalued from a tax perspective because the physical characteristics are not what is driving the value of the home.
Then, there is a problem with appeals to property tax assessments. Black homeowners are less likely to appeal, and less likely to win if they appeal, and less likely to get a significant reduction if they win an appeal. This is a different institutional problem.
But the problem of the assessments not being accurate is a problem that does not require intentional discrimination. Given the long history of residential segregation in the United States, however, it’s going to amplify those preexisting racial burdens that were already in place, even if there’s no intention to do so.