How property tax assessments create winners and losers
Can a stark room, dominated by a plastic-draped pile of boxes and decorated with inscrutable documents, spur scrutiny of the regressive tax that underwrites local government?
Artist Harrison Kinnane Smith spent much of the pandemic mulling property tax assessments, home appraisals and mortgages, and putting together one of the Mattress Factory’s temporary installations exploring the concept of home. Today, his work is at the center of a lunchtime panel discussion called “Overcharged and Undervalued: How Blackness Colors the Worth of a Home.”
A centerpiece of the discussion will be this data point: Based on assessments, sales and census tract demographics, the average Black homeowner in Pittsburgh pays property taxes at a 7% to 8% higher rate, relative to the market value of their home, than does the typical white homeowner.
“Say it’s a $100,000 assessment for the white family,” said Smith. “It would be $108,000 for the Black family.” The resulting difference in Allegheny County, City of Pittsburgh and Pittsburgh Public Schools property tax bills would be around $190 a year.
About Unbalanced: This year, PublicSource is exploring the effects of property taxes on people and communities a decade after Allegheny County’s last reassessment.
That finding echoes those of scholars who have found similar results nationally and in the vast majority of counties, including Allegheny.
Assessors nationally “systematically overvalue the lowest-priced homes, that is they estimate that those homes are worth more than they really are, whereas the homes at the top are systematically undervalued,” said Christopher Berry, a professor and director of the University of Chicago’s Center for Municipal Finance. Berry, whose research focuses on property taxes, is not involved in the Mattress Factory installation or discussion. The result is “a hugely regressive system.”
Politically, fixing assessments is perilous. Inevitably, some tax bills go up as others go down, and those who pay more complain — and vote.
As a result of court cases and political decisions, Allegheny County’s assessments are based on 2012 market values, which can be adjusted when a property owner or taxing body appeals. Berry’s research found that as of 2017, Allegheny County’s assessments were regressive — more burdensome to those less able to pay — though they were still fairer than those of most counties in the state.
In the run-up to the Mattress Factory installation, Smith and his friend Jordan Abbott, a research analyst with the Inter-American Development Bank, looked at data through 2020. They focused only on Pittsburgh homeowners, and concluded that the continued reliance on 2012 values has become part of the problem.
“The real issue is that there’s just no updated system,” said Smith. “We’d have a much more accurate assessment system if [reassessment] were just on a regular basis, if it occurred more frequently.”
Crucial and controversial
Property assessment is complicated, especially in a county like Allegheny, with more than 580,000 properties across 130 municipalities and 43 school districts.
Assessments are supposed to reflect the prices similar properties fetch on the open market. Your property tax bill is then based on:
- The assessment
- Minus applicable exemptions for factors like homeownership
- Times the millage rates set by the county, municipality and school district in which the property sits
- Divided by 1,000, because one mill is a dollar of tax due per $1,000 in taxable value.
Pittsburgh city and school property taxes are due Feb. 28, and Allegheny County’s on April 30. The revenue collected will cover much of the cost of public services from policing to paving, teaching to courts.
- The county’s operating budget of nearly $1 billion depends on the property tax for 39% of its revenue — more than double the size of the next-largest source, which is state funding.
- The City of Pittsburgh counts on $151.4 million in property taxes this year, or 23% of its revenue, also its largest chunk.
- For the Pittsburgh Public Schools, property taxes cover 30% of the tab, or $193.2 million.
“Property taxes are the main source of revenue for local governments in most places,” said Berry, whose team analyzed the fairness of the levy in counties across the United States. “The amount of money at stake is astronomical and the consequences for everyday people are quite significant.”
How can you evaluate assessments? If the prices of properties sold in arm’s-length transactions are reasonably close to their assessed values, then the assessments are fair.
In Pennsylvania, the job falls to counties. And in Allegheny County, the current system evolved from 12 years of lawsuits alleging that assessments were unfair, and political decisions by county executives.
Jim Roddey, the county’s first executive, conducted repeated court-ordered reassessments during his four-year term ending in 2003. Successor Dan Onorato’s eight-year tenure was marked by dogged opposition to reassessment, ending with a court-approved agreement that the county would use updated values in 2012.
Current third-term County Executive Rich Fitzgerald ran on an anti-reassessment platform, and at his inauguration even jokingly blamed property tax bills for an injury his wife suffered. He reluctantly oversaw the implementation, effective in 2013, of assessed values based on 2012 market conditions. Those values have remained the foundation of property taxation ever since.
County spokeswoman Amie Downs said no member of the Fitzgerald administration was available to be interviewed for this story.
Who wins? ‘Depends on the trends’
For homeowners who have not moved, the use of 2012 as a “base year” for assessments has meant unchanged county property tax bills since 2013. Municipal and school levies have altered only through millage changes. Assessments can still change if a property owner or taxing body files an appeal, which is most likely to happen when a sale or building permit reveals a swing in market value.
Assessments that are locked in for a decade, without any consideration of changing property values or inflation, are “not that common” nationally, said Berry. Such a system can benefit or hurt owners as property values change, he said. “It just depends on the trends in your area.”
Say an area is gentrifying, with wealthier newcomers buying properties and causing rising sale prices. A taxing body can appeal their assessments, pushing them close to the sale prices. Longtime residents, meanwhile, continue to pay based on lower base-year assessments. Then the property tax is progressive, Berry notes.
But if a community’s market prices are falling, then longtime residents — taxed according to outdated assessments — end up paying more than their fair shares.
Berry’s analysis of Allegheny County indicated that as of 2017, owners of the most expensive 10% of homes were paying annual property taxes averaging 1.85% of market values. The bills of owners of the least expensive 10% of homes averaged 2.62% of market value.
He found “a very stark relationship” between education, race and property taxes in Allegheny County, as in many jurisdictions. Assessments were lower, compared to sale prices, in majority-white census tracts and in places with higher prevalence of bachelor’s degrees. In mostly-Black areas and those in which bachelor’s degrees were less common, assessments were higher relative to sales prices.
“They’re only overtaxed because they disproportionately own the lower-priced homes,” he said, “and lower-priced homes are overtaxed.”
From redlining to regressive assessments
“It’s not individual actors,” said Smith. “It’s systemic racism.”
Smith, an Allderdice High School and Yale University graduate, has previously done exhibitions on topics ranging from the funding of museums by opioid tycoons to the devastation of African habitats by invasive species.
Mattress Factory curators recruited Smith as one of five local artists for an exhibition on the concept of home. He then read the work of University of Utah professor Troup Howard, who documented that property assessment systems nationally tend to tax Black and Hispanic residents at rates that are 10% to 13% higher than those paid by whites.
Howard attributed that to two factors. Neighborhood demographics tend to influence market values more than they influence assessments, nudging sale prices up or down in ways that were not matched by the taxable values. Plus minority homeowners weren’t as likely to appeal their assessments and were less likely to prevail when they did.
To Smith, Troup’s findings reflected America’s historic tendency to rob Black residents of many of the benefits of owning property, a trend that includes redlining and predatory lending.
“Yes, there is a strong legacy of all of those policies that we are still dealing with today,” he said, “but also these systems currently in place are perpetuating or creating new disparities.”
Smith’s findings got Mattress Factory Executive Director Hayley Haldeman thinking. “How can we impact and positively affect the burden,” Haldeman asked, “particularly for Black homeowners in Pittsburgh?”
Overtaxed but undervalued
The Mattress Factory assigned Smith a third-floor room in a former row house — now a museum annex — on Monterey Street, with a window overlooking the gentrifying Central Northside. Before the art, though, came the science.
Smith recruited his longtime friend Abbott. The two bought home value information and tapped federal housing data. They compared property sale prices within Pittsburgh to county assessments, looked at the relationships between the two in each census tract and correlated them with Census Bureau demographic information.
One wall of Smith’s exhibit features photos of two homes, both sold in 2017 and assessed similarly, one at $60,500 and the other at $66,100. One had a white buyer, who paid $300,000, and was dramatically underassessed. The other home had a Black buyer, who paid $55,000, and was being overassessed.
Smith and Abbott put those findings, plus other information about property taxation, online.
When a friend of Smith’s sought to sell a house in Highland Park, the artist saw an opportunity to test the home appraisal process. Appraisals are privately conducted valuations of properties that typically occur prior to sales and mortgages.
Smith and the seller arranged two appraisals. One appraiser was greeted by a Black person, and saw a home decorated with masks, wooden sculptures, a djembe drum and framed art that echoed African American ownership. For the other appraiser, a white person played the role of owner, and the items were replaced.
The appraisal for the white “owner” came in $36,000 higher.
The Black-themed decorations occupy the center of Smith’s exhibit, and the appraisals hang on one wall.
When Amanda Boston looks at the boxes of Black-reflective items removed from the Highland Park house, and the documents reflecting disparate appraisals amid regressive assessments, she sees another link in a chain that includes slavery, Jim Crow, urban renewal, subprime lending and mass incarceration.
All reflect “devaluation of Black communities, Black property, Black people,” said Boston, an assistant professor of Africana Studies at the University of Pittsburgh. The effects, she said, are “generational, long-lasting, and with horrible consequences, not just for Black people,” because “the whole nation suffers when people are deprived of wealth.”
On a third wall loops a segment from an MTV Cribs episode about rapper 50 Cent’s home — but digitally edited to remove reflections of Black culture, implicitly to increase its market value.
The fourth wall features documents reflecting a novel arrangement.
At Smith’s urging, the Mattress Factory took out a $10,000 mortgage on its Monterey Street annex. Smith and Abbott identified a Black homeowner in the city’s north who was paying more in property taxes than would have been likely in a white area. The museum contracted to use the mortgage proceeds to pay that homeowner $476 per year — covering the cost of overassessment — for 15 years. The balance of the mortgage proceeds will be donated to organizations serving Pittsburgh neighborhoods.
Smith noted that the complicated arrangement suggested “the impossibility of there being a solution that’s outside of the government.”
The search for solutions will be part of the panel discussion, Overcharged and Undervalued, which on Friday had nearly 100 registered attendees between its in-person and virtual options. Led by Boston, the panel includes Smith, Howard and Andrew Kahrl, a University of Virginia professor who is writing a history of discriminatory taxation.
Troup has suggested that better use of available data could reduce the inequality of assessment systems by 70%. Smith believes that regular reassessment is part of the solution, but doesn’t claim to have a fully formed fix to hand to county officials or legislators.
“My primary hope is just to make these issues more prevalent in the public eye,” he said, “to make sure that people know that this disparity is really substantial and materially affects a lot of Pittsburghers’ lives in a negative way, and for that reason is really important to address.”
Rich Lord is PublicSource’s economic development reporter. He can be reached at email@example.com or on Twitter @richelord.
This story was fact-checked by Katelyn Vue.
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