WEBVTT - The Black Homeownership Tax 0:00:03.680 --> 0:00:06.760 For most of my family members. Holding onto our land 0:00:06.760 --> 0:00:09.799 in Gilmour, Texas was simply more trouble than it was worth. 0:00:10.760 --> 0:00:14.800 What started with eighty acres of potential farmland or property 0:00:14.840 --> 0:00:19.000 to extract resources from, turned into a liability over time, 0:00:19.880 --> 0:00:27.360 Why taxes. My name is plus Maurice Montgomery, the third. 0:00:27.800 --> 0:00:31.080 You might remember Plas from episode one. He's a computer 0:00:31.160 --> 0:00:36.920 technician by trade and lives in Dallas. He came into 0:00:36.960 --> 0:00:40.440 about two acres in much the same way my dad did. 0:00:41.080 --> 0:00:43.280 It was passed down to him from my great great 0:00:43.320 --> 0:00:48.640 aunt and uncle. The Broodics Pleas, more than any relative 0:00:48.680 --> 0:00:51.159 I spoke to, has tried to make something of our 0:00:51.200 --> 0:00:53.760 family's land. He leased the trees on it to a 0:00:53.800 --> 0:00:57.400 timber company, he sold oil rights. He even toyed with 0:00:57.440 --> 0:01:00.480 the idea of turning it into a farm. But as 0:01:00.520 --> 0:01:04.440 time went by, he decided to give up on the land. Basically, 0:01:05.280 --> 0:01:08.280 what I decided to do, or what I wanted to do, 0:01:09.959 --> 0:01:12.880 was to simply sell the land so that it was 0:01:12.959 --> 0:01:16.800 no longer a liability on me or my family. The 0:01:16.920 --> 0:01:20.760 problem was his tax bills kept going up. When I 0:01:20.800 --> 0:01:24.920 first started following this, I'd get tax statements every year 0:01:24.920 --> 0:01:28.520 from ups your county. The the whole thing would come 0:01:28.520 --> 0:01:36.399 out to maybe undred two thousand dollars, okay, two thousand 0:01:36.400 --> 0:01:43.480 dollars a year, yes, And then suddenly the tax statements 0:01:43.560 --> 0:01:49.040 I would get they started to increase exponentially. The last 0:01:49.040 --> 0:01:53.920 statement I remember was right around and when when when 0:01:53.920 --> 0:01:58.920 this this this increase took place. It went up to 0:02:00.640 --> 0:02:05.840 ten thousand dollars, and then I noticed so I increases 0:02:06.160 --> 0:02:12.240 over the next few years. And then in two thousand 0:02:13.160 --> 0:02:18.440 five or so, the statement I got indicated almost a 0:02:18.520 --> 0:02:24.400 twenty dollar tax liability and it continued to rise from 0:02:24.440 --> 0:02:30.240 there over the years. Plus its tax liability gained as 0:02:30.240 --> 0:02:33.040 he fell behind on payments. It's also made it hard 0:02:33.080 --> 0:02:34.920 for him to find a buyer who would take on 0:02:34.960 --> 0:02:38.799 those unpaid taxes. In a wide ranging interview, the mayor 0:02:38.800 --> 0:02:42.200 of Gilmour, Tim Marshall described the essential role of property 0:02:42.200 --> 0:02:45.600 taxes and funding local projects. I think what people are 0:02:45.600 --> 0:02:50.040 expecting are they're expecting their infrastructure to be maintained, and 0:02:50.040 --> 0:02:52.959 people don't understand. Sometimes it's the infrastructure, even though a 0:02:52.960 --> 0:02:56.880 little small town like this is the sewer, water, streets 0:02:56.919 --> 0:02:59.600 in different things like that, the police department, the fire department. 0:02:59.720 --> 0:03:02.280 There's a lot of inner workings within the city, and 0:03:02.520 --> 0:03:06.280 the value of your land typically most people around, has 0:03:06.320 --> 0:03:09.280 gone down a little bit. So by raising your taxes 0:03:09.720 --> 0:03:13.560 a little bit the right we generate the same amount 0:03:13.600 --> 0:03:16.440 of money. No one disputes the need of a county 0:03:16.520 --> 0:03:19.520 or district to raise funds for schools and roads. But 0:03:19.600 --> 0:03:22.760 for many Black Americans, like Pleas, high tax bills have 0:03:22.840 --> 0:03:25.800 also become the greatest burden on land ownership, and in 0:03:25.919 --> 0:03:30.440 thousands of US counties, something more is happening. Black Americans 0:03:30.520 --> 0:03:36.320 are experiencing unfairly high taxes. In today's episode, we'll take 0:03:36.360 --> 0:03:49.800 you to one of those places. How the statistics are 0:03:49.800 --> 0:03:53.880 other cruel. The gap between the average income for Negroes 0:03:53.920 --> 0:03:57.000 in this country and the average income for lights has 0:03:57.040 --> 0:04:00.280 not clued. Do you think a Negro family and moving 0:04:00.320 --> 0:04:03.720 here will affect the community as a whole? I think that, well, 0:04:03.720 --> 0:04:06.920 the property utters will immediately go down if they are 0:04:06.960 --> 0:04:09.119 allowed to move in here on any number. So much 0:04:09.240 --> 0:04:12.600 bitterness built up in a person and resentment when you 0:04:12.760 --> 0:04:16.560 know that you're being segregated again simply because you're black. OK. 0:04:16.920 --> 0:04:19.599 At the bottom of the economic letter, the bottom of 0:04:19.680 --> 0:04:23.719 the housing letter, the bottom of the educational letters. We 0:04:23.800 --> 0:04:29.640 have lived. I'm leaving town on Andition for how many years? 0:04:29.800 --> 0:04:33.039 Before hundred years? I was prepared to try to get 0:04:33.120 --> 0:04:36.240 used to having a colored family on the block. Now 0:04:36.279 --> 0:04:38.200 there's another one across the street. You pretty soon they'll 0:04:38.200 --> 0:04:40.000 be one next door, and before you know what, those 0:04:40.000 --> 0:04:42.360 streets are gonna start looking like Harlo Well. I don't 0:04:42.360 --> 0:04:44.440 want to live in a colored slum. I don't want 0:04:44.480 --> 0:04:55.560 to live in a colored slum? Is that terrible? Welcome 0:04:55.560 --> 0:04:59.400 back to the paycheck. I'm Rebecca Greenfield and I'm Jackie Simmons. 0:05:00.600 --> 0:05:03.640 In the US, owning property has been a major driver 0:05:03.760 --> 0:05:07.799 of wealth creation. Last week, we talked about land ownership 0:05:07.920 --> 0:05:11.279 and how black farmland in particular has been chipped away 0:05:11.320 --> 0:05:15.120 over the years. This week, we're turning our attention to 0:05:15.200 --> 0:05:19.600 the heart of the American dream, owning a home. As 0:05:19.640 --> 0:05:23.240 we talked about previously, race and racism has a lot 0:05:23.279 --> 0:05:25.840 to do with who historically has had access to the 0:05:25.960 --> 0:05:29.279 US housing market, and we see those legacies play out 0:05:29.279 --> 0:05:33.120 in the stats today. Nearly three quarters of white families 0:05:33.200 --> 0:05:36.320 own homes, while less than half of black families do. 0:05:37.320 --> 0:05:39.800 This has how white people build wealth in all sorts 0:05:39.800 --> 0:05:43.840 of ways. What's even more troubling is that these disparities 0:05:43.839 --> 0:05:48.120 aren't getting any better. In Black home ownership rates had 0:05:48.120 --> 0:05:52.400 a record low since at least ninety There are lots 0:05:52.400 --> 0:05:55.240 of reasons for that, but at least some of it 0:05:55.279 --> 0:06:00.880 has to do with taxes. A new Bloomberg Business investigation 0:06:01.440 --> 0:06:05.920 uncovers how an unfair taxation system is hitting black homeowners hardest. 0:06:06.480 --> 0:06:17.560 Jason Grotto has the story, I want to take you 0:06:17.640 --> 0:06:19.839 on a journey of what it's like for me when 0:06:19.880 --> 0:06:24.520 I have to pay my rent every month. I don't 0:06:25.040 --> 0:06:28.440 It's the last weekend of the month. So Dilicias Scott 0:06:28.520 --> 0:06:31.640 is on her way to the post office. Ah, can 0:06:31.720 --> 0:06:38.480 I have a money order? I need a money order? 0:06:38.880 --> 0:06:45.000 Where is it going to for a payment? From there, 0:06:45.440 --> 0:06:48.720 she drives north on the freeway, just past Detroit's city 0:06:48.760 --> 0:06:51.760 limit to hand deliver her rent to a drab office 0:06:51.800 --> 0:06:55.839 building Noble for Era. So if I drop it off myself, 0:06:55.920 --> 0:07:00.120 driving here, I know a gay here, I see that 0:07:00.200 --> 0:07:03.680 it went into the building, so no one can say, well, 0:07:03.760 --> 0:07:06.720 we didn't get her payment. This monthly ritual leaves her 0:07:06.760 --> 0:07:11.640 feeling angry and frustrated. That's because this isn't just any 0:07:11.680 --> 0:07:14.640 house she's renting. She's been running a home that for 0:07:14.880 --> 0:07:21.520 years she used to own. It's not just a rental property. 0:07:21.920 --> 0:07:25.800 This is my home right. I raised my children in 0:07:25.880 --> 0:07:29.880 this space, my one thought since he was two years old, 0:07:30.920 --> 0:07:34.920 my other six kids five or six. We did things 0:07:34.920 --> 0:07:37.240 in a home that you can't take out. I can 0:07:37.280 --> 0:07:40.960 pack up my tangible stuff, but I can't pack my memories. 0:07:42.640 --> 0:07:46.440 Despite the trouble it's caused her, Dilicia clings fiercely to 0:07:46.520 --> 0:07:49.200 the two story tutor where she's lived with her three 0:07:49.280 --> 0:07:53.720 children for sixteen years. The landlord refuses to give her 0:07:53.720 --> 0:07:57.280 a lease or fix the collapsing back porch, and when 0:07:57.280 --> 0:08:00.960 it rains well, she needs three buck gets upstairs to 0:08:01.000 --> 0:08:05.040 catch water from the leaky roof. You can tell, brain, 0:08:05.160 --> 0:08:13.160 and you can tell how hard you cant will pour 0:08:13.320 --> 0:08:15.720 in in the drift. So like if I'm sleeping in 0:08:15.760 --> 0:08:17.560 the middle of the night and it's start the storm, 0:08:17.920 --> 0:08:23.200 and it's right in real hard, the drifts wants like 0:08:24.320 --> 0:08:28.040 a bucket. The story of how Dilicia lost her home 0:08:28.560 --> 0:08:31.000 is tied up in an injustice that has gone on 0:08:31.120 --> 0:08:34.680 for years and touches nearly every community in the country. 0:08:35.040 --> 0:08:37.520 It's a problem that has contributed to the racial wealth 0:08:37.559 --> 0:08:42.480 gap by saddling lower income, mostly black communities with burdens 0:08:42.520 --> 0:08:47.479 that wealthier and wider ones avoid. It's a systematic injustice 0:08:47.559 --> 0:08:51.920 that lurks in the most mundane of manners, municipal property taxes. 0:08:54.720 --> 0:08:58.360 Dilicia lost her home in two thousand fourteen because she 0:08:58.440 --> 0:09:01.880 fell three years behind on her party taxes. She got 0:09:01.960 --> 0:09:04.440 laid off from her job at a domestic violence shelter 0:09:04.800 --> 0:09:08.640 during the Great Recession. Then her partner, the father of 0:09:08.640 --> 0:09:13.360 her kids, left, drastically reducing the family's monthly income. It 0:09:13.440 --> 0:09:15.560 took her two years to find a job at a 0:09:15.559 --> 0:09:19.320 new shelter. By then, the fees and fines from missing 0:09:19.320 --> 0:09:23.240 payments compounded the money she already owed, leaving her stuck 0:09:23.240 --> 0:09:26.880 in a crushing cycle. I fell into depression. There was 0:09:27.080 --> 0:09:31.480 days where I didn't even realize that my kids had 0:09:31.520 --> 0:09:34.959 to go to school, Like I just couldnt get out 0:09:35.000 --> 0:09:38.760 of the bed. My mental capacity just wasn't there to 0:09:38.840 --> 0:09:43.320 recoup the unpaid taxes. Wayne County, Michigan, foreclosed on her home, 0:09:43.960 --> 0:09:46.400 which she had purchased in two thousand and five for 0:09:46.480 --> 0:09:50.720 sixty three eight hundred dollars. Then the county auctioned it 0:09:50.720 --> 0:09:54.199 off in November two thousand fourteen, and a Utah based 0:09:54.240 --> 0:09:58.960 investment company snapped it up for just forty dollars. Since then, 0:09:59.360 --> 0:10:02.360 the house is old two more times two different investors. 0:10:02.960 --> 0:10:07.920 The last sale in February fetched eighty four thousand dollars, 0:10:08.320 --> 0:10:13.120 eighteen times the price paid six years earlier. Dilysia meanwhile 0:10:13.480 --> 0:10:17.440 lost her entire investment. In fact, she pays more now 0:10:17.440 --> 0:10:19.760 in rent than she did when she had a mortgage. 0:10:20.640 --> 0:10:23.520 But here's the catch. She never should have lost her 0:10:23.520 --> 0:10:26.960 home because their tax bill should never have been that 0:10:27.080 --> 0:10:37.960 high in the first place. For years, Detroit city officials 0:10:38.040 --> 0:10:41.559 used wildly and accurate valuations of the house to calculate 0:10:41.600 --> 0:10:46.480 Dilysia's property tax bills, artificially inflating them by about fifty 0:10:46.559 --> 0:10:49.880 eight hundred dollars more than she should have paid, according 0:10:49.920 --> 0:10:53.320 to a Bloomberg analysis of her tax records. Once she 0:10:53.360 --> 0:10:56.760 fell behind, late fees and other penalties made it even 0:10:56.840 --> 0:11:00.440 harder to catch up. After missing two more bill, she 0:11:00.600 --> 0:11:04.080 was nearly ten thousand dollars in the whole Hers was 0:11:04.120 --> 0:11:07.319 among tens of thousands of homes in Detroit's lower income 0:11:07.800 --> 0:11:13.480 black neighborhoods That city officials routinely overvalued for tax purposes. Meanwhile, 0:11:13.840 --> 0:11:18.640 homes and affluent areas were systematically undervalued, reducing the taxes 0:11:18.720 --> 0:11:25.360 those homeowners paid. Detroit officials have admitted they over taxed 0:11:25.360 --> 0:11:28.160 about a hundred and thirty thousand people between two thousand 0:11:28.240 --> 0:11:31.800 and ten and two thousand and thirteen, but they say 0:11:31.800 --> 0:11:36.120 that now, while mistakes do happen, the system overall is fair. 0:11:37.480 --> 0:11:41.800 That assessment is disputed by Christopher Barry, who first uncovered 0:11:41.800 --> 0:11:46.000 these inequities. A public policy professor at the University of Chicago, 0:11:46.480 --> 0:11:50.320 Chris has been studying property tax systems for years. I 0:11:50.400 --> 0:11:53.200 met him while working as a reporter in Chicago, where 0:11:53.200 --> 0:11:57.280 he started documenting unfair assessments. He didn't realize that at 0:11:57.280 --> 0:11:59.880 the time, but he was about to embark on years 0:12:00.120 --> 0:12:05.240 research uncovering the fundamental unfairness of property taxes. I had 0:12:05.320 --> 0:12:07.240 kind of been thinking of this as one of these 0:12:07.440 --> 0:12:11.520 only in Chicago sort of phenomena, and there's just so 0:12:11.559 --> 0:12:13.200 many things like this that you get used to if 0:12:13.200 --> 0:12:16.160 your person that lives here in Chicago. But as that 0:12:16.280 --> 0:12:19.760 Chicago work began to do to get attention, I started 0:12:19.760 --> 0:12:21.920 to hear from people elsewhere, and first it was you 0:12:21.960 --> 0:12:24.000 know some activists in Detroit who said, hey, you know, 0:12:24.040 --> 0:12:26.080 we read about what's going on in Chicago and the 0:12:26.080 --> 0:12:28.600 work you did there. We're having the same issues here. 0:12:28.600 --> 0:12:30.760 You should take a look. And then it was you know, 0:12:30.800 --> 0:12:33.400 a lawyer in New York says, we've got a lawsuit 0:12:33.440 --> 0:12:36.520 going on similar issues here. And then as a reporter 0:12:36.600 --> 0:12:40.280 in St. Louis, you know, every place I look, I'm 0:12:40.360 --> 0:12:42.880 finding something similar. You know, the names changed, some of 0:12:42.920 --> 0:12:46.000 the details are different, but the overall pattern of unfairness 0:12:46.040 --> 0:12:49.840 and equity is just repeated place after place. Chris found 0:12:49.880 --> 0:12:53.359 that in cities and towns across the US, local officials 0:12:53.360 --> 0:12:57.679 have systematically overvalued the lowest priced homes relative to the highest, 0:12:58.200 --> 0:13:00.960 creating higher effective tax rates for those who can least 0:13:01.000 --> 0:13:04.360 afford to pay. From two thousand and six through two 0:13:04.360 --> 0:13:08.360 thousand sixteen, inaccurate valuations gave the least expensive homes in 0:13:08.440 --> 0:13:11.480 Baltimore an effective tax rate that was more than two 0:13:11.520 --> 0:13:14.839 times higher than the most expensive in New York City. 0:13:15.040 --> 0:13:18.400 It was three times higher in St. Louis, almost four 0:13:21.559 --> 0:13:26.080 In theory, these taxes should be completely fair. Property taxes 0:13:26.160 --> 0:13:30.240 are what's known as ad valorum Latin for according to value. 0:13:31.160 --> 0:13:33.960 Every property in a given place is supposed to be 0:13:34.000 --> 0:13:37.560 taxed at the same effective rate. What determines that rate 0:13:37.920 --> 0:13:40.480 is the value of the property, and that's where things 0:13:40.520 --> 0:13:43.280 go wrong. Chris found the nature of the problem is 0:13:43.320 --> 0:13:46.600 that people that own lower priced homes are systematically having 0:13:46.600 --> 0:13:50.240 their homes valued at more than their worth, while people 0:13:50.400 --> 0:13:52.920 at the top are systematically having their homes valued at 0:13:53.000 --> 0:13:56.600 less than their worth. And when the values are not right, 0:13:56.679 --> 0:13:59.600 and the values are unequal, then the taxes which are 0:13:59.600 --> 0:14:01.840 just comp huteed based on those values are also going 0:14:01.880 --> 0:14:06.400 to be unequal. Chris found the property tax is deeply 0:14:06.480 --> 0:14:10.640 unfair because it's regressive. That means the burden of the 0:14:10.720 --> 0:14:15.280 tax falls heavier on lower income people. It's the opposite 0:14:15.360 --> 0:14:19.120 of progressive taxes such as the federal income tax, which 0:14:19.120 --> 0:14:23.240 applies higher rates to people with higher incomes. And that's 0:14:23.240 --> 0:14:26.720 a big deal because Americans pay more than five hundred 0:14:26.760 --> 0:14:31.040 billion dollars a year in property taxes. That pays for 0:14:31.120 --> 0:14:36.680 public safety, schools, sanitation, and all the other services cities 0:14:36.720 --> 0:14:41.480 and towns provide. This as a matter of equity and 0:14:42.080 --> 0:14:45.640 our our values as a society. There are lots of 0:14:45.680 --> 0:14:48.600 reasons why people may argue about progressive taxation. I mean, 0:14:48.600 --> 0:14:51.160 should should the rich pay more? But there's really nobody 0:14:51.200 --> 0:14:54.400 who's making a normative argument in favor of regressive taxation, 0:14:54.520 --> 0:14:56.520 right that as a matter of principle, we should have 0:14:56.560 --> 0:14:59.920 the poor pay more. This isn't happening in a vacu. 0:15:00.560 --> 0:15:05.080 The disparities hurt Black communities disproportionately because the legacy of 0:15:05.160 --> 0:15:09.000 racial discrimination has left those communities with a larger share 0:15:09.040 --> 0:15:12.400 of lower priced homes. The median home value in black 0:15:12.440 --> 0:15:15.160 census tracks is nearly half of what it is in 0:15:15.240 --> 0:15:19.800 majority white and Hispanic ones, according to a Bloomberg analysis. 0:15:19.840 --> 0:15:23.040 So the way that shakes out is black homeowners end 0:15:23.120 --> 0:15:25.880 up paying more in property taxes relative to their market 0:15:25.960 --> 0:15:31.840 value than white ones. This is just a textbook example 0:15:32.120 --> 0:15:35.640 of institutional racism or systemic racism, or whatever you'd like 0:15:35.760 --> 0:15:39.080 to label it. And what I mean by that is, 0:15:40.040 --> 0:15:47.680 I don't think there's anybody in the assessor's office who's 0:15:47.880 --> 0:15:50.960 sitting there and explicitly saying, hey, let's go in the 0:15:51.000 --> 0:15:55.000 black neighborhoods and you know, jack up their assessments, and 0:15:55.000 --> 0:15:57.120 then let's go into the white neighborhoods and make them 0:15:57.120 --> 0:16:01.360 lower up but nevertheless, the outcomes that we see from 0:16:01.400 --> 0:16:06.360 the system are racially disproportionate, and that's the very definition 0:16:06.360 --> 0:16:11.440 of sort of institutional racism. But of course, these kinds 0:16:11.440 --> 0:16:14.680 of disparities are rooted in a history of racial discrimination 0:16:14.960 --> 0:16:18.880 that is explicit, and it's impossible to understand why this 0:16:19.040 --> 0:16:24.200 taxation disproportionately affects black communities without talking about the US 0:16:24.320 --> 0:16:28.240 legacy of housing segregation. I sat down with Bretton Mock 0:16:28.480 --> 0:16:38.960 of Bloomberg City Lab. He's been covering this for a while. Hey, Breton, 0:16:39.000 --> 0:16:42.080 thanks for joining us. Yeah, thanks for having me on. 0:16:42.680 --> 0:16:45.920 I'm excited to dig into this. Yeah. Well, it all 0:16:46.000 --> 0:16:48.960 starts with home ownership, which is one of the primary 0:16:49.000 --> 0:16:52.400 ways that many Americans accumulated wealth in the twentieth century. 0:16:52.920 --> 0:16:55.200 But it's one that white families have been able to 0:16:55.240 --> 0:16:58.800 capitalize on in ways that black families have not. And 0:16:58.800 --> 0:17:01.400 this runs so much deep for than property taxes, right, 0:17:01.760 --> 0:17:05.399 I mean, the history here helps explain why Black Americans 0:17:05.400 --> 0:17:09.359 are the ones with lower valued homes to begin with. Yeah, 0:17:09.480 --> 0:17:13.119 and here's the irony. You talked about homes being overvalued 0:17:13.200 --> 0:17:16.040 when it comes to setting the property tax rate. Well, 0:17:16.040 --> 0:17:19.240 many of those same homes are being undervalued by a 0:17:19.280 --> 0:17:21.879 different set of appraisers when it comes to deciding what 0:17:21.920 --> 0:17:26.480 they're worth on the market. Because of racial segregation, properties 0:17:26.520 --> 0:17:29.920 and majority black communities have historically been appraised at much 0:17:29.960 --> 0:17:33.280 lower values and sold at lower prices than similar properties 0:17:33.359 --> 0:17:37.000 and majority white neighborhoods. That kind of price coding has 0:17:37.000 --> 0:17:39.600 pretty much been cemented in the housing market thanks to 0:17:39.640 --> 0:17:44.879 the practice of redlining. Redlining Katerina talked about that in 0:17:45.000 --> 0:17:49.640 episode two. How does that fit into our story? Yeah, 0:17:49.760 --> 0:17:53.800 Like Katerina explained, redlining was a government sanctioned program for 0:17:53.920 --> 0:17:57.480 deciding that entire neighborhoods would be considered risky by giving 0:17:57.520 --> 0:18:01.120 them a grade between A and D. Black neighborhoods were 0:18:01.200 --> 0:18:04.640 routinely graded D and literally shaded and read on real 0:18:04.800 --> 0:18:08.200 estate maps in just about every city in the US. 0:18:08.240 --> 0:18:11.119 This practice pretty much ensured that very few people in 0:18:11.160 --> 0:18:14.000 black neighborhoods would be able to purchase houses or even 0:18:14.040 --> 0:18:17.639 get loans to improve homes that were already purchased. But 0:18:17.720 --> 0:18:21.600 those laws have been reformed now have fair housing laws 0:18:21.640 --> 0:18:24.240 at least begun to reduce the gap between white and 0:18:24.320 --> 0:18:29.639 black home appraisals. Well, that's the crazy part. Yes. Starting 0:18:29.680 --> 0:18:33.280 in nine eight with the Fair Housing Act, these particular 0:18:33.320 --> 0:18:37.200 practices were banned. But actually, recent research has found that 0:18:37.280 --> 0:18:39.920 the gap between appraisal values of black and white homes 0:18:39.920 --> 0:18:44.000 has widened. The gap is being exacerbated because the praisers 0:18:44.119 --> 0:18:46.800 currently decide to homes value by looking at the selling 0:18:46.840 --> 0:18:51.040 prices of surrounding homes without any kind of correction. That 0:18:51.200 --> 0:18:55.199 history of low values has just compounded over time. But 0:18:55.280 --> 0:19:00.359 what does that disparity mean in economic terms? So I 0:19:00.400 --> 0:19:03.160 spoke with Andre Perry at the Brookings Institution to help 0:19:03.160 --> 0:19:06.359 put this into context. I worked with him on a 0:19:06.359 --> 0:19:10.320 book several years ago about undervalued black properties. Since then, 0:19:10.440 --> 0:19:13.720 he's done a study to quantify differences in black home values. 0:19:14.240 --> 0:19:17.960 He explained how, after controlling for all housing and neighborhood factors, 0:19:18.359 --> 0:19:21.919 homes and black neighborhoods were under priced in appraisals compared 0:19:21.920 --> 0:19:27.560 to white neighborhoods. By here's Andre, accumulatively, that's about a 0:19:27.600 --> 0:19:32.520 hundred billion in lost equity. And that's just in alone. 0:19:32.680 --> 0:19:36.800 I always put it in in um perspective. Um, the 0:19:36.920 --> 0:19:40.480 hundred fifty six billion would have financed more than four 0:19:40.560 --> 0:19:44.480 point four million black owned businesses based on the average 0:19:44.480 --> 0:19:46.560 amount Blacks used to start up their firms, they would 0:19:46.560 --> 0:19:50.080 have paid for more than eight million UM college degrees 0:19:50.119 --> 0:19:52.919 based on the average amount of a public education. Now, 0:19:53.080 --> 0:19:56.199 this is money that is really robbing people of the 0:19:56.240 --> 0:20:00.880 opportunity to lift themselves up. And remember where we started 0:20:00.920 --> 0:20:05.879 this conversation, the racial wealth gap. These differences matter because 0:20:05.920 --> 0:20:08.760 home massets are supposed to appreciate as they are passed 0:20:08.760 --> 0:20:13.040 down through generations. As Andre puts it, wealth begets wealth. 0:20:13.640 --> 0:20:16.560 So if you are able to own a home, if 0:20:16.600 --> 0:20:21.440 your grandfather was able to own a home and they 0:20:21.640 --> 0:20:26.360 and here's he had children, he could pass on the 0:20:26.440 --> 0:20:31.400 equity gained from that house to the child, or UM 0:20:31.560 --> 0:20:36.280 you can apply it to um the college education, you 0:20:36.320 --> 0:20:38.879 can use it to start a business. Remember most people 0:20:38.960 --> 0:20:42.160 start their their business using the equity in their home. 0:20:43.000 --> 0:20:47.919 So UM, if you did not have if your grandfather 0:20:48.000 --> 0:20:52.359 great grandfather could not own a home, it's it's less 0:20:52.400 --> 0:21:06.720 likely you're going to be able to have wealth. Dilicia 0:21:06.840 --> 0:21:11.000 is acutely aware of this relationship between home ownership and wealth. 0:21:11.720 --> 0:21:14.760 It's why she's so doggedly committed to buying her home back, 0:21:15.200 --> 0:21:18.119 despite the perversity of the costs she has already borne. 0:21:19.000 --> 0:21:22.400 Like so many other parents, She's concerned about leaving her 0:21:22.400 --> 0:21:24.640 three kids an asset that will give them a leg 0:21:24.760 --> 0:21:27.359 up because she believes they'll be better off in the 0:21:27.400 --> 0:21:30.639 long run. For her, the house could be a source 0:21:30.720 --> 0:21:34.520 of foundational wealth. You know, I just want to leave 0:21:34.560 --> 0:21:39.200 them more than a couple of insurance policy. And that's 0:21:39.320 --> 0:21:42.359 that's the only thing. A couple of insurance policy and 0:21:43.119 --> 0:21:46.040 a ragny car. That's the only thing I have to 0:21:46.160 --> 0:21:49.000 offer them right now. And that's not fear for them. 0:21:49.040 --> 0:21:51.720 And I have to think about my mortality. I have 0:21:51.840 --> 0:21:54.679 to think about a plan. What is going to happen 0:21:54.800 --> 0:21:59.240 to them? Um, I don't want them even if if 0:21:59.440 --> 0:22:01.560 if I'm a going to buy this house, I don't 0:22:01.560 --> 0:22:03.680 want them to have to live there for the rest 0:22:03.720 --> 0:22:06.520 of them their lives. Like but I want them to 0:22:06.600 --> 0:22:11.119 have an asset right. Dilicia lost the home after was 0:22:11.240 --> 0:22:14.720 overvalued by a property tax assessor. Even though many of 0:22:14.760 --> 0:22:18.240 the same homes get undervalued when it comes to appraising 0:22:18.280 --> 0:22:22.400 their market price, how does that happen? To understand that, 0:22:22.720 --> 0:22:24.920 you need to get an idea for how local tax 0:22:24.960 --> 0:22:29.800 officials determine the value of homes. Unlike appraisers assessors aren't 0:22:29.800 --> 0:22:33.120 able to visit every home in the city. Instead, they 0:22:33.119 --> 0:22:35.520 look at the prices of homes that have sold within 0:22:35.560 --> 0:22:39.120 the last year or so. They then use computer models 0:22:39.160 --> 0:22:42.600 to estimate the value for all the homes in the area. 0:22:42.800 --> 0:22:45.040 But those computer models are only as good as the 0:22:45.119 --> 0:22:48.119 data going into them. It turns out there are some 0:22:48.200 --> 0:22:51.560 significant gaps in the data, and those gaps lead to 0:22:51.600 --> 0:22:55.560 some pretty serious errors that cause unfair assessments to creep in, 0:22:56.080 --> 0:23:01.080 especially for people in lower valued homes. Chris explains, I 0:23:01.160 --> 0:23:04.680 often try to explain this to people by imagining that 0:23:04.960 --> 0:23:08.760 we did income taxes the same way we did property taxes. 0:23:09.520 --> 0:23:13.399 So imagine that the i r S each year only 0:23:13.440 --> 0:23:16.520 got a W two for about one percent of the population. 0:23:16.680 --> 0:23:18.760 So for one percent of the people, the i r 0:23:18.880 --> 0:23:21.719 S actually knows what your income was, and for the 0:23:21.760 --> 0:23:25.480 other people they have to guess. They have to guess 0:23:25.480 --> 0:23:29.200 what your income is. And as a taxpayer, you don't 0:23:29.240 --> 0:23:31.760 file taxes. You just get a letter from the hares 0:23:31.800 --> 0:23:33.680 each year saying, hey, we guessed that you made a 0:23:33.760 --> 0:23:38.080 hundred thousand dollars last year. Here's your tax bill. That's 0:23:38.119 --> 0:23:41.880 how we do property taxes. And if we did income 0:23:41.920 --> 0:23:43.520 that way. I think it would be pretty obvious to 0:23:43.640 --> 0:23:45.719 people the ways in which that would be sort of 0:23:45.800 --> 0:23:50.600 incorrect and unfair. Just to build on the professor's analogy, 0:23:50.840 --> 0:23:53.520 local property tax officials do a bit more than just 0:23:53.720 --> 0:23:57.840 flat out guessing. They try to compare similar homes. Say 0:23:57.960 --> 0:24:02.040 a four bedroom, two bathroom branch sells for two dollars. 0:24:02.600 --> 0:24:06.000 Local officials will use that information to help guide how 0:24:06.000 --> 0:24:09.320 they assess the value of other four bedroom to bathroom 0:24:09.400 --> 0:24:12.800 ranch houses in the same area or neighborhood. If the 0:24:12.840 --> 0:24:16.080 i R S used that same method to set income taxes, 0:24:16.520 --> 0:24:20.560 the resulting unfairness becomes pretty clear. Suppose they knew nothing 0:24:20.600 --> 0:24:23.879 about you at all. The best they could guess is 0:24:23.960 --> 0:24:27.639 that you were making the average income. They'd say, we 0:24:27.720 --> 0:24:30.080 think you made the average income last year. Pay taxes 0:24:30.119 --> 0:24:34.680 on the average income. Well, that's really bad for people 0:24:34.680 --> 0:24:37.439 who earned below the average, because they're being treated as 0:24:37.520 --> 0:24:39.560 if they earned more than they did, and they're paying 0:24:39.560 --> 0:24:42.000 taxes that are too high. But it's a great deal 0:24:42.200 --> 0:24:44.680 for people who were above average, because they're being told 0:24:44.680 --> 0:24:47.000 they were average and they're paying taxes that are too low. 0:24:47.400 --> 0:24:49.960 And so you can already see the inequity that's built 0:24:49.960 --> 0:24:54.840 in this kind of averaging. That's what would happen if 0:24:54.880 --> 0:25:00.399 they had no data about you at all. Even with 0:25:00.440 --> 0:25:03.760 a little more data, the method that local officials used 0:25:03.800 --> 0:25:07.000 to set property values just isn't robust enough to capture 0:25:07.040 --> 0:25:11.280 important differences in market values among different homes for people 0:25:11.320 --> 0:25:15.639 like Delicia, those flaws can be disastrous. In fact, in 0:25:15.640 --> 0:25:19.080 places like Detroit, they just don't keep black families from 0:25:19.080 --> 0:25:23.440 acquiring and passing down wealth, they contribute to the actual 0:25:23.560 --> 0:25:26.520 destruction of it. One of the things we know about 0:25:26.560 --> 0:25:29.840 that the whole property tax process is that when people 0:25:29.960 --> 0:25:34.080 can't pay, they are subject of various kinds of sanctions 0:25:34.119 --> 0:25:37.080 by the state. And so you may have had your 0:25:37.119 --> 0:25:40.399 home systematically over tax overcharged too much, and then if 0:25:40.440 --> 0:25:43.640 you can't pay those unfair taxes, you might lose your 0:25:43.720 --> 0:25:47.879 home due to a tax foreclosure, or you might have 0:25:47.960 --> 0:25:50.200 your home sold from out from under YouTube some kind 0:25:50.200 --> 0:25:52.520 of investment firm that that is going around buying up 0:25:52.520 --> 0:25:54.680 these low value at homes. And you know, there's nowhere 0:25:54.760 --> 0:25:56.520 in the country where this has been a bigger problem 0:25:56.520 --> 0:26:00.119 than Detroit, where fully one quarter of all home in 0:26:00.160 --> 0:26:02.600 Detroit have been foreclosed on for failure to pay taxes. 0:26:02.640 --> 0:26:04.720 I'm not talking about any mortgage foreclosure here, but in 0:26:04.760 --> 0:26:09.920