Investor Scale and Property Taxation

A property tax bill depends on both the local property tax rate and the property’s assessedvalue. In this paper, we study the inequality in property taxation in the U.S. single-family homemarket based on a property’s assessed value. Comparing the assessment ratio of propertiesowned by investors with those of owner-occupiers, we find a 3.0%–4.7% assessment discountnationwide for properties owned by large investors (i.e., those owning more than 100 properties)relative to owner-occupied homes in the same area. This difference translates into an estimatedtotal annual property tax savings of $66–$104 million for large investors across the country.Further evidence based on micro-level appeals data in Cook County, Illinois, and Florida suggeststhat the institutional assessment discount results from a higher likelihood of appeal and morefavorable outcomes upon a successful appeal for large investors. States with a fairer propertytaxation administration, a higher market share by large investors, and a higher property taxburden show a greater assessment discount for large investors