Assessment Growth Limits and Mobility

In 1994 a limit on the growth of property values for tax purposes was imposed in Michigan. One consequence of the taxable value growth cap was the emergence of a differential in effective tax rates between new property owners and long-time property owners. The purpose of this paper is to examine the degree to which this differential affects the probability that property owners will sell their homes. Using parcel-level data from Detroit, Michigan, we present new empirical evidence that homeowners who enjoy reductions in effective tax rates due to the taxable value growth cap are less likely to sell their properties. Estimates suggest that the average duration of property ownership is about five years longer for those who enjoy the average reduction in effective tax rates resulting from the taxable value growth cap. However, the magnitudes vary depending on length of tenure, property value and location.

Key Words: Property Tax, Assessment Growth Limit, Mobility