Decreasing delinquency through assessment reductions: Evidence from Detroit

Detroit recently decreased assessments for 3 consecutive years, 2014-2016, with 2 possible types of reduction: a decrease in assessment without a decrease in property tax bill or a decrease in both. This article examines the effect of each type of reduction on property tax delinquency using parcel-level data from 2013 to 2016. Overall, results indicate that lowering a property owner's assessment without a decrease in their tax bill reduced delinquency by 1.7%. Lowering both assessment and tax bill reduced delinquency by 2.7%. Additional analyses examine the levels of assessment reduction that triggered changes in delinquency, the relationship between assessment reductions and taxes owed, the persistence of reduced delinquency without corresponding tax decreases, and how the results vary by property owner type (i.e., homestead and residency status). Property owner type is of particular interest because it provides possible explanations for why delinquency declined without lower taxes. Not only is this evaluation important for Detroit, but understanding what methods are effective in reducing property tax delinquencies is beneficial to officials in other jurisdictions struggling to collect property taxes.