ASSESSMENT GROWTH LIMITS AND MOBILITY: EVIDENCE FROM HOME SALE DATA IN DETROIT, MICHIGAN

Abstract

In 1994 the State of Michigan imposed a limit on the growth of property values for tax purposes. The assessment growth cap resulted in the emergence of a differential in effective tax rates between new and long-time property owners. This article examines the degree to which this differential creates a lock-in effect. Using parcel-level data from the City of Detroit, we find that homeowners who have lower effective tax rates are less likely to sell their properties; the average duration of property ownership is 7.5 years longer as a result of the assessment growth cap.