Lincoln Institute recommends slit-rate tax policy to spur development, would disincentivize surface parking and promote housing, other development on vacant land.
The Lincoln Institute of Land Policy released a new study, Split-Rate Property Taxation in Detroit, recommending the adoption of a split-rate property tax that would cut property taxes for approximately 96 percent of Detroit homeowners. By taxing land at a higher rate and buildings at a lower rate, a split-rate tax would generate an average savings of 18 percent for almost all homeowners across the city without impacting the property tax revenue collected by the city.
“By adopting a split-rate property tax, Detroit can make its tax system both more efficient and more equitable,” said John Anderson, an economist at the University of Nebraska, Lincoln, and lead author of the study. “Efficiency is enhanced by removing the tax-related barriers to capital improvements and development. Equity is enhanced by a reduction in taxes for the vast majority of residential homeowners.”
By taxing land at a higher rate, a split-rate tax would also serve as an incentive to develop underutilized surface parking lots and vacant land across the city. Underutilized surface parking lots are most notable in downtown, where nearly half of the surface area is dedicated to parking cars, with many surface lots empty except for game days and special events. A split-rate program would effectively increase the carrying costs of these surface lots, and we could see more development on these lots. If a split-rate tax were in place, it might have prevented the senseless demolition of buildings like the Saturday Night Building.
Also notable is the property tax savings, that would bring much-needed property tax relief to existing residents and businesses.
“If we are to continue the momentum of Detroit’s positive, equitable growth, we must transform our property tax structure to alleviate the burden on majority Black homeowners and local developers,” said Dave Blaszkiewicz, president and CEO of Invest Detroit, who commissioned the study. “This report provides a solution that accomplishes that while also disincentivizing blighted and underutilized properties that hinder Detroit’s growth.”