As Districts Seek Revenue Due to Pandemic, Black Homeowners May Feel the Biggest Hit

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New research bolsters the case that Black homeowners bear a disproportionate tax burden for underfunded public schools. Now those same homeowners are likely to see their property tax rates climb even higher due to the coronavirus pandemic’s economic devastation.

That’s because cash-strapped school boards that oversee majority-Black school districts are expected to ask their residents to fork over more cash to make up for state sales and income tax revenue lost during the pandemic.

The last recession more than a decade ago nearly wiped out states’ attempts to make up funding disparities between wealthier, majority white districts and poorer, majority Black districts. The coronavirus pandemic will only worsen the situation, as districts throughout the country make budget cuts and lay off thousands of educators.

At the same time, a new working paper highlights how local governments’ strategies to collect property taxes exacerbate academic and wealth disparities between white and Black families.

A growing group of scholars and civil rights advocates are now renewing their call for states to untangle school funding from their local housing markets.

“As long as we continue to wed school funding to property tax revenue, which is based on racist marketplace trends, why would it come as any surprise that we’ll see inequitable funding outcomes?,” asked Andrew Kahrl a Professor of History and African American Studies at the University of Virginia, who has studied the efforts by municipalities to overtax Black residents in order to keep white residents’ property tax rates low.

‘Racist Barriers’ in Housing Markets

As of 2016, majority Black and Latino school districts, on average, spent $2,226 less per student  than majority white districts nationally, according to EdBuild, a think tank that, prior to dissolving earlier this year, pushed for states to overhaul their K-12 funding strategies. That’s mostly because of the way school district boundaries cluster low-income Black and Latino neighborhoods together, leaving less overall property tax revenue to pull from.

“The problems that we saw with the suburbanization, post-World War II, is whites fleeing to suburbs and putting up racist barriers in their housing markets, creating their own separate districts, and hoarding their own local tax bases,” Kahrl said. “That ensured that their schools would be well-funded, where they’re drawing upon a middle-class tax base where the property is high in value and will continue to appreciate in value.”

A new study of home assessment and taxing data by Carlos Fernando Avenancio-León, a finance professor at Indiana University, and Troup Howard, a finance professor at the University of Utah, finds that Black-owned homes tend to be assessed at a value far higher than they actually would bring on the marketplace, compared with white-owned homes. That translates into a tax “burden” nearly 13 percent higher for Black homeowners nationally, the authors say.

In other words, Black homeowners proportionally spend more for a subpar public service.

The problem lies with the way homes are assessed.

The authors found that assessors are “insufficiently sensitive” to majority-Black neighborhood attributes that would typically depress assessed value, such as crime, and substandard quality of public amenities such as schools, libraries, and parks. That results in Black-owned homes being assessed at too high a value.

Once their homes are overvalued by assessors, Black homeowners, compared with white homeowners, rarely dispute the new assessment amount. When they do dispute the amount, they’re far less likely than white homeowners to win in court. And when they do win, they receive smaller reductions than white homeowners.

On the flip side, Black homeowners struggle to build wealth from their property and their communities have difficulty attracting businesses and new, wealthy homeowners because of the racist perception people have of their neighborhoods. In 2018, the Brookings Institution published a study that shows that homes of similar quality in neighborhoods with similar amenities are worth 23 percent—or $48,000—less in majority Black neighborhoods, compared with those having very few or no Black residents.

“We so often blame Black people, Black school boards, Black school districts for the state of their overall condition when in fact they’re systematically robbed of the resources they need to lift themselves up,” said Andre Perry, a fellow at the Brookings Institution, who helped conduct the study and has written a book about how the devaluation of Black-owned homes suppresses majority Black school districts’ funding.

Troubling Trends Repeating Themselves

The coronavirus pandemic has caused the widespread shutdown of the economy, resulting in states’ sales and income tax revenue plunging, and sparking a recession that fiscal analysts predict will last for the next three years.

Local school boards that oversee majority Black school districts during a recession can often further increase Black homeowners’ already-cumbersome tax burden when they go looking for revenue, research has shown.

States in the last half century have heavily subsidized low-wealth, majority Black school districts with sales and income tax revenue. This revenue source is highly unstable, compared with property tax revenue, which rarely budges because homes are so rarely reassessed.

In Texas, David Knight, a school finance professor at the University of Washington, found during the last recession, high-poverty districts increased average local tax rates at a significantly faster rate than low-poverty districts to make up for lost state aid.

This trend is likely to repeat itself in the coming years, said Stephen Dyer, an Education Policy Fellow at Innovation Ohio, a think tank that’s pushed for Ohio to overhaul its school funding formula.

Dyer has found that because of Ohio’s coronavirus-influenced budget cuts, poor districts will have to come up with almost 25 percent more local funding than the wealthier districts. And they have to come up with that money by asking taxpayers who barely make half as much money.

“’If the state pulls back [on funding], a community is going to have to raise property taxes in the middle of a pandemic and in the middle of a recession,” he said. 

Weathering the Economic Storm

On November’s ballot, the Cleveland public school system, which is 65 percent Black, will ask residents to increase their tax rate by another 12 percent—or $175 on top of the $2,790 in property taxes a resident pays for a home worth $100,000. (The majority of property taxes in most communities are targeted toward public schools.)

"This recommendation is needed to continue our progress and to manage unprecedented expenses caused by the COVID-19 outbreak," Cleveland school district CEO Eric Gordon said in a recent video message to the community. If the levy fails, the district stands to annually lose close to $67 million in K-12 funding.

Cleveland families, who earn, on average, $29,000 a year, have one of the fastest-growing tax rates in the nation, according to research conducted by the city’s Chamber of Commerce last year.

Cleveland’s schools, deeply impoverished and academically struggling, annually spend $16,162 per student. By comparison, the neighboring Orange school district, which is 67 percent white and one of the highest-performing school districts in the state, spends close to $21,000 per student. Its residents earn, on average, $105,000 a year.

An Orange resident who lives in a home worth $100,000 pays $2,280 a year in property taxes, $500 less than a Cleveland resident whose home is worth the same.

Rebecca Sibilia, the former CEO of EdBuild, proposed earlier this year that states pool property tax revenue at the county level. That effort, she estimates, would nationally increase spending for more than 75 percent of nonwhite students.

“We’re currently endorsing a system where it’s OK for upper-middle-class communities to continue to weather the worst economic storm in modern history,” Sibilia said. “Our lowest-income areas are always the most dependent on the most volatile revenues.  It’s no way to run one of our most important community benefits. It should be flipped.”

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