The case for improving property values in Detroit through split-rate taxation

A new study suggests Detroit could reduce most homeowner taxes while stimulating economic development by taxing land and buildings at different rates.

A row of houses in Highland Park

Highland Park

Detroit homeowners continue to face challenges with property taxes. Even as values rise, Detroit has the lowest property values of any large city in the country, combined with one of the highest property tax rates. A new study suggests the city could lower tax bills for 96% of homeowners by taxing land at a different rate than buildings. Known as “Split-Rate Property Taxation,” proponents believe adopting this system would boost property values in Detroit by increasing the cost on speculators holding vacant land while reducing the cost of development.

“It would discourage the holding of vacant land…and it would remove the disincentive there is for making improvements on the land.” — John Anderson, professor of economics at the University of Nebraska, Lincoln

Listen: How split-rate taxation can cut homeowner taxes and boost Detroit’s economy



John Anderson is an economics professor at the University of Nebraska, Lincoln, and lead author of “Split-Rate Property Taxation in Detroit: Findings & Recommendations.” He says that adopting a split rate property tax would make Detroit’s system more efficient and equitable by removing tax barriers for improvements and development, while also reducing taxes and increasing property values for the vast majority of homeowners.

“What would happen with a higher tax on land, of course, is it would discourage the holding of vacant land… and it would remove the disincentive there is for making improvements on the land,” says Anderson. “And of course, lower property tax bills would result in higher property values for those homeowners.”

Allie Gross is a freelance journalist based in Detroit who recently reported on property speculation in Detroit. She says the proposed rate could benefit homeowners by decreasing harmful speculation in the city.

“The discouragement of the speculator also helps homeowners because we know that property values, safety in neighborhoods, they all go down when speculation occurs,” says Gross.

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