| Summary: | The first chapter examines issues of vertical inequity in property assessment across Massachusetts. Several previous studies claim to identify bias in the assessment of housing value for the purposes of property taxes. This chapter highlights some problems with the methodologies used in many of those studies and provides an alternative framework for finding minimum values for assessor error and bias. Using data from the Massachusetts' Office of Geographic Information, we
build off previous studies in three ways. First, we briefly explain why the errors-in-variables problem can cause biased estimates of vertical inequity in property assessment and how previous solutions to this problem are based on misleading assumptions. Second, we show that a method based on hedonic price estimates using property-level observables can provide a lower bound for the extent of assessor error and bias for Massachusetts towns. Third, we explore if there are differences in
vertical inequity across towns in Massachusetts. Our results show that more than 23.3 percent of the variance in the difference between assessment and sale price across Massachusetts is due to assessor error, and that several property-level and town-level features can explain assessor bias. Furthermore, high-value properties across the state are the ones most likely to be under-assessed regardless of whether or not they are located in a high-income town.
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