What explains the resolution of property tax delinquency prior to forfeiture? Evidence from Hennepin County, Minnesota

ABSTRACT

This article focuses on the rate of redemption for tax delinquent properties in suburban and central city contexts of Hennepin County, Minnesota. Using a county-wide data set of properties that became tax delinquent in 2004, time-to-event (survival) models assess how the rate of redemption for tax-delinquent properties differs for properties subject to different redemption periods determined by property type and location. After controlling for a variety of other property and neighborhood-level characteristics, results indicate that the rate of redemption for tax-delinquent properties differs by location in ways that are not completely explained by different redemption policies associated with location and property type. These results suggest that in areas with healthy economies and minor tax delinquency problems government redemption policies may play less of a role in shaping redemption behavior than the characteristics of the property, neighborhood conditions, and regional factors that influence the perceived value of tax-delinquent properties in central cities and suburbs. These results have important implications for how local governments in the United States consider tax-delinquency issues in an era when economic and social changes in suburbs have made property tax delinquency a problem for central cities and suburbs alike.

Acknowledgments

The author thanks Jeffrey Strand and Mark Chapin for help accessing and interpreting data on tax delinquency in Hennepin County and the efforts of three anonymous reviewers whose insights improved the article substantially.

Funding

The research upon which this article is based was funded by the Hennepin University Partnership (HUP), which is a collaborative effort between Hennepin County and the University of Minnesota.

Notes

1. In 2014 the Minnesota state legislature passed legislation that shortened some redemption periods, such that the longest redemption period in the state is now 3 years. Because the research presented in this article uses data on tax delinquency that predates this change in state legislation, the redemption periods for tax-delinquent properties specified by the previous legislation is most relevant for the purposes of this article.

2. It is also possible to model these data using a competing-risks model, which is based on a proportional subhazards model (Fine & Gray, 1999). This method estimates cumulative incidence functions, which are defined as the cumulative probability that an event of interest has occurred in the presence of alternative events. In this case the alternative events include a property resolving a tax delinquency because the owner declares bankruptcy or forfeits the property. Like the Cox proportional hazards model used in the analysis presented in this article, the proportional subhazards model also accommodates censored observations or, in this case, those properties without a redemption (or competing event) during the 9 years of the study period. A sensitivity analysis indicates that a competing events model has substantively similar results than the Cox models. I choose to present results from the Cox models because of the presence of time-varying covariates in the data. In Stata (College Station, Texas, USA), the Cox proportional hazards model can accommodate time-varying covariates and still produce graphs that facilitate interpretation of the results, something that the proportional subhazards model cannot achieve.

3. This suggests that the Hennepin County Tax Assessment Office might have exercised discretion over tax forfeiture, allowing some properties to remain tax delinquent outside of legally prescribed redemption periods. After consulting with staff in the Hennepin County Tax Assessment Office, a different and more likely explanation is that the data tracking system in place in Hennepin County does not allow analysts to easily determine when tax-delinquent properties have exceeded the redemption period in every instance. Therefore, this small number of tax-delinquent properties that were not forfeited after their redemption periods lapsed may have been an oversight on the part of the Tax Assessor’s Office.

Additional information

Funding

The research upon which this article is based was funded by the Hennepin University Partnership (HUP), which is a collaborative effort between Hennepin County and the University of Minnesota.

Notes on contributors

Ryan Allen

Ryan Allen is an associate professor of community and economic development at the Hubert H. Humphrey School of Public Affairs at the University of Minnesota, where he directs the Urban and Regional Planning program. He earned his PhD in urban studies from the Massachusetts Institute of Technology in 2007. Allen’s research interests focus on housing and community development issues. In particular, he investigates the effect of economic shocks, such as the recent housing crisis and recession, on various facets of neighborhoods and community life in the United States. In addition, Allen focuses much of his research and teaching on the experience of immigrants in cities and suburbs of the United States. He is a frequent commentator for local and national media outlets and has published his work in a variety of journals, including Ethnic and Racial Studies, Urban Affairs Review, Housing Policy Debate, and the Journal of Planning Education and Research.