Property Taxation of Multifamily Housing: An Empirical Analysis of Vertical and Horizontal Equity

Abstract

This paper analyzes the uniformity of the property appraisal outcome for multifamily apartment complexes in Phoenix, Arizona. Specifically, it investigates vertical and horizontal equity and equity across assessment methods. Apartment transactions and assessed valuations are examined over a fiveyear period (1998-2002). Once possible bias in model specification is accounted for, no evidence of vertical inequity in the sample is found. However, there is modest evidence of horizontal inequity: the results suggest that complex size and geographic location are more difficult for the assessor to value uniformly. There is also inequity between small and large properties, as represented by two different valuation methods. Thus, the findings indicate that the income approach is superior to the sales comparison approach for valuing multifamily properties for tax purposes.

Keywords: property appraisal, multifamily, apartment, equity, valuation, income, sales comparision

JEL Classification: O11, O21, R11, C12, C31, C32, C33, C35, C51, C52