June

2019 RECOMMENDATIONS TO INCREASE PARTICIPATION IN

RICHMOND’S REAL ESTATE TAX RELIEF PROGRAM
Written by Ben Paul, Edited and Designed by Anna Barber

Executive Summary

Richmond’s Real Estate Tax Relief program reduces real estate taxes for seniors and disabled individuals with
incomes at or below $50,000. Eligible individuals can save between 30 to 100 percent on their real estate taxes,
depending on their income. It is a powerful program that helps vulnerable individuals stay in their homes amidst
rising real estate assessments and corresponding tax increases.1

Unfortunately, few eligible individuals are enrolled in the program. According to the City, roughly 2,500 individuals
are enrolled.2 This analysis finds there are between 6,900 and 7,800 residents who are eligible for the program but
are not enrolled in it. These residents are paying, on average, between $560 and $1,440 every year in additional
real estate taxes solely because they are unaware of the program or unable to enroll.

This analysis explains the Real Estate Tax Relief program’s eligibility criteria and why it is beneficial, estimates the
number of eligible individuals who are not enrolled in the program, and calculates how much money they could save
by participating in it. Finally, this report provides recommendations to the City to increase program enrollment.

This issue deserves attention now, both because the City has a responsibility to help connect eligible individuals to
benefits, and because program eligibility is set to expand on January 1, 2020. This paper analyzes enrollment under
the existing criteria. Recommendations to strengthen enrollment will be especially useful for educating individuals
who may become eligible under the expanded program.

The Real Estate Tax Relief Program

Richmond’s Real Estate Tax Relief program reduces eligible individuals’ real estate tax bills between 30 and 100
percent, depending on the individual’s household income.

Figure 1: Tax Reduction Percentage by Household Income

Household Income Range Real Estate Tax Reduction
$0 - $20,000 100%

$20,001 - $30,000 70%

$30,001 - $40,000 35%
$40,001 - $50,000 30%


City residents must meet the following criteria to participate in the program:

•  Be at least 65 years old and/or be permanently and totally disabled;

•  Live in the household for which the applicant is paying real estate taxes;

•  Have a combined household income of no more than $50,000, minus $10,000 of income for relatives living
in the household; and

•  Have a combined financial net worth of no more than $200,000, excluding the value of the house and up
to one acre of land. 1

A Model Social Benefit Program

Richmond’s Real Estate Tax Relief program is very well designed. Unlike many social benefit programs, Richmond’s
tax relief program is administratively efficient. Many benefit programs restrict how beneficiaries can use their
benefits, the Supplemental Nutrition Assistance Program (SNAP) being the most recognizable example. These
restrictions require government officials to write complex rules, beneficiaries and businesses to understand the
rules, and bureaucrats to enforce the rules. This results in a great deal of effort, and often a great deal of
administrative costs.

In contrast, Richmond’s tax relief program does not restrict how beneficiaries use their tax refunds. This freedom
benefits not only beneficiaries, who know their needs best, but also city taxpayers, who are spared the additional
cost.

Beyond official restrictions, beneficiaries of benefit programs often feel ashamed when they use their benefits in
public. Sometimes they endure outright discrimination. These experiences discourage eligible individuals from using
their benefits, if they enroll at all. Richmond’s tax relief program limits stigma because the benefit is provided as a
tax refund. It protects beneficiaries from discrimination because individuals and businesses do not know who
benefits from the program.

Finally, many benefit programs suffer from an “income cliff” problem. This issue arises when a beneficiary forgoes
an opportunity to increase his or her income because doing so would result in longer being eligible for a benefit
program. For instance, before Virginia expanded its Medicaid program, most working parents living in Richmond
were eligible only if they earned less than $4,536 per year. If a beneficiary earning $4,500 per year were to be
offered a 10 percent raise, he or she would have to decide between taking the raise and keeping his or her health
insurance, which is worth far more than $450.

Richmond’s Real Estate Tax Relief Program avoids the income cliff by reducing the amount of money individuals can
save as their income increases. On average, a program beneficiary stands to lose from $51 to $601 in tax refunds
depending on which income tier he or she moves into. An average beneficiary earning $50,000 a year, the maximum
eligible income, is at risk of losing $558 worth of benefits per year by increasing his or her income beyond the
eligibility limit. This sum is considerable but incomparable to the income cliff described in the preceding scenario.


Eligibility & Participation

This analysis uses the 2017 American Community Survey (ACS) 5-year Public Microdata Sample (PUMS) to conclude
that between 9,368 and 10,263 Richmond City residents are eligible to participate in the Real Estate Tax Relief
program. Only 2,500 individuals participate, meaning the program has a participation rate between 24 and 27
percent.3

The figure on the following page estimates how much money, on average, an individual in each income group can
save per year by participating in the program. The estimates are based on the median home value in each income
group.

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Figure 2: Average Savings by Income Group

Median Taxes
Percent Average Taxes After
Income Range Home Without
Discount Tax Relief Relief
Value Relief

$0 - $20,000 100% $122,000 $1,440 $1,440 $0

$20,001 - $30,000 70% $144,000 $1,728 $1,210 $518

$30,000 - $40,000 35% $145,000 $1,740 $609 $1,131

$40,001 - $50,000 30% $155,000 $1,860 $558 $1,302

Strengthening Enrollment

The good news is that better is possible. Even a small increase in the participation rate from roughly 25 percent to
33 percent would benefit between 590 and 890 individuals without requiring additional funds. In fiscal year 2018,
the program budgeted $3 million but only spent $2.8 million. Raising the participation rate to 33 percent would
bring the total cost of the program up to the budgeted amount. The following recommendations would help the city
reach that target:

1.  Clarify in the program brochure that an individual’s house and up to one acre of land do not count toward the
program’s $200,000 asset limit.
The program brochure states that applicants must “have assets (net worth) of less than $200,000.” It does
not include the key caveat that an applicant’s house and 1 acre of land are exempt from this asset limit. 30
percent of eligible individuals own homes with values at or above $200,000. These individuals may
incorrectly think they are ineligible if they were to learn about the program via the brochure.

2.  All program materials should be available in Spanish and other commonly spoken languages on the
Department of Finance’s website.
8,820 Richmond City residents report that they do not speak English very well.4 Simply making the program
available in Spanish and other commonly spoken languages would boost participation.

3.  Develop a tax relief calculator that can estimate an eligible individual’s potential savings and make it available
on the program website.
People participate in programs when they can easily understand the potential benefits. Individuals who think
they may be eligible should be able to enter their income and home value to estimate what they may be able
to save through the program.

4.  Develop an Eligibility Triage Tool.
Similarly, there should be an eligibility triage tool on the program’s website. Individuals could enter their
household income, age, disability status, and net worth, and the tool would make a tentative eligibility
determination. This tool would allow individuals to confirm that they are eligible for tax relief before taking
the time needed to collect various income-eligibility documents for the application.

These are just a few recommendations to increase the program’s participation rate. Surely, there are many other
ideas to be considered.


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Conclusion

Even the best-intentioned social benefit programs are only effective if they reach the people they are intended to
benefit. While Richmond’s Real Estate Tax Relief program can be extraordinarily valuable to those enrolled in it, how
can it be considered a success if three out of every four eligible individuals do not benefit?

If adopting policies that aide vulnerable families is a testament to our city’s values, implementing them well must be
a testament to our city’s spirit. Doing so requires a sustained effort throughout our community. Let us call on our
Mayor, councilmembers, and dedicated city employees to lead this effort.

Endnotes
1. Roberto Roldan, “Amid Gentrification, Little-Known Tax Relief Program Could Help More Richmond Seniors Age in Place,” WCVE,
2019.
2. Mark Robinson, "Richmond City Council Expands Tax Relief Program, Approves Semmes Avenue to Town Home Development,”
Richmond Times-Dispatch, 2019.
3. This estimate does not consider individuals’ household assets. Applicants must not have assets equal to or above $200,000,
discounting the value of his or her house and one acre of land.
4. 2013 – 2017 American Community Survey 5-Year Estimates, Table S1601

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