Computer Assisted Mass Appraisal (CAMA) and Geographic Information Systems (GIS) in New York City and Tokyo: Inaugurating a Comparison

 

 

Jack Eichenbaum, City Assessor                       Kaz Fujiki, North American Liaison

NYC Department of Finance-Property            Japan Real Estate Institute

1 Centre St. Room 373                                    5050 Kingsway, Second Floor

New York, NY 10007                                      Burnaby BC V5H 4H2 Canada

212-669-4563                                                 604-638-3113

jaconet@aol.com                                             kfujiki@aol.com

 

 

Very large and complex cities around the globe have evolved in ways that sharply differentiate them from smaller cities. Typically they have no peers in the same nation. High population densities in Tokyo and New York City have led to adoption of transportation and housing strategies that support a congested yet vibrant urban culture. These cities function quite differently from the norms for spacious  America and even much denser Japan. Nobody moves to Tokyo or New York primarily for housing or efficient roads.

 

During the late nineteenth century, both New York and Tokyo consciously used the older and larger imperial cities of London and Paris as models for their transportation systems, architecture, city planning,  bureaucracies, even for their clothing and entertainment.  While guided by underlying and idiosyncratic national identities, similar competitive dense urban cultures were developing a life style that was in many ways more like one another than their hinterlands. With the maturation of the skyscraper early in the twentieth century, New York began creating a city based on high-density high-rise structures.  After the devastation of World War II, while the other three cities moderately decentralized in response to suburbanizing trends, Tokyo began consciously rebuilding itself using the New York model, at the same time innovating new dense mixed land use projects around major rail junctions. More recently, central Tokyo has been losing population while Manhattan's population has increased somewhat. The two cities remain highly centralized for commerce.

 

This paper explores those similarities between New York and Tokyo that relate either to mass appraisal or the technologies employed in mass appraisal. First we summarize the similarities between the cities that are the strength of the present comparison. Next we discuss those dissimilarities which limit the present comparison. Finally we relate the experience of both cities with CAMA/GIS, noting areas where complementary exchange may be likely.

 

 

1.     Similarities between New York and Tokyo

 

Our comparison between these cities equates the 23 wards of Tokyo, the city before World War II, with the four dense boroughs of NYC (Manhattan, Bronx, Brooklyn, Queens) hereafter referred to as TK and NY.[1]  While neither region represents a current political definition of the city, the areas of TK and NY (250 sqmi ~ 650 sqkm) are approximately equal. Current census estimates for the NY population (7 million) are smaller than TK (7.8 million) but likely to grossly undercount minority and immigrant groups that are not a factor in TK.

 

            Estimated residential population densities for both TK and NY are approximately 30000/sqmi ~ 12000/sqkm. These densities are 4-30X densities in smaller American cities and suburbs and 2-10X densities in their Japanese counterparts. Density is the key factor in this comparison since it ultimately influences, if not determines, such basic urban functions as housing, transportation, and retailing. Household size, another dimension of density, averages about 2.5 in both NY and TK, falling to a minimum of about 1.5 near the central business districts where single person households abound.

 

Much more than any other city in their nation states, TK and NY rely on subways and commuter railroads to bring workers to dense central business districts. Some 80% of these commuters, including those commuting from outside TK and NY, use public transportation.  Less than half of the households  living within TK and NY maintain an automobile. Most do their shopping  in street markets, traditional neighborhood shopping districts and large regional retail centers convenient to public transportation.  About two thirds of the households of  TK and NY live in apartment houses but in a cityscape where considerably more land is devoted to private homes.

 

The natural settings of both TK and NY include estuarine and wetland environments which were first developed as ports and markets, later as great industrial complexes, now being redeveloped as landfill projects, waterfront housing and complex mixed use developments.  In remodeling its business center, TK developers consciously invoke the greater densities of  midtown Manhattan in NY by planning mixed-use high-rise complexes.

 

The dense pattern of the two cities, featuring verticality, transit, pedestrians and redevelopment creates a property valuation dynamic dominated by three dimensions and relationships  to points (transit stations, high valued intersections, trophy buildings). In newer suburban areas outside TK and NY, areas designed for homogeneity in value are more common (office parks, housing subdivisions, zoning enclaves). Within TK and NY, valuation is a complex process involving nuances of zoning, air rights, view, status, distance and other subtle factors.  The dynamic assumes that value is always varying with location rather than held constant within fixed neighborhoods.

 

In Japan, like the USA, but unlike the majority of economically advanced nations, property valuation for tax purposes is largely a local function. The current system of property taxes was introduced to Japan by the U.S. "tax reform mission" led by Dr. Carl Shoup in 1949. Both TK and NY have developed their own valuation systems, which are departures from the systems used in their populous and complex surroundings. As they are located in premiere world communications centers, TK and NY governments are proximate to rapidly developing information technology. Conversely there is rapidly developing demand for their digitized property data.

 

 

2. Differences between Tokyo and New York

 

TK and NY differ sharply in the locus of power of municipal government. Like most large cities globally, TK has a metropolitan government extending to both the central city and the suburban hinterland in the same prefecture. At the same time considerable power is granted to the individual wards. In NY, as in most American cities, there is a sharp political distinction between the city and its suburbs. Power is concentrated in the central city but nearby suburbs and smaller cities in the states of  New York, New Jersey and Connecticut compete with NY for development and residents, often by manipulating the property tax structure. In NY there are the four boroughs as well as 56 "Community Planning Districts" but they have little real political power.  

 

While overall land area and population in TK and NY is similar, distribution of commercial activity and housing is not. In TK there is no concentration of commercial area equivalent to lower Manhattan (Wall St area) or Midtown Manhattan; instead a dozen or so smaller commercial hubs have developed around key rail intersections over a wider area. Housing density and mix tends to be distributed more evenly in TK where rail transit is more ubiquitous. In NY the high-rise apartment landscape common to much of Manhattan yields to a majority of suburban style homes at the periphery.

 

 

 

The wide variety of ethnic groups that cluster to varying degrees in the NY cityscape lend spatially concentrated and distinct impact to property values.  More than a third of the population in NY is foreign born compared to some 2% of TK. Similarly, NY's wide range of economic class- from impoverished immigrants to the global super-rich- affects the valuation landscape in ways TK's more middle class population does not.

 

Japan has historically been a crowded country while the USA has been a spacious one. A very different land ethic has developed. This is expressed not just politically and economically, but culturally as well. The veneration Americans have for the King-size cattle ranch could also be attributed, in Japan,  to a tiny rice paddy. While TK and NY have long led their nations in having the highest land values, current land values in TK are 2-3X similar properties in NY. This is not a reflection of profit or current intensity of use so much as reverence for land.  In TK land-to-building value ratios tend to be 3-1 to 2-1 as a rule of thumb, compared to 1-1 in NY.  Wars, earthquakes and redevelopment have made TK buildings relatively expendable while aggregation of urban land takes wizardry. In contrast many NY buildings and historic neighborhoods have become icons while slum land, brownfields and awkwardly located waterfront land often remain idle for decades.

 

Property taxation in TK is primarily on land value. In NY it is on property value and the apportionment of value between land and building is neither a primary nor a well-defined task. TK requires carefully graded market values for land and cost values for buildings while NY relies on primarily on an income approach for property value except for private homes. In their housing databases, NY classifies primarily by number of units (related to size) while TK classifies by construction material (related to impermanence).  But both NY and TK give substantial tax relief to small houses at the expense of larger structures.

 

While TK and NY contain about the same land area for the same number of people and also have about the same household size, the equation does not hold true for interior space. TK housing units are smaller than NY. The average housing unit area is 62 sqm ~ 662 sqft in TK while in NY it is about 875 sqft ~ 82 sqm. Office space in TK is also considerably reduced on a per-employee basis. Many TK buildings would be considered "slivers" in NY and smaller spaces are routinely used which would be much harder to utilize in NY, both functionally and legally.  The pressure of high land values is a constant stimulus to use more space efficiently. Modern planning and construction in TK tends to surround transportation nodes with carefully designed mixed-use developments that create synergy out of density. 

 

 

3.    CAMA/GIS in TOKYO (TK)

 

A.     Property Taxes in Tokyo

 

There are approximately two million land parcels, excluding condominiums, in TK, which is divided into 23 wards. Real properties are assessed and taxed by the Tokyo prefectural government in the 23-ward area because the prefectural government provides some municipal services including fire, water, and sewer for the area. Other municipalities in Tokyo prefecture have their own property tax division to carry out their assessment and tax collection. The 23-ward area municipalities are given 52 percent of the property taxes collected by the prefectural government, which expects approximately 1.3 trillion yen ~ $11.3 billion US for the property tax revenues in the fiscal 2000, which ends on March 31, 2001. The amount of property taxes collected in the fiscal 1997 in TK accounted for 35.1 percent of the total tax revenues. Income taxes (26.5 percent) and business taxes (26.6 percent) were two other major tax items in TK.

        

 

 

          No property classes exist in Japan for property tax purposes, although there are homeowner's grants in place. Also, only the cost approach is applied for assessment and land and improvements are levied separately. In addition, the property tax rate is constant every year regardless of variations in assessed values. Due to this rigid nature of property tax parameters as well as equity concerns in assessed values, the tax authorities invented various complicated procedures to calculate taxes payable for the land portion in order to mitigate possible fluctuation in property tax revenues.

 

In terms of land, taxes payable are the product of the tax rate and the taxable value, which is calculated by multiplying the previous year's taxable value by a phase-in factor. The phase-in factor is based on the ratio of the previous year's taxable value against the current year's assessed value. For instance, let's say a piece of commercial land was assessed at 15 billion yen ~ $130 million US in 2001 and its taxable value in 2000 was 5.25 billion yen ~ $45.7 million US. The ratio in this case is 35 percent and its phase-in factor is 1.05 according to the table provided by the Ministry of Municipal Affairs. Therefore, the property taxes payable for this land is calculated as 5.25 billion yen * 1.05 * 1.7% = 93.7 million yen ~ $815,000 US.

 

Both land and buildings are reassessed in every three years in TK as well as all other municipalities in Japan. In-house staff of the municipality appraises buildings based on the cost manual. On the other hand, many municipalities, including TK, retain consultants for land assessment.

 

B.  GIS  in CAMA Valuation in Tokyo

 

Property assessment contains highly segmented procedures in TK. First of all, buildings are assessed separately from their underlying land as mentioned above. In addition, land assessment is carried out in three phases: benchmark site appraisal, frontage value estimation, and site valuation. Out of the three stages of land assessment, the GIS/CAMA technology is used in frontage value estimation. In terms of buildings, the Tokyo prefectural government uses aerial photographs and digital maps in order to monitor construction, addition, and demolition activities. The valuation method for improvements is strictly mechanical.

 

There are about 10,000 neighborhoods for the property assessment purposes in TK. In order to deal with drastic land value changes in central TK, the size of one neighborhood goes down to as small as 1,000 sqm ~ 11,000 sqft in some areas. In each neighborhood, a hypothetical benchmark site is created to serve as an indicator of the average land value level in the neighborhood. Licensed real estate appraisers appraise benchmark sites once every three years. Close to 300 fee appraisers were retained for the 2001 revaluation in TK.

 

In each neighborhood, 70 percent of the benchmark site value is translated into the frontage value of the street segment on which the site faces. The value is actually expressed as an amount per sqm, not by frontage. However, the way the value is plotted on a map resembles the frontage value method. The frontage value is used as the basis for estimating other frontage values in the neighborhood.

 

The next step is the creation of frontage value adjustment tables. The TK government used a consultant to develop the tables for the latest revaluation. In estimating the values of the factors, which are multiplied by the value of the benchmark site, a multiple regression analysis was employed. About 30,000 land sales comparables were collected for the analysis. Altogether 250 model equations were developed for TK. There were 15-20 variables considered for the frontage value adjustment tables. The most influential factors included road width, FAR, and proximity to public transit and city center. Approximately 27,000 frontage values were estimated for the 2001 reassessment in TK.

 

 

 

 

GIS played an important role in the formulation of the frontage value adjustment tables. The technology enhanced efficiency in this process by facilitating the following steps.

 

1) plotting the locations of land sales comparables and government land value survey sites;

2) saving various data, including photographs of each street segment;

3) identifying zoning regulations;

4) measuring the distance to CBD, railway/subway, commercial facilities, public institutions, and

5) checking the consistency of frontage values by comparing sales ratios.

 

Due to the lack of accurate cadastral maps, digital maps provided by an aerial photography-based map firm were employed as the base maps. The maps were equipped with about 250 layers, including zoning, water bodies, streets, railways, building footprints.

 

Using the frontage value adjustment tables, the TK government determined the value of each street segment in their jurisdiction. Then, based on the value of the frontage value, the values of sites along the street were calculated by multiplying the size of the site and all applicable adjustment factors, including shape, dimension, and corner influence.

 

C.  Issues for Further GIS/CAMA Utilization in Tokyo

 

Due to the fiscal constraints and less priority in the political arena, the cadastral survey in TK is going nowhere. This impasse of creating base maps, as well as the existence of the Tokyo prefectural government in the municipal affairs, including property assessment, caused distorted development of GIS in TK. For example, the city planning department of the municipality of Setagaya, one of 23 wards, is building a comprehensive planning database, which includes various maps using GIS. They are launching their web site for the GIS-based database in the very near future. Their database, however, does not include assessment information. In any case, GIS is becoming more and more indispensable for some areas of municipal administration including earthquake restoration planning.

 

In summary, there are many hurdles to be cleared before realizing a more sophisticated assessment system in TK. In the process of future development, NYC experience in the property assessment practice seems to provide TK with a good path to follow.

 

 

4.  CAMA/GIS in New York City (NY)

 

A. Property Taxes in NY

 

In the definition of the city we are using (NY) there are about 816K separate parcels. Of these, about 80K are condominium apartments leaving about 736K separate land parcels. The NYC Department of Finance centrally administers the property tax though logistically it is run out of separate borough offices. NYC is subject to certain New York State oversights. Assessment procedure is the same throughout the city but some definitions and exemptions are geographically prescribed and CAMA modeling is usually done at the borough level.  For fiscal 2001, the four borough NY should generate about $7.7 billion in property tax all of which becomes part of the NYC general fund.  For fiscal 2000, property tax revenue was about 35.7% of the total NYC budget with city income tax (24.7%) and sales tax (16.1%) as the next largest revenue streams.

 

Because the tax parcel layer effectively represents the most disaggregated level in the city, the attribute data contributed by the Department of Finance (parcel maps and data) is among the most valuable in the NYCMAP system. When the system is more fully developed and available to the public, hundreds of thousands of users may access this mappable property data annually. Already, several thousand users from all over the world (including Tokyo!) acquire files of property or tax map data annually. (Eichenbaum, 2000) One user is the Federal Emergency Management Agency (FEMA) which initiated a study of potential structural damage in Manhattan in the event of an earthquake. The Property Division of the NYC Department of Finance recognizes this migration of property data and is stepping up efforts to sharpen data collection skills and update property data files. It is also negotiating with the City Planning Department on a project to create a single "legal layer" out of separate parcel, zoning and official street maps.

 

In NY there are four classes of property for tax purposes. These allow for differences in assessed value percentages, tax rates and assessment methods. Class 1 consists mostly of one, two and three family homes that are assessed using a market approach; it has the lowest effective tax rates and is the largest with respect to parcel count. Class 2 consists of all other residential property. Class 3 is composed of special utility properties. Class 4  is for all other real property and is the largest in revenue generation.  Where possible, Classes 2 and 4 are typically assessed by an income approach while Class 3 properties are assessed via a cost approach.

 

Property taxes calculated by preferred market and income methods are based on the total parcel or property value. Land values, where they are reliable, are usually arrived at by residual techniques but are never the primary data for assessment except in the case of vacant land. Land values in NY are problematic because of definitional problems regarding land vs. building as well as data problems.  In NY, most vacant land is an exception to the norm or it wouldn't be vacant!  All properties are nominally reassessed every year although this may involve only model parameter adjustments and response to recorded physical change.

 

B. GIS  in CAMA Valuation in New York (NY)

 

GIS related techniques were inherent in the CAMA procedures introduced in New York in the 1980s. Various forms of software were employed to develop location response surfaces that would quantitatively account for the strong relationship between location and property value.  (O'Connor and Eichenbaum; Eichenbaum, 1989; Eichenbaum and McNamee) Land values can vary by as much as a factor of 100 over a distance of as little as two miles (3 Km). (Eichenbaum, 1995) Desktop mapping and contouring software became available to refine the process and much of it was incorporated into the city's CAMA system.  For Class 1 (small homes) a multiple-regression formulation generates a location response surface for each borough that provides a multiplicative ‘location factor’ for each tax block. A 'location-free' property value is multiplied by the location factor to obtain a model value. This multiple regression value is input as one comp in a comparable sales routine. Similar techniques were used to produce values for various commercial properties but have not been very successful.

 

Instead, GIS has been widely and successfully used as an aid in traditional assessment and administrative activities, particularly where location needs to be illustrated if not quantified.  Desktop mapping, using  US Census based address files or a digitized version of the city's parcel tax maps, has been helpful in correcting the database, defining neighborhoods and other districts, managing field activity, supporting tax policy scenarios,  and integrating data from other agencies. An account of these activities has appeared in the CAMA/GIS forum. (Eichenbaum, 1999)

 

C. GIS/CAMA beyond Valuation in New York

 

It has taken New York City most of a decade to conceive and execute the idea of a GIS utility that would serve a variety of municipal agencies as well as public, private and non-profit sectors. Problems were as much organizational as financial and technical. The city's separate agencies (Finance, City Planning, Transportation, Environmental Protection, etc.) are themselves large bureaucracies with existing GIS applications, and hierarchical leadership unused to lateral cooperation.  The city's GIS utility called NYCMAP ("Nicemap") is now housed and managed in a  'neutral' umbrella agency, the Department of Information Technology and Telecommunications (DOITT). It consists of a base map, a GIS layer of digitized physical entities (building lines, curbs, street centerlines, railroads, parks, cemeteries, etc) derived from orthographic aerial photography, together with overlays (water main and sewer maps, tax parcel maps, zoning, etc) from other sources that have been registered to the base map.  Gradually, attribute date (describing water mains, tax parcels etc.) is being added.

 

Because the tax parcel layer effectively represents the most disaggregated level in the city, the attribute data contributed by the Department of Finance (parcel maps and data) is among the most valuable in the NYCMAP system. When the system is more fully developed and available to the public, hundreds of thousands of users may access this mappable property data annually. Already, several thousand users from all over the world (including Tokyo!) acquire files of property or tax map data annually. (Eichenbaum, 2000)  One user is the Federal Emergency Management Agency (FEMA) which initiated a study of potential structural damage in Manhattan in the event of an earthquake. The Property Division of the NYC Department of Finance recognizes this migration of property data and is stepping up efforts to sharpen data collection skills and update property data files. It is also negotiating with the City Planning Department on a project to create a single "legal layer" out of separate parcel, zoning and official street maps.

 

New York City assessors will eventually have access to much of the data in NYCMAP. The Department of Finance is currently considering simple mapping applications that can help assessors do their job. The layer of aerial photography, for example, clearly exposes such entities as private swimming pools and billboard structures that have previously been difficult to locate.

 

 

References NY

 

Eichenbaum, 1989:  "Location as a Factor in Determining Property Values"  Property Tax  Journal 

  Vol. 8  No. 2  pp. 151-169

Eichenbaum, 1995:  "The Location Variable in World Class Cities"  Journal of Property Tax

  Assessment and Administration  Vol. 1 No. 3 pp. 46-60

Eichenbaum and McNamee, 1996: "Approaches to Mass Appraisal of Real Property through GIS"

  URISA 1996 Annual Conference Proceedings  Vol. 1 pp. 74-84

Eichenbaum, 1999:  "Desktop GIS in Assessment Administration"   Integrating GIS &

  CAMA Conference Proceedings,  New Orleans

O'Connor and Eichenbaum, 1988:  "Location Value Response Surfaces: The Geometry of

  Advanced  Mass Appraisal"  Property Tax Journal  Vol. 7   No. 3  pp. 277-296

 

 

References TK

 

Please consult with Mr. Fujiki for sources in Japanese.



[1] Staten Island, the fifth borough of New York City, has about 400,000 residents and 127,000 tax parcels. Population density is only about one fourth that of “NY “ and there is no rapid rail connection to “NY”.