M id A tlantic Real Estate Journal — Financial — Appraisal — April 2026 — 13
www.marej.com
A ppraisal
By Carlo L. Batts, MAI, Rittenhouse Appraisals and The Reduxx Group AI and Property Tax Assessments: Proceed with Caution
A
rtificial intelligence (AI) promises to shake up many industries
current market conditions. The black box problem. AI decision-making processes lack transparency. With- out visibility into the logic behind valuations, identify- ing and correcting errors becomes nearly impossible. Property owners can’t effec- tively challenge assessments they don’t understand. Methodology inconsisten- cy. AI requires standardized frameworks to function ef- fectively. For emerging prop- erty types like data centers, or properties with unique characteristics, lack of com-
parable data and standardized valuation approaches leads to unreliable assessments. Data scarcity. Critical infor- mation such as rents, occupan- cy rates, operating costs, and tenant details often remain private. AI can’t accurately assess what it can’t access. Many local jurisdictions also lack the technology infrastruc- ture to feed quality data into AI systems. Inadequate oversight. Most local and state taxing au- thorities haven’t budgeted for AI training or professional oversight. Without human
experts reviewing AI out- puts, errors compound and inaccuracies persist. A Tool, Not A Solution I’m not anti-technology. AI can play a valuable role in streamlining research and identifying broad patterns. But it cannot replace the nu- anced judgment that experi- enced professionals bring to property valuation. As AI becomes more prevalent in property tax assessment, com- mercial property owners must remain vigilant. Regular portfo- lio reviews, understanding local assessment methodologies, and
challenging inaccurate valua- tions become even more critical when algorithms, rather than experienced assessors, drive the process. The goal should be accu- racy, not automation. Until AI can fully account for market complexity, local nuances, and real-time conditions, hu- man expertise remains essen- tial to ensuring fair property tax assessments. Carlo L. Batts, MAI is the principal of Rittenhouse Appraisals and The Reduxx Group, both based in Center City Philadelphia. MAREJ
including commercial real estate. One part of that promise would be rev- olutionizing property tax assessments, by improving
Carlo L. Batts
accuracy, analyzing massive datasets, and streamlining bureaucratic processes. But as someone who has spent decades working com- mercial property valuation and tax assessment, I see sig- nificant risks in how AI is be - ing deployed in this space. The technology may actually exac- erbate existing problems, caus- ing property owners to overpay taxes on portfolios that have already lost significant value. The Valuation Crisis Commercial real estate valu- ations are currently at odds with governments’ appetite for tax revenue. Economic volatility, changing property management standards, inter- est rate increases and rising capital costs have depressed commercial property values across many markets. Yet as- sessments haven’t kept pace with these market realities. Enter AI, which many tax authorities view as a tool to modernize assessment pro- cesses. The problem? AI learns from available knowledge, and in property taxation, that foundational knowledge is often flawed, incomplete, or outdated. Where AI Falls Short The limitations of AI in prop- erty tax assessment are sub- stantial and specific: Unique characteristics of properties or markets get lost. Properties have distinctive features, which influence value, including location nuances, ten- ant mix, physical condition, and market positioning. AI strug- gles to weight these factors appropriately, especially when many jurisdictions maintain artificially high assessments to preserve revenue. Past data misleads. Prop- erty valuation isn’t linear. AI trained on historical data can’t adequately account for mar- ket disruptions, changing use patterns, or economic shocks. While steadily increasing as- sessments might serve govern- ment budgets, they don’t reflect
Reduce Your Commercial Real Estate Tax Burden
•
•
•
•
•
•
•
•
•
•
Made with FlippingBook Digital Proposal Creator