Calculating the WOZ value

Municipality of The Hague

Determining and approving the WOZ value based on appraisal models and preparing an appraisal report.

Last change on 23rd of August 2024, at 15:59 (CET) | Publication Standard 1.0

• Publication category: Impactful algorithms
• Impact assessment: Field not filled in.
• Status: In use

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De code wordt niet openbaar gepubliceerd. De applicatie 4Woz is een standaard WOZ-taxatiesysteem van het bedrijf 4Value, dat ook door andere gemeenten in Nederland wordt gebruikt.

Responsible use

Goal and impact

The 4Woz application supports in the valuation process for the implementation of the WOZ Act. 4Woz supports the management of property characteristics, the analysis of market data, the determination of appraisal values, the checking and approval of the appraisal values into (in IBS) WOZ values to be disposed of and the preparation of the appraisal report as substantiation of the WOZ value. The algorithms play a role particularly in determining the appraisal values and preparing the appraisal report because they involve complex calculations and comparisons. The appraisal algorithm functions well when the value level is correct, the inter-value ratios are right and there is a reconciliation of the appraised values to the analysed market data. The appraisal report algorithm works well when appraisal reports make the appraised value plausible, e.g. by presenting all the property characteristics of the property itself, mentioning its own market data and (in the case of houses) referring to three comparable sold houses with a WOZ value.

The effect on the daily life of citizens and businesses is that the application 4Woz enables the municipality of The Hague to annually make a new, up-to-date WOZ valuation for all WOZ objects in The Hague and to substantiate it with a valuation report. The WOZ assessments are sent annually to citizens and companies (on paper or digitally) together with a WOZ decision open to objection and appeal. This is communicated through local media, the website of the municipality of The Hague and MijnDenHaag.nl. The WOZ value of a house is public to a limited extent and can be consulted via wozwaardeloket.nl. Citizens and companies can request the assessment report of the WOZ objects of which they are interested parties (owner and/or user). Users of the WOZ value, such as the National Tax Office and the Water Board, use the WOZ value for taxation, among other things.

Considerations

There is no better alternative to 4Woz's algorithms. On the contrary, 4Woz itself is currently seen as an alternative to a traditional way of valuing where individual valuations can be made outside the IBS valuation model. In a completely traditional way of working, individual, municipal valuers each make their own interpretation of property characteristics and market data into an appraisal value. A computerised valuation model that works according to algorithms generally helps to make the analysis of market data, valuation of properties and substantiation through a valuation report much more consistent and unambiguous. The frequency of annual valuations and WOZ decisions is only possible thanks to algorithms such as those included in 4Woz.

Human intervention

Yes, certainly there is human intervention in the sense of the user of the application 4Woz. WOZ data managers take care of managing property characteristics in a consistent manner, WOZ valuers analyse market data in interaction with stakeholders (citizens and businesses). WOZ appraisers set up the models, which amounts to determining unit prices and setting the influence of object characteristics on the appraisal value. Finally, the outcome of the appraisal model is checked by WOZ appraisers before the WOZ values are determined. The 4Woz application is used in an annual process. In it, managing property characteristics and performing market analysis are continuous activities. After WOZ decisions are made in IBS within eight weeks after 1 January each year, 4Woz supports successively in a number of WOZ sub-processes. At first mainly in the handling of objections and appeals, in summer and autumn the emphasis is on the set-up of valuation models, in autumn the emphasis is on preliminary consultations with specific stakeholders and on large-scale checking of the quality of valuations. Within eight weeks of 1 January, the annual cycle is in principle completed with the re-adoption of the WOZ assessments. This is basically the way to freeze and formalise the outcomes of the algorithms. Until then, a WOZ assessor can continuously improve the WOZ assessment before it is determined as a WOZ value. The handling of objections is a formal moment to reconsider the outcome of the valuation model with the citizen or company.

Risk management

For automated valuation models, risks include, in particular, a poor quality of object characteristics, insufficient or inadequately analysed market data, the set-up of the valuation models with key figures and a poor verification process of appraised values. The outcomes of 4Woz's algorithms depend on the quality of property characteristics, proper analysis of market data and the proper design of the assumptions of the valuation models. Great importance is attached at the front end of this valuation process to the professionalism of the WOZ data managers for an unambiguous and complete registration of object characteristics. Similarly, importance is attached to craftsmanship of the WOZ valuer for proper market analysis, knowledge of the market, design and operation of the valuation models and verification of valuations. Through informal contact, many citizens and businesses are also able to provide information for the benefit of the valuation process and/or objection handling.

Objections can be raised against the outcome of the process in which the 4Woz algorithm is used. The outcome of the algorithm is the WOZ value determined by a WOZ decision open to objection and appeal. Another outcome of the algorithm is an assessment report substantiating the WOZ value. According to the WOZ Act, the interested party (owner/user) of a WOZ assessment can submit a reasoned objection within six weeks of the date of the decision, pointing out incorrect data. As part of the handling of the objection, the grievances are assessed and the data underlying the WOZ assessment including the WOZ value are corrected if necessary. The ruling on the objection is open to appeal. The interested party can also always address a question to the Tax Department of the municipality of The Hague. This can sometimes lead to ex officio adjustments.

Legal basis

The legal basis that makes working with algorithms/taxation models such as 4Woz necessary is the WOZ (Valuation of Immovable Property Act). Under this, the municipality of The Hague annually determines the value of all WOZ properties via a WOZ decision open to objection and appeal. The assessed value is substantiated with a valuation report that is available to interested parties. The municipality also implements the WOZ Act for its customers, including the National Tax Office and the Water Board. Data are supplied to customers via the National Provision WOZ (LV WOZ).

Operations

Data

The WOZ Act makes extensive use of basic registrations. The WOZ object is delimited on the basis of data on property recorded in the Basic Land Registry Register, BRK. And usage is based on natural and non-natural persons listed in the Basisregistratie Personen (BRP) and/or the Handelsregister (NHR). When delineating WOZ objects, the relationship is also made to premises and addressable objects from the Basic Register of Addresses and Buildings (BAG). Part of the tax application IBS also forms the Property Valuation Key Register (WOZ), which records the object, the interest (the tax liability) and the WOZ value. The WOZ sector model provides insight into the hundreds of data included in a tax application and valuation system such as 4Woz. It takes too far to write this out here. Two main groups of data are processed through the algorithm, First, these are object characteristics such as primary object characteristics (type of object, size, year of construction, outbuildings and the like), secondary object characteristics which are a qualification of e.g. location, maintenance, quality and appearance. The second group of data includes market data such as asking prices, purchase prices, rents, construction costs and land prices. These are mostly reduced to key figures. The algorithm then calculates the values of WOZ properties in components using object characteristics x key figures. The sum of the value of components is the assessed value, which is approved and delivered to IBS (Integrated Tax System) after verification.

Technical design

In fact, algorithms are very simple mathematical operations such as addition, subtraction, multiplication and division when calculating appraisal values from object characteristics and unit prices. The same is true when preparing valuation reports. More complicated sub-processes such as coding and measuring object characteristics and classifying objects into groups and the like is still old-fashioned manual work. This also applies to setting the unit prices used for calculation. The fact that algorithms are nevertheless applied in the form of 4Woz has to do with the fact that almost 300,000 WOZ objects with a multitude of WOZ sub-objects and object characteristics) are valued in an annual process. In doing so, the algorithm helps to do this in a consistent manner to ensure as much as possible that equal objects are treated equally.

One group of algorithms includes the calculation rules in which, based on object characteristics and unit prices set by the appraiser, the appraisal value is calculated in parts. A two algorithm is used to prepare residential property valuation reports based on a kind of penalty point system. Here, a legal requirement is that this appraisal report shows three properties with WOZ value and an analysed market data (purchase price, exceptionally a sample appraisal).