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Property Tax Drop in Houston?

houston market research texas Aug 06, 2019

Good news for investors and homeowners in Texas. Recently, lawmakers passed on a reform to slow the growth of property tax increases by limiting it to a certain amount (it's called the Texas Property Tax Reform and Transparency Act). Texas doesn't have a reputation for low property taxes... so this brings a sigh of relief.

"As you’ve probably heard, Dallas and Houston's economies are booming, along with population growth. Jobs abound, salaries are increasing, home prices are low and rents are high. So Texas has been a very attractive place for real estate investors — except for those high property taxes that can eat into cash flow.  So, this tax legislation could make a big difference for those who already own property in the Lone Star state, and for those who are thinking about it." - Real Wealth Network

What is the Texas Property Tax Reform and Transparency Act?

Currently, local governments have the capability to raise property taxes up to 8% annually without protest. The exception to this rule is in Houston where city limits these hikes to 4% per year.

The new reform is going to limit Texas to a 3.5% increase each year, with Houston being capped at 2.5% annually. Fantastic! What if they want to raise them above those caps? In order to do so, the proposal needs to be decided by voters in a major election as part of the November election ballots.

Texas has the 3rd Highest Property Tax Rate in the Nation

^This is according to Memphis Invest. The blog says that "525 Texas cities increased their property tax rates by more than 3.5% in 2017. Now the cap is lower and anything over that is automatically put on the ballot."

New Appraisal Standards

Apparently, there's been some transparency issues between appraisals and tax rates. In an effort to clear up the confusion, a new process has been put together: 1. Valuing the property; 2. Protesting the values; 3. Adopting the tax rates; 4. Collecting taxes. Now two notices will be sent separately to property owners. First to deliver the appraised value and second to notify of the tax rate. Among a few other minor changes, all members of the appraisal review board will be undergoing more rigorous training.

When does the Tax Rules Take Effect?

January 1st of 2020.

Is Texas a Good Place to Invest?

We've written about Houston plenty in the past. Everything from "Hurricane Harvey to the 3rd Largest Metro Job Growth in U.S." to a "Texas Employment Outlook in 2019"

But here's the good stuff... "Top 10 Stats For Houston"

  1. Population: 2,312,717 – 4ᵗʰ largest U.S. city (Wikipedia – 2017 estimate)
  2. 5-year projected population growth: 1.7% (PwC, 2018 – U.S. average is 0.7%)
  3. Median household income: $47,793 (City Data, 2016 – U.S. median was $57,617)
  4. 5-year projected employment growth: 1.6% (PwC, 2018 – U.S. average is 0.6%)
  5. Cost of living index: 94 (City Data, 2016 – U.S. average is 100)
  6. Rent-to-household-income ratio: 20.2% (PwC, 2018 – less than 30% is ideal)
  7. Median 1-bedroom rent: $838 (Rentonomics, 2018 – U.S. median is $743)
  8. Year-over-year rent growth: 1.8% (Rentonomics, 2018 – U.S. average is 1.5%)
  9. Median single-family home sale price: $240,200 (NAR, Q3 2018 – U.S. median is $266,900)
  10. Year-over-year home sale price growth: 2.7% (NAR, Q3 2018 – U.S. median is 4.8%)

Bonus: RealPage: Annual Rent Growth Leaders (#11)

Bonus: PwC/ULI: Markets to Watch in 2019

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