Pay, Buttercup: No end in sight for real estate appraisals
OWhen Emily Joseph bought her first home in Kidd Springs Park earlier this year, she expected the annual property tax to be around $4,000, based on 2019 assessments.
But by the time she completed the purchase in May, the annual tax had doubled to about $8,000, adding $300 more than expected to her monthly house payment.
“I didn’t think it would be exactly the same number, but it’s doubled in three years,” she says.
The 29-year-old, who is a bartender and marketing manager, says she is now looking for a roommate to help pay the house’s property taxes.
Property tax assessments in Dallas County totaled nearly $40 billion more in 2021 than 10 years prior, despite moderate increases in population and housing over the same period. This contributes to the affordable housing crisis by making home payments and rents less affordable for many Dallas residents. Even though the city is expected to cut its property tax rate this month, steadily rising property assessments mean Dallas residents are paying higher property taxes each year than ever before.
Homeowners who take the time to challenge their assessments from the Central Dallas Assessment District can sometimes drive down the value of their home, but this annual ordeal doesn’t help much.
Mortgage loan officer Melissa Wynne bought her home in Wynnewood in 2019 when it was assessed for tax purposes at $365,000.
In 2020, the assessed value jumped to $415,000. The last valuation was $485,000. Protesting the value of the property and citing comparable sales in her neighborhood, she convinced the assessment district to lower the assessed value to $445,000.
The 2,000 square foot home, which she shares with her husband and their 19-month-old daughter, has two bedrooms and two bathrooms.
“Half a million dollars is just crazy,” she said.
The appraisals are based, in part, on comparisons with neighboring properties, and Wynne says her home doesn’t compare to the large, fully remodeled, square-foot Wynnewood homes that the appraisal neighborhood piled up next to hers. This argument, along with evidence of structural damage to their garage, helped her get a lower assessment, even though she thought the ultimate taxable assessment should have been even lower. She says she kept pushing until her only remaining alternative was to sue the Assessment District.
“That’s when you have to say, ‘Is the decline in value worth the time and expense it will take to fight this?’ “, she says.
High property taxes can cause buyers to lose buying homes and sellers to lose sales, she says.
“They have such a tight debt ratio that the increase may prevent them from qualifying for the home they’re buying, and we’ve definitely seen that happen,” she says. “Or they can no longer afford to live there.”
This is the struggle of middle class people. In low-income neighborhoods, high property taxes threaten displacement.
“Most of the neighbors in West Dallas have fallen behind on taxes and are at risk of being displaced,” says Shellie Ross, executive director of the Wesley Rankin Community Center, which has offered workshops on protesting property taxes.
“The West Dallas area has really skyrocketed in cost, and for many their jobs don’t pay more to cover it.”
The owner’s dilemma
Higher taxes also mean higher rent. Those who live in homes they at least own can qualify for a Homestead Exemption to reduce their property taxes somewhat and set an annual cap on assessment increases. This is not the case for commercial properties, however: tenants bear the burden of rental tax increases.
AJ Ramler of Proxy Property says his company has about 50 rentals.
The company bought a duplex in 2015, when property taxes were $2,700 per year, or about $225 per month. At the time, the combined rents for two units were $1,400 and taxes were about 16% of that amount.
For the same duplex in 2021, taxes cost $8,500 per year, or about $700 per month. The two rents now total $1,900, 37% of which goes to taxes.
The duplex is now running at a loss and income from other properties absorbs the difference, he says.
“I know this guy can’t afford rent for $1,100 a month, but I know I can rent him for $1,100 a month,” Ramler says. “So I have to operate at a loss or raise the rent.”
Rent increases can be tough decisions for small landlords because long-term tenants who pay their rent on time and don’t cause trouble are worth keeping. And handing over a tenancy can be costly, with renovations and rent losses between tenants.
Ramler’s father, who lives off Social Security retirement and income from three rental homes, recently took $10,000 in higher property taxes, cutting his rental income in half.
Property tax for Proxy Property’s office on Singleton Boulevard has risen 782% in just one year, 2021, Ramler says.
“It’s a punch in the gut when they come back with that,” he says. “It’s a hell of a bump.”
How the state could reduce property taxes
Property valuations are rising, in part because the prices people are willing to pay for properties in Dallas are rising. “Dallas home prices are accelerating faster than almost everywhere in the United States, despite recent interest rate hikes,” according to data released in September by S&P CoreLogic.
There doesn’t appear to be much relief in sight, according to Texas State Rep. Jessica Gonzalez, a Democrat whose district includes downtown Oak Cliff.
Gonzalez’s 2018 campaign included promised efforts to reduce property taxes. She has introduced several bills in the Texas House of Representatives, including a joint effort with fellow South Dallas Democrat Senator Royce West.
These proposals would have allowed property taxpayers to enter deferred payment plans before falling into delinquency and would also have expanded exemptions for homesteads and over-65s.
But the Texas legislature is mired with issues such as abortion and trans rights, she said.
The biggest contributor to high property taxes are public schools, she says.
“The Texas Legislature is not funding public schools the way it should, even though we have this surplus fund,” she said. “Taxes need to be raised to fund schools at the local level.”
A U.S. Supreme Court decision in June opened the door to allowing public funds to pay for private religious schools.
Gonzalez says she expects education funding to deepen with proposals for private school vouchers that would divert funds from public schools.
“People are going to keep moving to Texas, and Dallas is a popular place,” she says. “Unless the state puts its fair share into public schools, this will continue to be a problem.”