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My friend was lucky enough to qualify for Austin's affordable housing program. He put up $160,000 (mortgage) while the "foundation" paid nearly $100,000 of the total cost. He is contesting his property tax assessment because His current property tax assessment is the TOTAL $260,000 assessment rather than $160,000 ( his share). How do other cities handle this? Texas is a high property tax state, so this is important to him. Anybody come across this situation?
My friend was lucky enough to qualify for Austin's affordable housing program...which allows him to buy a home worth no less than $260,000 with only a $160,000 mortgage... because ...the "foundation" paid nearly $100,000 of the total cost.
Now, he is contesting his property tax assessment at $260,000...
Anybody come across this situation?
Everyone in the world who owns a home.
Don't want to have to pay taxes based on $260,000...??
Then buy a house worth less.
The house sold for $260,000. That is now the Fair Market Value.
Does the "foundation" own a share of the house ? ( I doubt it) If so, maybe they should pay part of tax bill.
Buyer should count his blessings and happily pay the tax.
You hit the nail on the head!!! The Foundation OWNS it's share that it contributed. When the market appreciates and he decides to sell, he is limited to 2% per occupancy year of the initial investment ($160,000). The foundation gets the rest. Genius really. An affordable housing owner could take a much higher paying job in the future, but it would only yield a 2% profit per year when the house sells. A person with means would make much more profit if they pay market rate instead if using the affordable housing route. The design keeps "rich" ppl from gaming the system. My friend and I believe that if the City wants to encourage affordable housing that they shouldn't tax the shot out of them. The high property taxes are what is making housing unaffordable for many east austinites.
I was thinking it was absurd that this program existed, until the part about limited to 2% occupancy per year.
However, unless the foundation is ran by idiots with terrible accountants and lawyers, they will have structured the deal so they own debt plus have rights to the appreciation over the cap without owning equity. Effectively, he's leveraged into a deal with a cap on appreciation in exchange for not paying interest on the extra 100,000 of debt. If appreciation runs less than 3% per year, he is actually getting a good deal.
The taxes are his problem. It is almost certain they will have written it into the legal contracts he signed. Property values around Austin are very affordable. This quarter million dollar house isn't a trailer. He used what is effectively low variable rate interest that compounds throughout the life of the property to leverage into a bigger house. If the foundation OWNS 40% of it, they need to send an employee to live in that 40% of the house. If he controls that property and doesn't let the foundation house employees in the house, then he owns 100% of the property, owes 100% of the taxes, and has used debt leverage to acquire it. The bank loaned me funds for a mortgage on my property. I pay interest as it accrues, but otherwise the concept is the same. They bank does not pay my property taxes out of their property. They have a debt interest, not an equity interest. The way the interest is structured in the foundations transaction through capping appreciation does not change the fact that it is a debt interest.
You're welcome.
-Financial Analyst - I do this **** for a living, so yes, I'm right.
LOL this reminds me of a situation with my dad a few years ago.
He built a house - rather, he had other people build it but he was the contractor. Consequently, he paid less per square foot than is typical. He built the house for about $350,000 or so.
He lived in it for several years and during the real estate boom, and then he decided to sell it. He put it on the market for $500,000.
Then he got a tax bill with the value listed as $500,000 and he hit the roof. He called me ranting and raving about how he had built that house for just $360,000 a few years earlier and how could it have gone up in value that much in just three years yada yada yada. I said, "Dad. Stop. What do you have the house listed for?" He said, "$500,000." I said, "What do you hope to get for your house?" "$500,000." I said, "I rest my case."
Sheeze! Just try contesting a tax assessment when your house is LISTED for the exact amount the tax assessor has it valued at! Crazy!
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