Why are Texas Property rates extremely High, highest in nation (Houston: loans, houses)

[gregandvicky]

Probably a better poll or question would be:

What needs to happen to reduce property taxes in Taxas, sorry Texas???

[tech2enable]

Originally Posted by texasdiver

Some additional reasons that haven't been mentioned and that weren't options in your poll.

1. Unlike many west coast states like CA, OR, and WA, Texas has no initiative and referendum process in its state constitution. So it is impossible for Texas voters to pass a property tax initiative such as the famous Prop 13 in California or similar measures in Oregon. In Oregon, for example, voters long ago passed an initiative that requires a 60% supermajority for school levies to pass. A whole lot of school levies in Oregon go down to defeat despite winning 58 or 59 percent of the vote, which would be considered a resounding approval in Texas.

2. School districts in Texas have generally not been centralized like in many other states. For example, here in the Waco area there are at least 10 separate school districts that serve the greater Waco area. And some of the school district boundary lines look suspiciously gerrymandered around racial and class lines. A similar sized city on the west coast would likely only have one or two school districts covering the entire metro area. What this means is that Texans tend to identify much more closely with their local schools and school districts than residents in other states. The obsession with HS football also plays a part. So I think it is much easier to pass a school levy when the school district is local rather than a sprawling metro district and when community identity with the local football team is so strong.

3. Affluent Texans tend to send their kids to public schools to a much greater extent than affluent parents on the east coast. Pick any affluent community or suburb in Texas and you will find an extraordinary degree of connection to the local school district. Highland Park & Southlake in the Dallas area, Lake Travis and Westlake in the Austin area. Katy and the Woodlands in the Houston area. If you picked any area with similar demographics in say suburban NYC you'd see a much greater percentage of kids being sent to private prep schools and a great deal less interest and support for the local public schools. Since most wealthy communities in Texas are so centered on their schools it is much easier to pass property tax levies.

4. School quality is one of the few distinguishing differences between neighborhoods in Texas which makes it a MUCH more important factor in real estate values than might be the case in other states. Texas is mostly flat. The cities are sprawling and cover enormous amounts of land. And there are few distinguishing geographical features that provide natural exclusivity. In a typical west coast city like Seattle, San Francisco, or Portland there are all sorts of geographic features that lend exclusivity to upscale neighborhoods. Hills, views, shorelines, forests, etc. In Seattle, for example, houses with views of the mountains or Puget Sound command extraordinary premiums over identical houses with no views. And shoreline neighborhoods are especially pricey. In Texas there is rarely much geographical difference between wealthy and poor neighborhoods. So factors such as the school district a neighborhood is in become much more important factors in determining real estate values. For example, in Dallas I would expect a house in Highland Park ISD to command a considerable premium over an identical house a block away in the Dallas ISD, simply on the basis of being in a more desired school district. Because most residents of these upscale areas of Texas that have good schools are acutely aware that their property values are closely tied to school quality they tend to support school levies to a greater extent than might residents in other states in which the geographical features of the landscape create much more permanent and obvious boundaries between rich and poor. If you don't believe me go look at the endless debates about Katy vs Sugar Land in the Houston forum which almost always come down to school rankings.

I thank you for the informative post, however lack of initiative and referendum is not the cause for high property taxes , many states without that process have lower property taxes, although I note that the feature is a bit different in regards to texas.

You also should know that suburban people in new york do send their children to local public schools, now I mentioned Robin hood, in which wealthy school districts send transfer payments (although some districts are trying to use wind tax loopholes such as sterling to avoid them) to poorer ones which in turn send it to even poorer ones aka dallas and houston isd to a rural isd in south texas.

School districts centralization is one thing, I am not sure a statewide property tax along with control can help this.

Lack of a state income tax does not appear to be the sole reason or even the major reason for high property taxes, although the poll indicates quite a few people think that way, there was an option that said property taxes are high because many people are used to thinking that way and not questioning the system

[tech2enable]

Originally Posted by TexasHorseLady

Higher property taxes are one reason that Texas does not have the problems that California and Florida (and some other areas) are experiencing now, because those same property taxes act as a control on housing prices, helping keep them from appreciating astronomically as they did in areas without that brake, keeping them to slow, steady growth. So, not going so high, we don't have as far to fall.

Yes, appraisals are higher than they were some years ago. So is everything else (I'm paying considerably more for diesel now than I did in 1999, and for a lot of other things, so expecting my house appraisal to remain the same would be silly).

That's correct, high property taxes , in addition as the value of the house goes up, do do your taxes, also it discourages speculation since the taxes rise and you have to pay them, a high rate also increase the loss factor over time, further discouraging long term speculation and buying to speculate and the assessment encourages new construction due to taxing at the same rate for a property regardless of new or old in nearly all circumstances.

[danieloneil01]

Originally Posted by desertsun41

I agree with you. Texans love to complain about property taxes. They should try paying $15,000 a year on a 2500SF ranch on a 50 X 100 lot like we all did in NJ.

And what was the property worth? Saying you paid 15k/yr on property taxes means nothing when you exclude a major factor.


And it sounds like it was a big place on a good size lot.

[tech2enable]

Agreed, there is more to a home's value than square footage, people's perception of how much tax they are paying, need to take into account other factors as well as the wealthy people living in the area who may be a lesser percentage of taxes as well as income/jobs.

[hoffdano]

Originally Posted by orbius

In the last tough economy in the 80's. Your above average new house in Texas was 75k. I believe the homestead exemption back then was 15k though I'm open to being corrected if that wasnt the case.
Back then Texas truly was a tax bargain. Most people were paying property tax on 60k assessed value.

Contrast that today where the average house assesed value is around 150k in Texas. Thats close to 3 times as much assesed home value as people were paying on just 25 years ago. Also the tax rate itself has increased quite a bit over those years. I wouldnt be shocked if people are paying 4 times as much property tax as they were 25 years ago in a pure dollar value.

If this recession deepens is the Texas property tax rate tenable or is it going to cause a total collapse of Texas housing? Will the ever growing numbers of people forced to rely on unemployment have the money to pay their exceptionally high property tax at the end of the year?

Given this scenario I think 'Property taxes are so high because: Texas hasnt experienced a deep recession in recent years'. Could be added to your choices.

No one knows if the current tax structure is tenable in a deep recession. We'll find out more information at the end of year, beginning of next year. If theres a massive spike in foreclosures next year, and it starts to devastate real estate values. Something that will cause even more waves of foreclosures as people go underwater. Then I think Texas will be forced to recognize its current tax burden on homeowners is untenable. The state, if its realistic, will have to recognize that a state income tax is necessary at this point.

The best evidence on this issue is probably California. In a recession unemployment and loss of corporate profits causes deep harm to a state's finances. The revenue pain is swift and huge - the result a $25B shortfall and budget crisis. Employment is further impacted by reductions in state payrolls.

Texas has lost income during the recession but it hardly affects tax revenues. Property taxes are relatively constant unless assessed values change. Even if assessed values drop property taxes do not drop significantly because the Texas housing market is not in a free fall.

I haven't looked at foreclosure rates by state but I'm fairly confident Texas is in reasonable shape.

Texas' "exceptionally high" property tax rates on an cash out of pocket basis are just not that high because the properties are simpler cheaper.

The $1M house in California taxed at 1.4% still generated $14K in property taxes. A similar house in Texas costs $400K. Taxed at 2.5% the tax bill is $10K. A person in Texas struggling to make ends meet probably still is more likely to afford his home than the same person in California.

[danieloneil01]

Originally Posted by hoffdano

The best evidence on this issue is probably California. In a recession unemployment and loss of corporate profits causes deep harm to a state's finances. The revenue pain is swift and huge - the result a $25B shortfall and budget crisis. Employment is further impacted by reductions in state payrolls.

Texas has lost income during the recession but it hardly affects tax revenues. Property taxes are relatively constant unless assessed values change. Even if assessed values drop property taxes do not drop significantly because the Texas housing market is not in a free fall.

I haven't looked at foreclosure rates by state but I'm fairly confident Texas is in reasonable shape.

Texas' "exceptionally high" property tax rates on an cash out of pocket basis are just not that high because the properties are simpler cheaper.

The $1M house in California taxed at 1.4% still generated $14K in property taxes. A similar house in Texas costs $400K. Taxed at 2.5% the tax bill is $10K. A person in Texas struggling to make ends meet probably still is more likely to afford his home than the same person in California.

2.5%, God I would've loved that in SE Houston. My house in Dickinson was appraised at 150k and I paid almost 6k in taxes. Hell by what you post the $1M house owner pays way less than I did in Dickinson. Come on NJ post those high rates. Still waiting to see them. I'm guessing the houses are 3x as much as my 150k home but less than 3x times the property tax.


As for your assessment I find it extremely flawed to say the least. Those people with the $1m dollar homes usually got those stupid arm loans, interest loans or really couldn't afford them. Also all of those homes are extremely over priced just look at Arizona.

[TexasHorseLady]

I'm paying about $7,000 for my house near downtown Austin appraised at $348,000. That's with no homeowner's exemption, because it's a rental property, and comes out to a bit over 2%.

[Lakewooder]

Originally Posted by desertsun41

I agree with you. Texans love to complain about property taxes. They should try paying $15,000 a year on a 2500SF ranch on a 50 X 100 lot like we all did in NJ.

That can be the case in Texas if you are in a neighborhood with good schools - and yes they can be in DallasISD (my area, Lakewood - in East Dallas, is like that).

[danieloneil01]

Originally Posted by TexasHorseLady

I'm paying about $7,000 for my house near downtown Austin appraised at $348,000. That's with no homeowner's exemption, because it's a rental property, and comes out to a bit over 2%.

One word, Lucky.