Twelve years ago Leann Henderson bought a house in the Joseph Edward neighborhood of East Austin for around $142,000, she said.
Since then the value of the house has risen exponentially. “Faster than I can barely keep up with,” she said.
This year the Travis Central Appraisal District, or TCAD, valued Henderson’s home at over $318,000, more than double what she paid for it.
As she has for the past five years, Henderson protested her appraisal, successfully lowering the value on which she pays taxes.
She is not alone.
As home values have skyrocketed in Central Austin, so too have the number of property appraisal protests lobbied by homeowners. Since 2012, the number of protests has increased each year, with 2018 on track to set a new record, according to TCAD.
Between 2012 and 2017 the total appraised value of properties in the area nearly doubled, even as the number of properties increased only marginally, according to data obtained from TCAD. In that same period the number of protests increased nearly 40 percent.
If past data is any indicator, protests will continue to rise.
However, even if their protests are successful, property owners will still face Austin’s dynamic real estate market and changing property tax rates.
“It’s a struggle, absolutely,” Henderson said.
A Neutral Body
Unlike most states Texas does not tax income. As a result property taxes shoulder a heavier burden of the state’s costs.
According to a February report by personal finance website WalletHub, Texas has the sixth highest effective real-estate tax rate in the country.
Austin residents belong to at least five taxing entities: Austin Community College, Austin ISD, Central Health, the city of Austin and Travis County. Each has its own tax rate.
Historically each entity appraised and assessed properties individually, leading to disparities in taxable values.
In an effort to refine this process, the Texas Legislature created appraisal districts in 1979 to appraise and assess all properties independently.
“The system established works with two sides that often have conflicting interests: taxpayers and taxing entities,” said Marya Crigler, chief appraiser at TCAD. “
[The appraisal district is
] to be an unbiased reporter of what the facts are.”
Many property owners think of TCAD as an adversary, said Danny Walker, principal at Proper Tax Protest, which represents investors and clients against TCAD in protest cases.
“The appraisers have no vested interest in the values being as high as possible,” he said. “All they’re really doing is trying to fairly appraise all these properties.”
Although rising home values indicate a good investment, “no homeowner in history ever thinks their home is appraised too low because every homeowner wants to pay less taxes,” Walker said.
A ‘Colossal Workload’
TCAD appraises and assesses every property in Travis County annually. In 2017 the agency assessed 67,260 properties in Central Austin alone.
Walker called this process “a colossal workload.”
In April TCAD sends value statements to property owners. This statement includes an estimate of their property tax bill, calculated by multiplying the assessed value by the previous year’s tax rate.
This can cause confusion among taxpayers because tax rates change annually and are not typically set by the time appraisal values are sent out.
Upon receiving their notice property owners have until May 15 or 30 days to file a protest.
Protests, or “appeals,” can be decided in informal meetings with TCAD staff or in front of the Appraisal Review Board, which is filled by residents who volunteer for the job.
In rare cases an appeal may continue to mediation or a trial.
Most appeals—80 percent in Central Austin last year—are successful, meaning that the assessed value is lowered.
In late July TCAD sends a report of the total taxable value to the relevant entities, by which time at least 95 percent of protests must be resolved.
A Hot Market
Appraisal values aim to match what a property would sell for if placed on the market.
High demand for property in Travis County and, more specifically, in Central Austin coupled with low supply drives up prices, even for homes that are in disrepair, Crigler said.
If property tax rates remain stable or are lowered, property owners could still pay more as home values rise.
The reverse is also true.
“Even if we make a significant reduction
[in your appraisal value
], you could still pay more
[than the previous year
] because tax rates go up,” Crigler said.
Despite the costs of Austin real estate, there are some protections for property owners.
The homestead exemption applies to properties that serve as a primary place of residence. Those who owned their homes prior to Jan. 1 may request the exemption through TCAD.
The exemption caps the annual increase of a property’s assessed—or taxable—value at 10 percent, even if the appraised—or market—value increases more substantially.
Protests are another resource.
Unlike real estate appraisers, who spend time at a property before determining its value, TCAD relies in part on extensive databases of market statistics.
Sometimes, however, TCAD misjudges the market value of a particular property.
“The people who really see a big difference
[in their tax bill following a protest
] are people whose houses are heterogeneous,” Walker said, because such properties are harder to appraise than condos or “cookie-cutter” homes in master planned developments, which typically sell for comparable prices.
“The appeals process is supposed to be for you to share information with
] that allows them to refine their process,” he added.
In 2016 Nicole Hamlin bought a house in Tarrytown for around $1 million.
“It had everything that I wanted,” she said.
That year the home was appraised at $637,573, according to TCAD.
In 2017 TCAD appraised the house at $1,092,625, which represents an increase of more than 40 percent. This change was also well above the 2017 median increase in value of homes in the 78731 ZIP code, which, at $44,787, was the highest in Central Austin.
Due to this updated appraisal value, Hamlin’s property tax bill increased substantially.
“I thought that there was a chance that it could increase,” Hamlin said. “I never thought in a million years it could go up $10,000 in one year.”
Despite the sticker shock of Hamlin’s 2017 appraisal notice, it would not necessarily qualify her as a successful protest candidate, Walker said.
“If you just bought a house and you paid market price and you’re trying to get it appraised below market price, that does not run with
] at all.”
TCAD appraisal values sometimes lag behind the market, and a home sale or homestead exemption application may trigger a reset, Crigler said.
“I wish I had known that going into
],” Hamlin said.
Preparing a Protest
Leann Henderson has perfected her protest strategy over the years.
“I looked at the tax information on every single house in my neighborhood and figured out what they appraised the price per square footage,” she said, using publicly available data published online by TCAD.
Although the homes in her area are comparable to hers, TCAD had appraised some of them for less.
“I made a spreadsheet, and I sent that in,” she said, attributing TCAD’s decision to lower her appraised value by more than $15,000 to her provision of “evidence.”
Henderson, however, is unsure how long she can stave off rising property taxes.
“I never thought that my house would be worth what it is. In some ways it’s great. This is probably my retirement plan because I’m going to make so much money off this house when I sell it,” she said. “But unfortunately I know I will have to sell it.”