Public Policy Positions

Local Property Taxes - Tax-Rate Setting Process

The MetroTex Position
Our association supports various measures to ensure a more transparent and honest conversation occurs at the local level when tax rates are set. These measures include supporting:

1. The reduction of the rollback rate at 3.5%;
2. An automatic tax ratification election if the rollback rate is exceeded;
3. Requiring all no new revenue and rollback tax rate worksheets to be filed with the State Comptroller and requiring a certain percent of worksheets to be audited;
4. Enhancing property tax notices (e.g. eliminate last year’s tax rate from notice, as including last
   year’s rate leads to confusion and inaccurate comparisons of tax rates); and
5. Simplifying the calculations of no new revenue and rollback tax rates.

What does this means for the real estate industry?
Texas has been a dominant force in the national economy and housing affordability has been a contributing factor. The increase in property taxes threatens this affordability.

Local property taxes in Texas have increased dramatically over just the past few decades. In the last 20 years, the total property tax levy statewide increased more than 200%—or $35.36 billion—according to the latest data from the Texas Comptroller.

Part of the increase in local property tax revenue can be attributed to new property added to the appraisal roll and higher property values. However, an increase in property value should not be an automatic increase in property tax revenue. If a local taxing entity needs more revenue, a more honest and transparent conversation needs to occur at the local level so taxpayers completely understand why. But the current system is confusing, and it ends up with more Texans seeing a hidden property tax increase.

Short-term Rentals

The MetroTex Position
MetroTex REALTORS® support legislation declaring that a municipality may not adopt or enforce a local law that expressly or effectively prohibits the use of a property as a short-term rental.

MetroTex REALTORS® believe cities should use the tools already at their disposal to combat nuisance
properties and bad actors and protect the health and safety of tenants, property owners, and community members.

These ordinances infringe on a property owner’s ability to conduct business without government intrusion. In addition, they are often duplicative, ineffective, and intrusive to owners and tenants of rental properties.

What does this mean for the real estate industry?
Many property owners choose not to rent their homes because of rental-registration ordinances.

In addition, property owners who choose to rent their homes are forced to increase monthly rental rates to pay for additional regulation from city governments. This increased cost is passed on to the tenant, which adds to affordability and availability issues at a time when many real estate markets across Texas are experiencing high prices and lack of rental inventory.

Many cities in Texas have adopted—or are seeking to adopt—ordinances requiring property owners to pay an annual fee to register all rental properties with the city or ordinances banning short-term rentals altogether.

The cities argue that rental-registration ordinances give them tools to address code violations and contact property owners.

However, cities across Texas already have code-enforcement divisions whose sole purpose is to identify, deter, and remedy code violations on properties. Additionally, property owners are readily identifiable and accessible through existing government records.

Sales Price Disclosure

The MetroTex Position
Our association opposes all legislative efforts to require the disclosure of sales-price information because:

1. Sales price is not necessarily a good indicator of taxable value;
2. It’s an unnecessary invasion of privacy;
3. It could pave the way for a new real estate transfer tax in Texas, as most states that require sales price disclosure use it to compute tax liability for the transfer of real estate.

What does this mean for the real estate industry?
According to conservative estimates, sales-price disclosure will lead to a more than $250 million property tax increase for Texas property owners.

High property taxes are already a barrier to homeownership and the relocation of businesses to Texas.
Increasing property taxes would be a disincentive to homeownership and enterprise, hurting the real estate market and the Texas economy.

Some appraisal districts, cities, and counties argue for full disclosure of all real estate sales prices to establish the value of real property in Texas.

There are numerous problems with basing value, especially taxable value, on the sales price of a real
property. In many cases, central appraisal districts (CADs) do not consider seller concessions, which can lead to artificially high tax-appraisal values in the year-of-purchase and beyond.

There is also a problem with subdivisions that feature unequally sized lots or custom-built homes. Another issue concerns farm and ranch properties where improvements like trade fixtures and livestock are included in the sales price.

Additional difficulties arise with commercial properties, which may include a business and/or trade fixtures, value of long-term leases, and properties where mineral rights are included or excluded from the sale.

Rental Registration Program

Dozens of cities in Texas have adopted rental registration ordinances in an effort to solve various perceived concerns surrounding rental properties in their communities. Some cities require owners of rental property to register the property with the city in an effort to ensure that current contact information is available in case the city needs to reach a responsible party in the event of an emergency or code enforcement issues. Other cities go further and implement inspection requirements for rental properties in an effort to combat health and safety issues which these cities feel result from
mismanaged single-family rental properties.

For Texas REALTORS®, owners of rental property, and property managers, rental registration and inspections can represent a significant burden to their business and to their tenants (constituents). Such programs put property owners and investors at a competitive disadvantage and will result in higher costs to consumers. Inevitably, these municipalities will incur additional funding needs as a result of the additional city staff and resources to administer such programs.

There is no evidence that single-family rental properties, as a whole, constitute a problem demanding
special action. The stories of slum landlords are usually associated with multi-family properties in the midst of low-cost housing neighborhoods where other social conditions are unfavorable. Evidence suggesting special programs targeting single-family landlords is anecdotal.

Legal Challenges
Mandatory inspections of single-family rental properties have not been allowed in Garland, Texas. As a result of Dearmore v. the City of Garland, the court dismissed the case when the City voluntarily amended its ordinance following the preliminary injunction. The city could not require a person who rented or leased a single-family dwelling to allow an inspection of the rental property as a condition of issuing a permit, or penalize the lessor for refusing to allow an inspection of the property without a
warrant, as required by the 4th amendment to the U.S. constitution.

MetroTex Position
The MetroTex Association of REALTORS® opposes rental registration and inspection programs. The MetroTex Association of REALTORS® has noted numerous problems and inconsistencies associated with rental registration/inspection proposals and cautions local municipalities against endorsing any such program. In addition to the problems outlined previously in this document, others include the following:

1. Rental Registration programs will have a disparate impact on tenants.
   • The Fair Housing Act (FHA) serves to protect disenfranchised groups seeking to own or rent homes, many of whom are low income tenants. Any rental registration program
     negatively impacts the very people the FHA was intended to protect. Property owners will experience an increase of their costs and a restriction of their property as a viable
     housing solution hurting the very families that can least afford it.
2. Rental Registration Fees serve as selective property tax on rental property.
   • This would increase the cost of both owning and occupying rental property.
3. A common misperception that code violations are exclusive or even most prominent among rental property.
   • In many cases, owner-occupied and multi-family apartment properties are just as culpable in volume of code violations. The proposal punishes compliant rental property owners while doing little to alleviate the underlying problem.
4. The vast majority of rental property owners act responsibly and maintain their properties in compliance with its City’s codes and ordinances.
   • A competitive market demands this. While there may be rental properties which need to be addressed within a particular community, subjecting all rental property owners to a costly and often punitive program is neither appropriate nor fair to consistently compliant property owners.
5. Enforcement of ordinances already on the books would solve many of the problems that a registration program is designed to address.
   • The issue quite often is enforcement of current ordinances rather than a need to create a new ordinance specific to rental property. In some cases, the proposal could simply be a disguised attempt to generate additional revenues or to increase funding for the code
     enforcement department to enable the city to enforce current ordinances.
6. A program that is costly or hinders business activity within a city could lead to a tax increase for all property owners.
   • In some cities that have implemented such a program, investors have expressed that they will no longer purchase investment properties. When rental is no longer an option for these properties and the proportion of owner-occupied properties increases, homestead exemptions will be placed on the higher percentages of properties. As less
     revenue is collected because of the homestead exemptions, the tax rate will have to be increased on all property owners to make up the lost revenue, thereby increasing
     housing costs for everyone.

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Home Owners Associations

The MetroTex Position
Our association supports the Legislature’s continuing effort to reform Home Owners Association (HOA) laws to ensure HOA operations are transparent and consumer-friendly. Any HOA legislation should seek to provide an appropriate balance between private-property rights and community standards while keeping intact property owners’ First Amendment rights.

We support legislation requiring HOA’s and related 501(c) 3 nonprofits to be registered entities with the real property records of the county in which the property is located, including relevant and current contact information.

Our association also supports legislation to eliminate the exemption for fees paid to 501(c)3 corporations from the transfer fee subchapter of the Texas Property Code.

What does this mean for the real estate industry?
HOAs can provide a great benefit to property owners by enhancing their quality of life and the enjoyment of their property. However, when the HOA is not managed well, marketing and selling homes in those neighborhoods can be difficult.

Homeowners associations exist to enhance neighborhoods and increase property values. Increasingly, though, HOA’s are taking on functions local governments traditionally provide. The Texas Legislature has addressed HOA issues a number of times over the last 20 years, yet property owners and property buyers still voice concerns over actions taken by HOA’s.

Most of the problems with HOAs generally fall into three categories:

1. Money or collection issues;
2. Deed-restriction enforcement;
3. Lack of responsiveness from the HOA.

Eminent Domain

The MetroTex Position
Our association understands the need for legitimate property condemnations; however, landowners should be justly and timely compensated. As the leading advocates for private-property rights, MetroTex REALTORS® are uniquely positioned to ensure fair treatment of property owners.

Significant improvements can be made to enhance protections on private-property rights for Texans.

MetroTex supports legislation that:

1. Requires pipeline and electric utility easement agreements to include a list of basic terms to protect the landowner during construction and future use of the easement, and requiring these companies to use a standard document provided by the Attorney General that includes these terms.
2. Provides landowners with information about the project seeking their land and about their rights by requiring a public meeting in each county where affected landowners can ask questions about the project and the company’s eminent domain authority—as is required for public entities with eminent domain authority—and requiring the landowners to be informed of their rights and how the company will calculate fair compensation.
3. Protects the landowner’s right to receive a bona fide offer by ensuring a landowner receives an initial offer of fair compensation and information necessary to evaluate whether the initial offer is truly a bona fide offer, and requiring a bad actor that negotiates in bad faith to make an additional “penalty” payment to the property owner.

What does this mean for the real estate industry?
Private-property rights are threatened whenever the government uses eminent domain. Property owners should be treated fairly and protected from abusive eminent-domain practices.

The Texas Constitution limits the use of eminent domain by requiring adequate compensation for the land on which eminent domain is used. While considered a necessary tool of government, it is argued that the exercise of this power has been expanded and abused. Texans continue to struggle with an unbalanced set of laws at odds with a state known for private-property rights.

Voting Guide

For more information on upcoming elections and REALTOR® endorsed candidates, check out MetroTex Voting Guide.