Watch out, Texas renters.
You may not worry about spiking property values that are forcing some Texans out of their homes.
But you are not immune.
The apartments, duplexes and homes where you live likely have skyrocketed in value and management may well be on the verge of hiking your rent — again — to cover the cost of growing property tax bills. Whether you know it or not, hundreds of dollars of your rent check are going to the property tax bill.
“Apartment complexes have remained one of the strongest categories we have,” said Jeff Law, Tarrant County’s chief appraiser. “Rents have increased, occupancy has increased, many properties have sold and many are undergoing rehab.”
As a result, the 2019 appraised values of apartment complexes in Tarrant County have gone up about 20%, compared with an 8% to 10% increase in residential values, Law said. There is no comparable number for rental homes.
“You may think you have a free lunch,” state Sen. Paul Bettencourt, R-Houston, recently told renters in Texas. “But you don’t.
“You’re being eaten for lunch.”
This was his word of warning as state lawmakers work on proposals to provide property tax relief, including one measure that caps the amount cities, counties and school districts can raise in property tax revenue without asking for voter approval.
Julie McCarty is among those watching and waiting to see if any relief comes.
McCarty, who owns rental houses in Tarrant County, recently spoke to a crowd from the steps of the state Capitol about how Texas renters are shouldering more of the property tax burden than they should.
“Tenants pay more property tax than any other Texan,” McCarty, also president of the Northeast Tarrant Tea Party, recently posted on social media.
That’s because homestead exemptions aren’t allowed on rental properties, which means there’s no cap on the value of that home or complex.
As a result, McCarty, for instance, has seen the value of her rental homes increase as much as 90% in any given year. Those increases are passed to renters.
“Landlords build those astronomical property taxes right into their rent, yet tenants don’t know and don’t realize how much they are paying the tax man,” McCarty wrote.
Even so, demand for rentals continues to grow, particularly as new residents keep moving to Texas.
Texas lawmakers have until the end of their legislative session, May 27, to pass laws, including any property tax relief.
There are more than 210,000 apartments in Tarrant County. Last year, the total appraised value of the complexes that house those units was about $20 billion, Law said.
This year, the projected value is up to $24 billion.
“It’s supply and demand,” said Tony Comparin, founder and managing partner with Alliance Tax Advisors. “It’s a function of the properties that are doing well.”
Meanwhile, Comparin said some apartment complexes may have been undervalued in the past, which prompted appraisal districts to hike values to catch up.
In some cases, the value of apartment complexes have more than doubled in the past five years, such as The SageStone Village in Fort Worth, which went from $17.2 million in 2014 to a proposed $46.4 million this year, according to Tarrant Appraisal District records.
“We have to acknowledge that this is passed through to the tenants, because the owners can’t be in business at a loss,” Bettencourt said.
At The Landing at Centreport, a 318 unit complex in Fort Worth, renters pay from $1,400 a month for a one-bedroom apartment to around $2,800 for a three bedroom apartment, said Jason Busboom, who recently bought the complex with his business partner Thao Te.
Last year, when construction finished on the complex, it was worth $45.2 million. This year, the proposed market value has gone up to $51.7 million, Tarrant Appraisal District records show.
That likely means a bigger tax bill to pay.
“There’s a huge increase every year,” said Busboom, who also owns other properties. “It absolutely rolls through to rental rates.”
As much as $400 or $500 a month of each rent payment is earmarked just to help pay property taxes, he said.
The cost of renting
Rising property values on rental properties generally trigger higher rents, which often prompts tenants to move out in search of a cheaper place to live.
Homes can cost thousands of dollars to rent each month, depending on their location, such as whether they are close to major attractions or universities such as TCU.
McCarty said she’s had to raise the rent on many of her three-bedroom, two-bathroom homes with a garage from $1,200 a month in 2010 to $1,450 a month this year.
As for apartments, the average rent in Tarrant County is $1,067 per month, compared with a statewide average of $1,091, according to ALN Apartment Data Inc.
Austin and Arlington recently made the list of the top 10 places with the nation’s fastest increasing rents, according to data from Apartment List.
And Arlington joined Aurora, Colorado, Colorado Springs and Stockton, California, as the top cities with the fastest rent growth during the past five years.
The report notes that large cities draw many new jobs, but “surrounding suburbs” see the biggest jump in renters.
State lawmakers are looking for ways to give property owners tax relief as they dedicate more money to funding Texas schools. A variety of bills are making their way through the Legislature.
McCarty urges all landlords and tenants to contact their state lawmakers and urge them to consider capping increases on all properties, not just homesteads.
The Texas Senate has passed Senate Bill 2, which won’t shrink tax bills but would prevent cities, counties and other entities from increasing property tax revenues more than 3.5% unless voters say a larger amount is OK. School districts would face a 2.5% cap, without voter approval.
The Texas House has not taken up House Bill 2, the lower chamber’s property tax bill. A House committee recently revamped SB 2, dropping the 2.5% cap for school districts to 2%. That bill is expected to reach the House floor for debate in the next few days.
Texas’ top three leaders — Republicans Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen — proposed raising the state’s sales tax by 1 cent to lower property tax bills across the state. Critics say this increase would hit the poorest Texans the hardest.
But Bettencourt said something needs to be done this year not just for Texas homeowners and business owners, but also for future ones.
“This is the day that taxpayers have long waited for, a recognition of the obvious: They are being taxed out of their homes and their businesses,” he said when presenting SB 2 to the Senate. “We (also) do this for the Texans who have yet to own a home, have yet to start a business.”
“It’s what we are building today that they will inherit,” he said. “We want to maintain the ability for (future generations) to have a home they can pay for because property taxes don’t go through the roof.”
How the value of these Tarrant County apartment complexes have grown over the past five years, according to Tarrant Appraisal District records:
|Apartment Complex||2014 value||2019 value (proposed)||% increase|
The SageStone Village in Fort Worth
Enclave at Arlington
Camden Riverwalk in Grapevine
Trinity Bluff in Fort Worth
|$19 million||$26.2 million||38%|
|Ranch at Fossil Creek in Haltom City||$21 million||$37.3 million||78%|