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Lending
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4 min read
Welcome to the second conversation in our Elevating Voices Series! In case you missed the first one, A Discussion About Equity and Inclusion in Lending, we are engaging in various conversations with real estate and real estate lending professionals regarding diversity, equity, and inclusion within our industries.
We will also speak about dynamics impacting homeownership rates amongst Black and Latino communities and draw attention to the people and organizations that are working to make a difference.
For this conversation, I spoke with Mr. Michael Hill, VP of SWBC’s Ad Valorem Tax Advisors, and learned some shocking facts about the wealth and homeownership gaps within the minority community. We also discussed why many people of color are not taking full advantage of the property tax protest process.
In this blog post, we’ll highlight some key points from our conversation.
Changes in tax laws are dependent on the location
Michael: Using Texas as an example. Tax law can change every two years, and those laws impact both overall ownership as well as the individual jurisdictions for property tax. And so, the 254 counties in Texas all fall under the state’s control for governance.
However, each county can opt in or out of certain breaks for homeowners. In Bexar County, for example, the county may opt into these programs. But if you’re right up the road in Kendall County, this area may not offer the same opportunity to decrease your tax rate.
I’ll give you a personal example. When my wife and I finished college and were looking for our first home, one of the very first things I did, was try to find a home that was outside of the city because you have lower tax rates.
These are the types of decisions that you have to make as a homeowner who is wanting to invest in real estate, but of course, you must be educated in order to make that informed decision.
Tyreo: I just think that more children, especially within these minority groups where it's just not happening, need that opportunity to get that information.
Michael: I completely agree.
How does the property tax appeal process work? Is it fair for lower-income families and minorities?
Tyreo: Maybe it's just an assumption that I'm making, but it appears that too few Black and Latino homeowners understand that the opportunity to protest their property taxes is there, but they're simply not taking advantage of it. If that is true, why? And what might be behind the structure that allows this to happen?
Michael: Many lower-income families are not aware of the state tax codes or the tax laws they have access to. The statutory deadline to file an appeal in Texas is May 15. Many people don't know that.
Likewise, many people believe that the ad valorem property tax is like an income tax where you can’t appeal. In fact, “ad valorem” is Latin for “according to value,” which means the amount you owe in taxes is based on the value of your property.
Through the tax protest process, you can appeal your home’s value on a local level. You can take it through further appeal, arbitration, mediation, and more thorough litigation. You can fight it all the way up to the Texas Supreme Court.
Unfortunately, a 2019 study conducted in Bexar County showed of the 135,000 appeals that were filed that year, only 6% received a reduction in value. This means that for 94% of the appeals, there was no change in their value.
So, there's still a large gap between the reduction on a local level through an arbitration level. But then, there's an even larger gap between those that had no change in the appeal at all in 2019.
These people are walking away from the fight when they could actually win, if only they were knowledgeable about having the opportunity to stand up for themselves.
What impact is gentrification having on property tax rates?
Tyreo: This isn't a slight impact. This is, “I'm going to lose my house because I can't afford my taxes.”
It seems like there should be more that could be done to prevent this from happening. A system in which you can still invest in your city and enjoy it without it destroying the livelihoods and any sense of wealth creation for so many.
Michael: I agree with you that you want to see the development of the cities. You want to see cities continue to grow and have opportunities, but not at the expense of the people of the community. The people are what make up the community. I don’t agree with the approach that the only way we can develop and make our city better is at the sacrifice of the very people that make up the community.
There must be a better way.
I don't think it's conscious or intentional that they are targeting lower-income families. I think they are driven by historically rooted practices that are now antiquated that they refuse to change.
Today, there are people at the appraisal district—appraisers and managers—who know there is a systemic issue at play, but they also are not the decision makers that can make a change to what needs to be changed.
I believe deeply that it’s extremely important for everyone who touches the real estate industry to be on the same page. Adopting uniform practices—whether they’re related to lending, property tax, mortgage, or whatever it may be—should be a central focus, as should set a goal for every homeowner to have educational resources available to them so that they can make the best-informed decision for themselves as well as their families.
Check out the full conversation below!
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