Home owners in primarily African-American zip codes in Harris County are seven times as likely to be over-taxed by at least 10% as home owners in primarily Anglo zip codes. Harris County Appraisal District (HCAD) is responsible for valuing property in Harris County, the largest county in the Houston Texas metropolitan area. This practice has been occurring since at least 2009 and violates the Texas Constitution and probably the Fair Housing Act of 1968.
The Texas Constitution requires that “Taxation be uniform and equal”. Whether intentional or not, the valuation practices of HCAD have led to systemic excess and unequal taxation in heavily African-American areas. The practice also appears to violate the Fair Housing Act of 1968 by reducing the chance of African-Americans being able to qualify for loans. O’Connor & Associates has data dating back to 2009 to document the problem.
HCAD’s valuation process includes annually comparing the assessed values to the sales prices across the county to identify areas where home values should be increased or decreased. It is difficult to understand how they have not identified excess taxation in the African-American areas as they complete this annual process.
“In my opinion, there are four reasons this practice continues: 1) Few property owners in the affected areas protest their property taxes, 2) having a large number of homes over-valued helps insure HCAD scores well on the ratio study (a key metric of HCAD performance), 3) no one is asking HCAD to change the practice and 4) even if HCAD is aware of it, it is not a priority since there is no pressure to change”, according to Pat O’Connor, president of O’Connor & Associates. Let’s consider these issues in order.
The number of low-income home owners who protest their property taxes is low, whether they are African-American, Hispanic or Anglo. Due to historical factors, the heavily African-American areas tend to be lower income than the heavily Anglo areas. HCAD has many duties, which include valuing property and handling property tax protests. Historically, the more likely property owners were to protest, the more likely HCAD was to be conservative in setting property values. Since relatively few low-income African-American home owners protest their property taxes, the level of assessment does not affect the protest volume in a meaningful manner. About half of HCAD’s appraiser resources are dedicated to property tax protests. If home owners who were over-taxed regularly protested, HCAD would likely be more sensitive in setting values in their neighborhoods.
The second issue is that having a large number of low value properties somewhat over-assessed provides substantial assistance to HCAD in passing the ratio study, conducted every other year by the Texas Comptroller. While many Texans are not familiar with the Texas ratio study, it is one of the most important keys to success for an appraisal district, since school districts which are deemed under-assessed are subject to losing school funding back to the State of Texas. It is beyond the scope of this press release to fully discuss ratio studies, Texas school funding and the Robinhood factor which transfers taxes from school districts with high property values per pupil to school districts with low property values per pupil.
The third issue is that no one with power is asking HCAD to resolve the problem. O’Connor & Associates reached out to senior HCAD management in early 2014 several times requesting a meeting with HCAD valuation staff and members of the Black Houston Real Estate Association (HBREA). Despite several requests, there was no response from HCAD. HBREA and O’Connor & Associates first worked on this issue in 2013. The effort in 2013 was focused on making members of the community aware of the problem and encouraging them to review their values and protest if appropriate. While we made progress, the situation essentially remains unchanged.
The fourth issue is one of priorities. HCAD is under tremendous pressure to accurately value large commercial properties. Greenway Plaza sold for $950 million in 2013 and HCAD informally agreed to a value of $611 million in 2013. There are many similar values of properties selling in excess of $100 million being assessed at 50 to 70 percent of market value. HCAD took decisive action in 2013 and increased the values of major class A buildings by 50%, and then raised them another 20% in 2014. There is an unprecedented level of lawsuits regarding the final value of these mega properties valued in excess of $100 million. There is political pressure from many of the tax entities that HCAD serves to fully value these properties. Members of the Texas legislature are reviewing these values as a possible source for additional school funding, since the constitutionality of Texas school funding is being battled in the courts for the fourth time in 35 years. The other issue facing HCAD is a possible tsunami of property tax protests in 2014. HCAD raised property values by 19 percent for both commercial and residential, which will generate $1 billion in additional property taxes for Harris County tax entities before appeal loss. Hence, there is expected to be a record level of property tax appeals.
In summary, there is uncontroverted data available to document discriminatory taxation of homes in African-American areas and this practice has been occurring for at least five years. There is no motivation for HCAD to address the problem. Sunlight is the best disinfectant,” a well-known quote from U.S. Supreme Court Justice Louis Brandeis, refers to the benefits of openness and transparency. O’Connor & Associates is hopeful the media will recognize the outrageous system which over-taxes low-income home owners while giving huge discounts to the owners of property valued in excess of $100 million, and provide some sunshine and transparency.
O’Connor & Associates is a Houston-based property tax consulting firm. It is the only firm that represents property owners of any value in volume, representing over one hundred thousand home owners. O’Connor & Associates represents tens of thousands of homes valued at less than $100,000. “Most firms want to handle only large commercial businesses or wealthy home owners’ protests,” said Pat O’Connor, president of the firm, “but helping the small guy is part of our mission, and in this case, it’s the lower-end home owner who is really getting the raw deal.” O’Connor & Associates represents over 110,000 clients, which we believe is more than any other property tax consulting firm in the nation.
For more information contact Scott Sherrill at 713 375 4264 or Pat O’Connor at 713 822 8613.
Posted in: Protest Property Taxes Keywords: Property Tax Houston, Property Tax Consulting