Shared from the 10/26/2023 Houston Chronicle eEdition

Property taxes cut by half for affordable housing

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Melissa Phillip/Staff file photo

Affordable housing nonprofit Avenue CDC pushed Harris County for a tax break for local affordable housing providers.

This March, when the staff of affordable housing nonprofit Avenue CDC was readying to renew the insurance on their apartment complexes, they received dismaying news. Mary Lawler, the organization’s executive director, and several board members jumped on a call with staff to discuss the prices their broker reported. The new price doubled from the year before.

The organization had budgeted for an increase in insurance costs, but they hadn’t imagined they could go up so much. And, as an organization dedicated to affordability, they couldn’t pass down the costs to their renters, whose incomes had not seen a commensurate boost. Utilities and property taxes were also on the rise. It was, in Lawler’s words, “an emergency.”

As insurance companies react to increasingly frequent climate-related disasters, construction and labor costs rise and land values soar, affordable housing providers are calling for more support. In response, Harris County launched a new program in August that will cut the county-related portions of property tax bills for qualifying affordable rentals in half. The decision makes Harris County the first major county to opt into the affordable housing tax break made possible by a 2003 state law, according to the Harris County Office of County Administration. The county makes up roughly a quarter of a resident’s property tax bill, depending on which school district, city and municipal utility district they’re in.

County Commissioner Adrian Garcia said he hoped other taxing entities, such as the city of Houston will follow suit. Doing so, he said, “will absolutely transform affordable housing.”

Brenda Cabaniss, public information officer with the Houston Housing and Community Development Department, said that such a measure was being considered.

In Harris County, the tax break traces back to Avenue CDC’s insurance emergency, which pushed Lawler to turn to a Texas law from 2003. The law eased the property tax burden for nonprofits like hers. Still, it specified that taxing entities in counties with a population of at least 1.8 million were exempt from providing the tax break unless they officially opted in.

Persuading local governments to do so seemed like a daunting task. But this year, costs came to a head. Lawler reached out to other affordable housing nonprofits, and they made their case to Harris County commissioners.

Commissioner Adrian Garcia said he had been looking for strategies “to keep affordable housing affordable” since real estate values “caught fire during the pandemic.” When Lawler brought him the state law, he said it was a simple decision to support it. “I was like this is way too easy.”

Affordable rental properties that meet a number of criteria can apply. For example, they must be owned by a Texas nonprofit and at least half the units must be rented for rates significantly below market rents (affordable to households earning 60 percent of their area’s median income or less).

Since the program was launched at the end of August, the application window for the 2023 tax season ends Oct. 28. The county will rebate half of the eligible taxes for qualifying applications, which have been capped at $1.5 million a year. For the first year, the county has budgeted roughly that amount in lowered property tax revenues to cover the rebates.

In future years, the application window will open from Jan. 1 through March 1. The Harris County Appraisal District will be notified of which properties are approved, and their bills will reflect the 50 percent exemption.

Daniel Ramos, the county’s budget head, explained that because laws limit how much property tax revenue the county can collect each year, if the county knows in advance which properties will receive exemptions, they can include that in their calculations. In other words, the county’s property tax revenues will not be impacted because taxes will be set at rates to increase the allowable amount of property tax revenue.

Ramos pointed out that while Harris County is building new apartments, market rates are often out of reach for those with lower incomes. “So we’re trying to use our resources and our tool box to build ... what is needed. Which is what’s affordable.”

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