In these times, double down — on your skills, on your knowledge, on you. Join us Aug. 8-10 at Inman Connect Las Vegas to lean into the shift and learn from the best. Get your ticket now for the best price.
A long political struggle over Texans’ property taxes, and by extension over how appealing the Lone Star State is to homeowners, has wrapped up this week with what Gov. Greg Abbott described as the “largest property tax cut” in state history.
Though the legislation is still currently rounding the bases, if approved as expected it could in theory send even more people to what is already the fastest growing state in the U.S.
Texas lawmakers announced the deal Monday. Among other things, it will increase the amount homeowners can exempt from the taxable value of their properties from $40,000 to $100,000. According to the Texas Tribune, it’ll also shift a portion of schools’ operating costs to the state so that those schools can reduce taxes, and reform Texas’ appraisal system.
In a statement, lawmakers described the deal as an $18 billion tax cut for Texans.
The deal comes after months of legal wrangling over $18 billion the state set aside for tax cuts. Of that money, $12.3 billion was available for lawmakers to use as they saw fit. Abbott — who has stated he wants to “eliminate” property taxes — and the Texas’ House of Representatives wanted to use the money to compress school tax rates. However, Lt. Gov. Dan Patrick and Texas’ Senate wanted to use some of the money to increase the state’s “homestead exemption,” which lets homeowners reduce the taxable value of their houses.
The disagreement brought two of Texas’ biggest political egos into conflict.
Ultimately the state’s political leaders met last week in Austin to hash out a deal, and both sides seem pleased with the results.
“It may have taken overtime, but the process has produced a great bill for homeowners and businesses,” Patrick said in a statement this week.
Abbott was similarly upbeat, saying in his own statement that he promised to return property taxes and the deal “is a step toward delivering on that promise.”
“I look forward to this legislation reaching my desk, so I can sign into law the largest property tax cut in Texas history,” he added.
The deal still needs official approval from state lawmakers, but it was on the fast track by mid week and lawmakers’ statements framed such steps as formalities at this point.
Texas Gov. Greg Abbott, left, and Lt. Gov. Dan Patrick as the two view the inaugural parade in Austin in 2015. Credit: Robert Daemmrich Photography Inc, Corbis and Getty Images
While the minutiae of the deal may be most interesting to members of Texas political class, the deal’s implications could extend to communities across the U.S. Texas has had the fastest growing population of any state in the U.S. for years now, and it achieved that growth thanks in part to its affordability relative to pricier parts of the country such as California and New York. According to Zillow, for instance, the average home value in Texas last month was $298,325. Meanwhile in California — the state that lost the most residents in 2022 — the average home value was $728,121.
However, at the same time Texas’ property taxes — which in addition to schools pay for things like local safety departments and infrastructure — cancel out some of the state’s relative affordability advantages: According to Rocket Mortgage, Texas has the seventh-highest property taxes in the country, ranking above expensive places such as California and New York. That means consumers could theoretically relocate to Texas but still end up with comparable, or in some cases higher, monthly home payments due to the higher property tax burden.
If lawmakers are able to meaningfully reduce Texas’ property tax burden — something they say they’ve now accomplished — that could give the state an even bigger affordability advantage over other regions. And that in turn could intensify the flow of would-be homeowners to the Lone Star State.
It remains to be seen how much impact this particular deal will have on real estate consumers’ perception of Texas, or if even more people from places like California will continue migrating east. But lawmakers at least framed the deal as a victory for those who already own homes in Texas.
“I started working to reduce property taxes at a capital hearing in 2003, 4 years before I was elected to the Texas Senate,” Patrick reflected in his statement this week. “It has been a long road, but this is a great day for all property owners.”
