Uncertainty looms for renters as Texas lawmakers clash over property tax relief
Texas’ top Republicans are engaged in a heated debate over how to distribute property tax cuts between businesses and homeowners, while Democrats are advocating for relief for renters as well. With more than one-third of households in the state consisting of renters who contribute a significant portion of school property taxes through their monthly rent, Democrats are proposing a tax-cut package that includes cash refunds for renters. State Representative John Bryant, a Dallas Democrat involved in crafting the proposal, emphasized the importance of considering all Texans when discussing property tax reductions.
Under the Democrats’ proposal, landlords would provide documentation to the state comptroller’s office to demonstrate the amount tenants paid in rent, which would then be used to calculate the cash rebate. The duration of the program remains unclear, but the spending is limited to $3.8 billion. Unlike several other states that offer explicit tax breaks to renters, Texas currently does not have any provisions that directly benefit renters. Renters are unable to claim homestead exemptions, a tax exemption for homeowners, as they do not own their own homes.
There have been suggestions from some Republicans and tax policy experts that renters could indirectly benefit from tax cuts if lawmakers allocate funds to school districts to reduce tax rates, a concept referred to as “tax rate compression.” However, the allocation of $12.3 billion in property tax cuts for compression has been a source of contention between Lieutenant Governor Dan Patrick and House Speaker Dade Phelan. While Phelan intends to allocate the entire amount to compression, Patrick proposes using a little over two-thirds for compression and the remainder to raise the homestead exemption.
In addition to providing relief for renters, the Democrats’ tax-cut package also includes an increase in the homestead exemption for homeowners and a boost in the state’s basic allotment for schools. Homeowners would see their homestead exemption rise to $100,000 or 25% of their home’s appraised value, capped at $200,000. The proposal aims to enhance the education system by increasing the state’s funding per student by $1,000, ultimately resulting in a permanent wage increase of $4,300 for teachers.
While the impact of tax cuts on rental costs is difficult to measure, it is believed that slower increases in property taxes for landlords could potentially lead to slower growth in rent prices as well. Experts predict that this effect would manifest quickly as landlords compete for renters. However, tax cuts are unlikely to cause a decrease in rent prices, as other expenses associated with rental properties, such as insurance, labor, and maintenance, can contribute to higher overall costs. Therefore, landlords typically set rents based on market demand and supply, regardless of tax cuts.
The issue of rising rent costs extends beyond property taxes and involves various factors, such as tight housing markets and restrictions on housing development. Nathaniel Barrett, a landlord in South Dallas, argues that meaningful relief for homeowners and renters can be achieved by removing local restrictions that hinder housing construction, thus reducing property values. However, such measures did not progress in the Legislature this year.
The rent burden in Texas has intensified, particularly for renters who are predominantly people of color with lower incomes. Asking rents in major metropolitan areas have significantly increased since the COVID-19 pandemic, making it more challenging for renters to afford housing. Housing advocates contend that tax rate compression alone is insufficient to provide substantial relief for struggling renters.
In conclusion, as the debate over property tax cuts in Texas unfolds, Democrats are pushing for relief for renters, highlighting the need to address the concerns of all Texans. The proposed tax-cut package includes cash refunds for renters, an increase in the homestead exemption for homeowners, and additional funding for schools. While the ultimate impact of tax cuts on rental costs remains uncertain, experts agree that other factors, such as housing market dynamics and expenses beyond property taxes, significantly influence rent prices.
