Pandemics And Property Taxes: Don’t Expect A COVID-19 Miracle

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On May 15, the Dallas Central Appraisal District will be mailing property tax appraisal notices. Property owners will have the normal 30-day window to protest their valuations. For those newly homesteaded in 2019, you had until April 30 to file your exemption (just like always).

Gentlemen and ladies, start your engines.

Aside from appraisal date push, procedurally everything is the same as usual. Appraisals are based on the fair market value of a property as of January 1 – another reason to be hung over New Year’s morning.

This year, there have been grumbles and rumbles about curbing valuations because COVID-19 has supposedly hurt the market. So far, there is scant evidence of that.

Sure, a lot of homes were pulled off the market and even more are likely waiting in the wings to be listed. This has resulted in an inventory crunch.

Sure, agents report property showings are waaaay down. If buyers don’t see property, they don’t buy.

Sure, the pipeline for closings has slowed because sheltering buyers have paused those decisions.

So yes, the whole freight train of real estate has slowed down.

But, has any of it impacted values? If only one house has sold when usually three sold in the same time frame, that’s a decrease in volume, not value. I can’t say that the alerts I get every morning show a decided increase in price reductions.

And that’s the thing. While sheltering at home seems for many to have been going on for an eternity, it hasn’t. The pandemic only really started gaining speed in March. With a closing typically taking a month, there’s not a lot of data to work with.  Someone who wrote a contract on March 15 with a 30-day window that still hasn’t closed is only two weeks delayed – the Penthouse Plunge took well over two months to close.

Even if officials said they’d reassess values as of today, there’s not enough data to really change valuations.

States of Emergency

Regardless of the logic, many think the state, the city and/or the Appraisal Districts (anyone really) should offer property tax relief because of COVID-19. But unless something changes, they can’t. Appraisals are set January 1st so if there’s any devaluation (COVID-19 or otherwise) in 2020, it will be reflected in 2021. Some opine that weather-related events have seen reappraisals occur after January 1, but COVID-19 hasn’t physically damaged a single property.

For everyone who points to the state of emergency issued, I will point to the Recession. When, during the Recession did officials step-in and change values mid-cycle?  Never. COVID-19’s effect on property is economic, not physical.

Rob Wheelock of Property Tax Managers, a firm specializing in property taxes, pointed me to a letter written by state Senator Paul Bettencourt, Chair of the Senate Committee on Property Tax to Attorney General Ken Paxton. Bettencourt asked Paxton for his thoughts on whether Tax Code 11.35(g) could be applied to COVID-19. Section 11.35(g) deals with property tax exemptions when property is damaged by a disaster. Net-net, Paxton’s answer was that it doesn’t – again, economic versus physical damage to property.

But this is Texas with its HUGE property tax loophole the state has loved to keep open for big property owners (and donors) for 20 years. Any property owner can sue, sue, sue until a court agrees with them all the way to the state supreme court. They don’t have to use comparable valuations anywhere near their property – different states even.

With Wheelock’s help, I predict that Texas will see a raft of lawsuits filed by commercial property owners seeking to lower their taxes (the kinds of people who could afford to pay their fair share but hate to at all costs). I further predict a lot of them will win – not because they’re right, but because it’s Texas. I know, those predictions hardly required Kreskin (who, at 85 is still alive).

Real Help For Residential Owners

With economic hardships that result in massive unemployment, the problem isn’t the valuation on your home or the tax rate. It’s that while unemployed, the safety net isn’t deep enough to keep people afloat.

Here’s an example. The last time I was unemployed (this is pretty much the only financial event I’ve been unscathed in), the maximum payout was $1,600 per month. My 2019 property taxes at the Athena were $7,235 on a valuation of $326,288. That’s $603 per month in property taxes. Toss in a mortgage and HOA dues and let’s call it $2,500 per month. I would be $900 in the hole every month for housing alone – before a crumb would’ve crossed my lips. Sure, if I didn’t have HOA dues, I’d have $350 left per month to eat, but how far would that stretch if I had a spouse, kiddies and Rover?

The Recession should still be fresh enough to realize that keeping people in homes is critical to minimizing wreckage. Officials can offer a few options. I’ve said before that Texas’ one-time wallop of a tax payment is a burden to some people. Two or more installment payments would be easier to swallow. If unemployment is relatively short, this may be all that’s needed.

For those with longer-term problems, we should look to senior citizen programs that allow taxes to be deferred all the way until a property is sold if need be.

Escrow Can Help

When I discussed this with Wheelock, he reminded me that roughly half of residential mortgages collect property taxes as part of a monthly payment in an escrow account.

On the one hand, this is similar to my desire to spread payments out, but if a monthly nut exceeds income/unemployment, not being able to pay is a double-whammy.

Ticking Time Bomb

The same should be true of mortgages, but it’s not so far. The vast majority of mortgage programs like the CARES act use forbearance instead of deferral and that’s a time bomb. Deferral means adding payments to the end of a mortgage.  Forbearance means when the forbearance period ends, you owe all monies by a set time – perhaps having to make double-payments for several months at the moment you’re trying to get back on your feet.

Again, for those with mortgages that also make property tax escrow collections, how do these programs work for both components?

For homeowners financially hit during COVID-19, these months of forbearance may be the calm before Faustian banks come to collect your soul.

Look for your assessments after May 15. Challenge them as needed. But remember, there is a lot of time before bills get mailed out. The tax rates could drop or other payment options might be setup. AND if you’ve got the money but still don’t want to pay your fair share, drive your (luxury) car through the loophole and sue. It’s the Texas way.

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Jon Anderson

Jon Anderson is's condo/HOA and developer columnist, but also covers second home trends on An award-winning columnist, Jon has earned silver and bronze awards for his columns from the National Association of Real Estate Editors in both 2016, 2017 and 2018. When he isn't in Hawaii, Jon enjoys life in the sky in Dallas.

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