Many Texas taxpayers have charged that the current property tax system is unfair because it penalizes longtime homeowners with a higher tax bill when their neighborhoods start to gentrify. The Texas County Appraisal District says it has come up with a new method for assigning the appropriate property values to home residents.
The Travis Central Appraisal District’s (TCAD) method of assigning property values involves new and remodeled homes in gentrifying neighborhoods are appraised separately from older homes that have not been remodeled. Mayor Steve Adler praised TCAD Chief Appraiser Marya Crigler and her staff for devising a new tool to make appraisals more equitable, according to a report in The Austin Monitor.
Crigler explained that TCAD’s new method of assigning residential appraisal values in central city neighborhoods is designed to reduce the impact of new construction and remodeling on the owners of homes that have not been remodeled. Adler said this is the first time this appraisal method, called market segmentation, has been used in Texas, and he lauded TCAD for taking the step.
Michael Kasper, director of residential appraisals for TCAD, said the district categorizes new construction and remodeled houses differently than older homes that have not been remodeled.
“In the Deep Eddy and Tarrytown neighborhoods, you have a 1930s house next to a sprawling complex built on three lots. Those are completely separate market segments,” he told the Austin newspaper. “Using the segmentation method, the older houses’ values are compared to the values of other older houses, while the new and remodeled houses are judged in a separate category.”
Kasper explained that TCAD appraisers did a market value study of the Allandale neighborhood to find out whether remodeled or reconstructed homes were being appropriately valued, in contrast to original or remodeled homes. They found that for 2015, the remodeled homes were undervalued, while the original homes were being overvalued. The district had appraised the remodeled homes, on average, at about 83 percent of actual value. But the homes that had not been updated or remodeled were frequently valued at 120 percent of their actual value, presumably because they were in the same neighborhood as the remodeled homes.
“They’re on the same street, side by side, but two very different markets,” Kasper said.
Market segmentation allows for new and remodeled homes to be appraised at their full market value, Kasper said, and homeowners of older or original homes are not burdened with undue market value. In Allandale, that meant one market with an average appraisal value of $520,000 and a second market of remodeled or reconstructed properties with an average value of $1.2 million. Kasper said that TCAD intends to conduct market segmentation analysis for every neighborhood in the urban core, including East Austin, in 2017.
Lonnie Hendry, director of commercial appraisals, explained to city council that the district has been working hard to improve appraisals using data mining. That means the district looks at information that publicly traded companies are required to disclose about financing for various commercial properties. In addition, he said, the district is able to learn about commercial property values when properties are refinanced.