Apartment landlords in Texas’ largest county will see much steeper property tax bills this year.
Multifamily landlords in Houston and surrounding Harris County saw the value of their holdings gain an average of 24 percent since 2021, the highest gain of any commercial real estate asset in the nation’s third-largest county.
Industrial warehouses in Harris County saw their value increase an average of 19 percent year-over-year, while retail properties rose 18 percent over the same period, according to a Bisnow report that relied on data compiled by CBRE.
But the prospect of high property taxes or even a recession are not keeping multifamily developers from entering Houston or any of Texas’s other markets. Building permits for multifamily properties in Texas’ five biggest markets rose 26 percent in the first quarter from a year earlier.
Texas is a high property and sales tax state because there are no income taxes. Investors and landlords in the Lone Star State seem to be fine with that arrangement.
In Texas, property owners are allowed to protest their property tax rate and many will do just that. Retail property owners usually have the best chance of getting significant reductions. For example, in 2019, average retail assessments in Harris County were reduced by two-thirds, to 6.68 percent from an initial 21.3 percent increase, according to the report.
Multifamily property landlords are probably not going to fare as well because of the increased values and the investors piling into the Texas multifamily market.
Any property tax hike will be passed on to multifamily tenants in the Houston market, where rents are up 10 percent year-over-year.
Harris County’s impending property tax hike on the industrial property is also unlikely to keep developers from building, acquiring, or upgrading warehouses on spec, because vacancy rates are below 1 percent in some markets.
[Bisnow] — Karn Dhingra