REALTOR® Day at the Texas Capitol Legislative Priorities, Part II
In our continuing series about this year’s key issues for REALTORS, we take a closer look at what is happening in the world of taxes, tax reform, and responsible access to home equity.
Tax rates
Property taxes in Texas are among the highest in the nation. Many factors put pressure on local revenues and spending, such as school funding, state mandates, and infrastructure development and maintenance. While school property taxes are the largest portion of a property owner’s tax liability, local taxing entities too easily capitalize on upswings in the housing market by allowing rising property values to passively inflate their budgets. Unfortunately, this results in continual jumps in individual property tax bills, regardless of tax rate. TAR supports legislation that promotes honesty and transparency in the property tax rate setting process and facilitates property owner engagement in the process. TAR opposes any attempts to politicize the appraisal process by requiring voter election for members of the appraisal review board or central appraisal district board of directors. TAR supports more of a separation of the appraisal and tax rate setting process. TAR believes higher appraisal values should not be vilified. TAR believes local governments and voters should determine how much revenue is necessary. Here are bills under consideration:
HB 15 (Rep. Dennis Bonnen, R-Angleton)
- Primarily reforms the property tax rate setting process, by focusing on taxing entity procedures and access to tax information for property owners.
- Requires an automatic tax ratification (rollback) election for all taxing entities
- Creates a statewide standardized database of property tax rate and collection information
SB 2 (Sen. Paul Bettencourt, R-Houston)
- Creates a new division under the Texas Comptroller’s office, the Property Tax Administration Advisory Board, to oversee appraisal districts and local tax offices
- Lowers the rollback rate from 8% to 5%
- Requires an automatic tax ratification (rollback) election for all taxing entities
Access to Home Equity
For more than 140 years, Texas didn’t allow home-equity lending because of the possible repercussions from defaulting on the loan. Strong home-equity protections in the Texas Constitution allowed Texas to avoid much of the negative impact of the recession. In 1997, TAR was heavily involved in passing a constitutional amendment allowing Texans access to the equity in their properties, while providing important provisions to ensure those homes are protected. However, the lending market has changed over the past 20 years, and some homeowners may not be able to fully access the equity in their properties because of rising costs. TAR supports a few select updates to the Texas Constitution to modernize the home-equity lending process.
HJR 99 (Rep. Tan Parker, R-Flower Mound)
SJR 60 (Sen. Kelly Hancock, R-North Richland Hills)
What the joint resolutions do:
The joint resolutions propose a constitutional amendment to revise the home-equity provisions in the Texas Constitution.
- Lowers the fee cap to 2%
- Removes three of the top fee generators from the fee cap:
1. appraisal fee,
2. survey, and
3. state base premium for title insurance policy/title examination report.
- Maintains the 80% loan-to-value ratio
- Provides a choice on “seasoned refinances” between maintaining the home equity loan and all constitutional protections, and transitioning to a standard rate-and-term. If the loan is modified from a home-equity loan to a standard loan, a disclosure will be required notifying borrowers they are giving up those constitutional protections guaranteed for home-equity loans
- Allows for an 80% loan-to-value ratio for Home Equity Lines of Credit (HELOCs)
- The amendment resulting from the joint resolutions would take effect Jan. 1, 2018 and would apply to a home-equity loan made on or after the effective date and to an existing home-equity loan that is refinanced on or after the effective date.