SterlingResidential.com | Buying & Selling Residential Properties in Texas | Houses for Rent Houston Area | Humble Atascocita Kingwood & Spring Texas Realtors | Sterling Residential®, Realtors® | Real Estate Broker: Property tax reform could have stemmed loan abuses

Politicians are pointing fingers at lender problems these days as the mortgage debacle unfolds. Now that the money ride is over and voters are losing their homes, politicians are drawing their legislative guns. So as not to appear as though they slept through their watch, they’re scrambling to look busy devising regulatory curbs on lender abuses. Yet, the proverbial horse is long out of the barn as the pols close the gate behind it. Slow to the draw — they want to look like heroes and avoid blame.

Texas pols could have been heroes. Years ago they had the opportunity to pass meaningful property tax reform, but none came. Year after year, homeowners watched property tax appraisals rise. Texas appraisal district boards fought homeowners for every dime, pushing appraisal values and property taxes ever higher. On it went until many borrowers were forced into the riskiest loans for a chance at homeownership — as taxes, insurance, and home prices surpassed the financial ability for average working families.

While still among the most affordable places to live, Houston has experienced dramatic increases in insurance, taxes, and home prices — cutting many buyers out of the market. Several years ago, lenders developed new loan products for marginally-qualified buyers that made homes more affordable for the short term — long enough to get them closed and moved in before the rates reset and the loans became unaffordable. With lenders promising refinancing as an option later, borrowers closed high risk loans on homes they couldn’t have afforded otherwise. Now that home values are dropping and refinancing is out of the question, borrowers are defaulting in record numbers.

Where were the politicians when those risky loans were made? Fighting homeowners for higher appraisals and more taxes. Local and state government lobbyists fought all grass-root efforts for property tax reform. Riding a wave of tax revenues, Texas legislators increased spending to record levels. As home prices appreciated up to 100% across Houston, money poured into government coffers. Texas legislators are quick to point out that school tax cuts they passed during the 2005 legislative session returned some of that money to taxpayers. However, under then-current appraisal district appreciation rates, the school tax cut was never going to provide significant homeowner tax relief — its was a placebo in place of essential property tax reform.

If Texas pols are serious about tax relief, they should start by making it illegal for local or municipal government agents to lobby the legislature on property tax issues that conflict with their duty to represent us. Second, Texas legislators should pass a law that mirrors California’s own Proposition 13 — legislation that would lock appraisal values at the last sales price, eliminating government spending on unrealized real estate gains. Finally, the legislators should consider an alternative to the burdensome property tax regime — it is overcome with conflicts of interest, meddlesome governmental lobbyists, and expensive bureaucracy. A simpler tax system in the form of a consumption or increased sales tax could eliminate or reduce property taxes and make homeownership affordable for more working Texans.