Property owners in Montgomery County said they are concerned about how high property taxes will be this fall after seeing a sharp rise in their homes’ market value this spring.

The average market value of properties in Montgomery County spiked 29.8% from 2021-22, according to data from the Montgomery Central Appraisal District. In comparison, the average market value for properties with homestead exemptions has increased no more than 11% year over year in Montgomery County since 2011.

As local taxing entities begin budget discussions for the upcoming fiscal year, Tammy McRae, Montgomery County’s chief tax assessor-collector, said at an April 21 tax workshop she believes lower tax rates are needed to compensate.

“When values go high, tax rates need to go down,” McRae said. “You need to pay attention to that because this year more than ever, most tax rates need to be coming down.”

Montgomery County Chief Appraiser Tony Belinoski said all property is appraised at its full market value as of Jan. 1. Notices are sent to homeowners in the spring with a market value and appraised value. The market value is what the home is worth, whereas the appraised value is the taxable value before property tax exemptions.

In years prior, the market and appraised values have been similar, Belinoski said. However, most homeowners may notice a discrepancy this year between values due to the state’s 10% cap on appraised value increases while home values surge.

To help, the city of Conroe approved a 20% homestead exemption in April, and local legislators pitched solutions to provide further taxpayer relief.

“We cannot control what the appraisal district does. ... But what we can control are two things. One is we can put a homestead exemption. ... The second one will happen more toward a budget, ... trying to push [the] tax [rate] down,” Conroe City Council Member Raymond McDonald said in an interview.

Appraised values rise

The increase in appraised values is a result of several factors. Belinoski said there is a large demand for homes in Texas but a low inventory of homes to purchase.

The appraisers consider market transactions from home sales, and since so many homes have been sold above the asking price, this drives the market value up, according to Dick Lavine, senior fiscal analyst with Every Texan, an Austin-based public policy center.

“Everyone expected the market to take a hit during COVID-19,” Belinoski said. “Instead, the exact opposite happened.”

For example, according to a May 3 release from the Houston Association of Realtors, the median price of a single-family home in Houston has increased nearly $80,000 in the last two years.

Homeowners can protest appraised values if they feel they are inaccurate and receive an informal hearing with the Appraisal Review Board; the protest deadline is May 15.

Despite no guarantee of getting appraised values reduced, Belinoski said in an email he encourages property owners to protest, especially if they believe the market value is inaccurate and can provide information to warrant an adjustment. County data shows the number of protests filed has increased about 55% from 2015-21.

“Most of the time [the ARB and homeowners] come to an agreement,” Belinoski said.

Unsustainable increase

The year-over-year percent change in average market values in Montgomery County has been in the single digits for the last six years. As such, Belinoski said he was shocked by 2022 appraisal values.

Locally, the average market value for properties within Conroe ISD boundaries rose 27.4% from 2021-22—following a 9.2% increase overall from 2017-21—and 34.3% within Montgomery ISD boundaries, following a total increase of 12.89% from 2017-21, according to the MCAD.

Property values are increasing faster than the median income across Montgomery County, leaving people struggling to pay bills, said state Rep. Steve Toth, R-Woodlands.

Montgomery County’s median income increased 26.9% from 2010-20, according to the American Community Survey five-year estimates, while county data shows the average market value increased 52.83% during that time, spiking another 33.84% from 2020-22.

As such, homeowners said they are worried about how high their taxes will be this fall.

“What bothers me the most, and I think other people, is the complex nature of determining what your property taxes are,” Conroe homeowner Rich Eimer said.

Adam Perdue, research economist at the Texas Real Estate Research Center, said the center is expecting the housing market to slow over the next year and prices to decrease. In the Houston area between 2020-21, there was a 21% increase in home prices, when typically there is a 5% increase over a two-year span, Perdue said.

“We expect to see [prices] fall back much closer to that 5% or even fall below it. We are expecting to continue to see it be a positive [increase] but slower than what we have seen over the past two years,” he said.

Although property values increased, taxing entities are limited to how much they can raise their property tax revenue. Counties and cities are limited to a 3.5% increase and schools to 2.5%, Perdue said.

“Taxing jurisdictions look at that [appraisal valuation] and they figure out what their rate will be, and that [tax] rate almost has to fall. [Taxing jurisdictions] don’t necessarily need more revenue because the valuation increased,” Perdue said.

Seeking relief

Homeowners may see relief from homestead exemptions and two statewide propositions approved by voters May 7.

Lavine said Proposition 1 amended the exemption for those who are disabled or over 65, allowing school taxes to decrease for these homeowners instead of being frozen at age 65 so as not to increase the amount. Proposition 2 increased the homestead exemption for school taxes from $25,000 to $40,000 off of the appraised value.

Some cities are taking measures locally to assist homeowners as well. The city of Conroe voted April 28 to increase its property tax homestead exemption from 2.5% to 20%, the maximum allowed by law. Council also voted to increase the city’s exemption amount for disabled and over-age-65 populations.

“These new exemptions are not only allowing tax relief for our seniors and disabled, but also for every hardworking homeowner in our community,” Mayor Jody Czajkoski said in a news release.

The city of Montgomery also approved a 20% homestead exemption in July 2021, which took effect this fiscal year, Community Impact Newspaper previously reported.

Toth said while homestead exemption changes will help, he believes they are not enough. He is advocating for doing away with appraisal districts and using a price-paid valuation, which he said 40% of states use in property tax calculations. Homeowners’ taxes would be based on the amount the home was purchased for instead of an ever-changing value.

Toth said he has introduced a bill advocating for such in previous legislative sessions and is anticipating a hearing on it in the 2023 session, which will begin Jan. 10.

In addition, state Rep. Cecil Bell, R-Magnolia, said he believes the chief appraiser of each county needs to be an elected position. He said he has drafted a bill for it that is gaining traction this year.

“When you have that much authority, you should be responsible and accountable to the people,” Bell said.

Maegan Kirby and Jishnu Nair contributed to this report.