HCAD ‘cherry-picking’ on market valuations
Orwellian black-box condo appraisals by the district are making a sham of equity analysis and fair taxation
This is a tale of two condos. It began in April, when the Harris County Appraisal District decided one condo was worth 20 percent more than another one.
Both are on the same floor of the same high-rise building. Their front doors are 8 feet apart. They have the same basic floor plan and square footage and enjoy the same view of downtown. Both were purchased more than 19 years ago.
The homestead exemption was decidedly not a factor. HCAD laid higher taxes on the homestead — my home — and gave the investor-owned rental condo the big break.
The cookie-cutter floor plans in a highrise building make tax inequities more obvious than they are in neighborhoods with unique single-family homes. Apart from décor, high-rise condos are commodities, as close as real estate gets to an apples-to-apples comparison.
The more data I saw, the worse the inequity got. The building has 232 condos, including 92 corner units that are identical or very similar to mine. HCAD claims those 92 corner units range in value from $156 to $364 per square foot. Height does not explain the difference. HCAD “awarded” two of the top valuations to condos on lower floors. HCAD thinks 73 of the 92 are worth less than mine — as much as 37 percent less.
The Texas Constitution guarantees equal and uniform taxation. After two HCAD administrative hearings, this constitutional guarantee is starting to resemble George Orwell’s “Animal Farm,” where “All animals are equal, but some are more equal than others.”
First you attend an informal hearing. My hearing officer insisted that HCAD’s market valuation program is a sophisticated piece of information technology that weighs an intricate array of factors that — I gathered — surpass human understanding and cannot be revealed to mortal taxpayers. The non-uniform valuations it generates are non-contestable, I was told, at least not unless the taxpayer doggedly persists through another hearing at the appraisal board.
The law recognizes that people have a “right of explanation” in the Information Age. When a computer decides your fate, you have a right to know how it did it: What data did it use? What weight did it give to various factors? What caused apparent discrepancies?
This principle of law and due process is recognized throughout the computerized world, but not at HCAD. Its valuation program is a non-transparent black box. It makes inexplicable decisions. Taxpayer, deal with it!
Armed with lovingly color-coded copies of a 92-line spreadsheet that took me 12 hours to make, my next stop was the appraisal board. The board would not even look at my beautiful spreadsheet. The topic of equity was avoided.
The board instead focused on the recent sales price of several heavily renovated condos in the building. My modestly appointed home, apparently, is equitably valued when compared to a handful of sumptuous, granite-clad palaces with solid gold toilet flushers.
The board ducked the glaring equity question: If those high-priced sales are comparable to my condo, how can they not also be comparable to all the identical condos in the same building that HCAD claims are worth 15 — 37 percent less than mine? HCAD’s black-box valuation program has gone rogue, assigning wildly different comparables to similar properties. As long as HCAD compares your home to a group of similarly overvalued properties, your taxes will always be equitable at HCAD’s “animal farm.” If your neighbor has a lower value, this is also equitable, as long as your neighbor is granted low-valued comparables.
Equity apparently does not include the idea that two identical properties side-byside should be roughly in line with each other.
Some tax consultants call HCAD’s approach “cherry-picking.” As a law professor, I prefer the term “abuse of discretion.” By either name, it makes a sham of equity analysis. Every whimsical valuation is equitable in relation to its own comparables. The inequitable choice of comparables shall not be discussed!
In the end, some condos are just “less equal” than others.
The appraisal board has authority to address equity problems. Its failure to do so leaves most homeowners with no legal remedy. Taking HCAD to court costs a minimum of $3,000 — more than most homeowners stand to save by litigating. Arbitration is cheaper, but arbitral results do not set precedents, so HCAD’s Orwellian handling of homeowner equity protests never gets struck down. Houston’s homeowners beg the Texas Legislature to help us put HCAD’s black-box valuation program back in its box.