Will lower property taxes give renters any relief ?

Texans are set to receive $18 billion in property tax relief over the next two years, and none of it — at least directly — is earmarked for renters.

Across the state, renters occupy about three out of every eight households, including more than half of those in Texas’ largest cities, according to Census Bureau estimates. They pay property taxes indirectly to their landlords, who pass on the costs as a portion of the rent they charge.

But some lawmakers and policy experts say there is no guarantee that property owners will, in a similar fashion, pass along the savings from Texas’ multibillion-dollar property tax-cut package, even as the cuts are funded by taxes that everyone pays.

“We’re talking about a huge part of our population,” said state Rep. John Bryant, D-Dallas. “Everybody pays property taxes, but not everybody is getting a property tax cut. Only the owners of the property are getting it, and no reasonable person suggests that they’re going to pass (it) along to the renters.”

The tax-cut package, passed by the Legislature this summer and resoundingly approved by voters last month, drives down local school district tax rates and more than doubles Texas’ homestead exemption, allowing homeowners to pay school property taxes as if their residence was worth $100,000 less than its true appraised value. Lawmakers paid for the cuts by dipping into the state’s more than $30 billion surplus of leftover cash — mostly a product of taxes on sales and oil and gas.

Republicans argue landlords will be compelled to pass on cost savings to remain competitive with the rest of the market, particularly in renter’s markets when landlords are struggling to lease out their properties.

“In a declining rental market, tax cuts do get passed on to renters because of market forces,”

said state Sen. Paul Bettencourt, a Houston Republican and the Senate’s lead property tax cut author. He argued the benefits would be passed on across all types of rental units, from multifamily apartment complexes to commercial real estate. “This is a well-known economic principle,” he added.

The question of whether renters will see any property tax relief depends on the “dynamics in each local housing market,” said Lynn Krebs, an economist at the Texas Real Estate Research Center at Texas A&M University.

In places with lots of vacant rentals, where landlords would need to offer lower rent or other incentives to attract tenants, “then it seems perfectly logical that the lower property tax burden will give them the ability to do that, and they would do that” to prevent the property from going uninhabited, Krebs said.

But that’s not always the case. And without those market pressures, Krebs said, there’s nothing to force the savings onto renters as long as the market “is demanding housing at higher or current rates.”

“If there’s a serious housing shortage, as there has been in recent times in a lot of markets, then it would be reasonable to expect that landlords would really have no need, or reason, to lower their rents,” he said.

The tax cuts come amid a period of flattening and declining rent prices across the country — including in Texas’ major metro areas — as markets rebound from a spike in demand during the COVID-19 pandemic.

The Austin metro area has seen the most pronounced decrease in Texas, with rental prices down more than 6 percent from where they were a year ago, according to Apartment List, a real estate listing site that uses census data and its own listing data to estimate median rental listings. In the Austin area, twobedroom units were being rented out at a median monthly rate of $1,629, down more than $100 from a year ago.

Year-over-year rent prices are down a few percentage points in the Dallas-Fort Worth and San Antonio metro areas, according to the site. They are mostly flat in the Houston area, which did not see such dramatic price spikes during the pandemic, nor the same level of new apartment construction that has left many areas with housing “supply” that exceeds current levels of demand.

The median rental price for a two-bedroom unit in the Houston area stood at $1,286 as of November, virtually unchanged from $1,290 in November 2022, according to Apartment List.

San Antonio saw a more modest decline, from $1,317 last November to $1,277 last month.

Ben Martin, research director for the housing nonprofit group Texas Housers, said many cities remain in “a high-demand situation” in which landlords do not feel pressure to lower rents or, theoretically, pass on the tax relief. He described the tax cuts as “a redistribution of wealth to wealthier households, and nothing to the poor,” because people across all income levels paid into the budget surplus but are not all guaranteed to see relief.

“Renters are significantly more likely to be low-income, and they’re significantly more likely to be non-white — Black or Hispanic — households,” Martin said. “Renter households in the state are the households that are struggling financially the most, full stop. And we have done the opposite of supporting them.”

But Chris Newton, executive vice president of the Texas Apartment Association, said the tax cuts would benefit renters by slashing the “largest operating expense” for landlords: property taxes.

“We look forward to supporting new efforts to bring even more property tax relief to property owners which, in turn, will help deliver greater flexibility and affordability for Texas renters,” Newton said in a statement.

Over the summer, as the taxcut package remained in limbo amid Republican in-fighting, Bryant and several other House Democratic lawmakers offered a plan that would have provided a cash rebate to tenants, totaling up to 10 percent of the rent they paid the year before.

Bryant contends that the only way to deliver relief to renters is to send it to them directly.

“Everybody has contributed sales tax dollars to the state treasury to create this surplus. Not just property owners, but everybody,” he said. “So, it’s unfair to give the tax cut only to a certain part of our population.”

Some of the relief, he added, will end up going to out-of-state companies that “may be doing a minimal amount of business here other than owning property, and therefore may not even be contributing very much to sales tax collections.”

Republicans declined to fold Bryant’s proposal into the property tax cuts, arguing the relief would be passed on automatically via market forces. Bettencourt added that he sees the idea as a form of rent control, a principle that he and other Republicans vehemently oppose. And such a program would be “technically impossible” for the state government to administer anyway, he argued.

“Somehow, you’d have to go into the business of knowing everybody’s rent payments everywhere in the state, whether they pay 10 months, one month, two weeks,” Bettencourt said.

There are no statewide limits on how much landlords can raise rents year-over-year, and cities are barred from enacting their own rent control policies unless the governor allows it during an emergency.

Bryant’s plan called for landlords to submit records to the state comptroller outlining how much rent their tenants paid. The comptroller would set a deadline for renters to apply for relief and determine how much would be sent to each recipient.

Krebs, the Texas A&M economist, said he would expect the rebates to be counted as federally taxable income, which “would mitigate, to some extent, the benefit.”

In any case, he said, the Legislature arrived at a tax-cut package under which renter relief will hinge on conditions of supply and demand.

“It really just comes down to what’s driving the market,” he said.

Thousands of people gathered in Germany on Sunday for demonstrations against the far right, among them Chancellor Olaf Scholz and his foreign minister, following a report that extremists recently met to discuss the deportation of millions of immigrants, including German citizens, if they took power.

There were protests in Potsdam, just outside Berlin, and at the Brandenburg Gate in the German capital. They followed a demonstration on Saturday in the western city of Duisburg.

Last week, media outlet Correctiv reported on the alleged far-right meeting in November, which it said was attended by figures from the extremist Identitarian Movement and from the far-right Alternative for Germany party, or AfD.