Apartment owners, already struggling with tenants unable to pay their rents in the COVID-19 economy, say they’re also facing astounding increases in their property values, which will mean higher taxes.
It’s a double blow for many apartment complex owners in Galveston County who already are stretching their reserves thin, they said. Some worry increasing taxes combined with lost revenue will lead to foreclosures, they said.
For many multifamily complexes across the county, property valuations went up between 50 percent and 200 percent, according to a letter the Galveston County Apartment Association sent to the Galveston Central Appraisal District, an independent organization that determines the value of taxable property in the county.
“We believe these property value increases, during the worst economic crisis this country has seen since the Great Depression, is unconscionable and without merit,” according to the letter.
The letter, which the association sent last week, asked the appraisal district to reconsider its valuation.
Jerry Smith, managing director of Keener Investments, said the value of the company’s Galveston County properties skyrocketed. The company owns apartment complexes around the county and in Houston.
At The Breakers Luxury Apartment Homes, 8801 Monticello Drive in Texas City, valuation rose this year to $14.6 million from $10.1 million a year ago, a 45 percent increase, according to central appraisal district data.
Valuation of The Shore Apartments, 501 Davis Road in League City, rose to $12.5 million from $6 million, a 108 percent increase, according to data.
That means Smith’s escrow payments — the money he pays his lenders throughout the year to allocate to property taxes — will increase significantly, he said.
Smith has been lucky because many of his tenants have been able to pay rent, he said. In both April and May, he collected 10 percent less rent than in March, Smith said.
“If our economy doesn’t pop back into action by June, we are probably going to be in a rougher spot,” Smith said. “And on top of that, they’re doubling people’s property taxes.”
‘EVERYBODY NEEDS TO PROTEST’
The central appraisal district attributes the higher appraisals for apartment complexes to several factors, said Jeff Faulkner, director of commercial property.
The district appraised complexes too low in 2019 by about 15 percent to 20 percent, Faulkner said.
Last year, 15 apartment complexes sold in the county, and all of them sold for much more than the district had appraised them, Faulkner said.
“We had a couple apartments in League City that were significantly more than what we had them appraised at,” Faulkner said. “We didn’t have any choice but to rework our income model.”
Faulkner understands people are frustrated, especially with the pandemic, he said.
“We couldn’t just pick and choose,” Faulkner said.
For some property owners, high property taxes are even more of a worry than tenants not being able to pay rent, they said.
Richard Denson, vice president of Galveston Bay Properties, has been waiving rent for some of his tenants who lost their jobs and he’s tightening up expenses in response, he said. The company owns and manages about 50 rental homes and small apartment complexes.
“We’re not as worried about the COVID stuff as we are about property taxes,” Denson said.
Apartment owners who don’t agree with their assessed value should protest just like any other property owner in the county, Galveston County Tax Assessor-Collector Cheryl Johnson said.
The values are extremely high this year, and normally most people don’t protest the values, she said.
“Everybody needs to protest this year,” Johnson said.