6% Homestead Exemption FAQ

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1. Will this exemption require a cut in services?  

No, it will not. My plan calls for making this exemption revenue neutral – meaning that we will raise the tax rate to make up for the lost income. This will still provide meaningful net savings to homeowners while slightly shifting the burden of property taxes to commercial and industrial properties.

2. Does it just help rich people?

No. This exemption will help any person that owns and lives in a home in the City of Austin. It will help more than 200,000 families, and under my plan, the median homeowner will save more than $50 a year. Because property tax is a regressive tax, meaning lower income folks pay a larger share of their income to the tax, reducing the tax is a progressive measure. Most families helped are not rich – Most of Austin’s 135,000 homes are worth approximately $220,000 or less and there are only 1,900 worth more than $1 million.

3. What’s this about a shift in the burden of property taxes? 

Since 2000, the property tax burden on homeowners as a share of total property taxes has risen from 45% to 54%, while the burden on commercial and industrial properties has fallen. By raising the tax rate ever so slightly to make this exemption revenue neutral, some of the tax burden will shift back to commercial and industrial properties.

4. Why can’t we wait to do this as part of the budget process in a few months?

Unfortunately, state law dictates that homestead exemptions must be considered and passed before June 30, well before the budget is done in September.

5. Will this exemption hurt renters?  What are we doing to help renters? 

No, this exemption will not significantly impact renters. The tax rate on the average multifamily unit will slightly increase (50 cents per month), but rents are determined by many more market forces than such a small increased tax burden. Currently, the Austin area has very high rental occupancy rates, and so rents are really determined by the market dynamics of supply and demand.

The council is taking action to help those who rent, however, including revision of the inequitable drainage fee. Council will also increase funds used in the Tenant Rental Assistance Program.

6. Why a percentage exemption? Can’t we make it a flat or capped exemption?

No, state law does not allow cities to enact a capped or flat exemption, though Austin has long been advocating for such a tool.

7. Why should homeowners receive an exemption on their property?

Home values have risen 3.5 times as much as salaries in recent years, and for many homeowners, their properties are worth far more than when they purchased them. There are many homeowners who would not be able to purchase the homes that they live in now, and their tax burden has grown along with the value of their home. Short of selling their property, they have no remedy for rising taxes. I believe long-time homeowners and families should be able to stay in their homes even as values skyrocket.