Houston keeps property tax rate unchanged, budget deficit surges to $88M

Houston homeowners will not see a higher city property tax rate this year. But the city’s budget gap has more than tripled, and elected officials have not specified where the money will come from.

Initially, the budget shortfall was $25 million. But now it has risen to $88 million, Finance Director Melissa Dubowski said.

“I want to look under all the rocks, and then when I think that we’ve done all that, we’ll have a conversation with Houstonians…As a taxpayer, I like that approach. I also see needs in the city.”

– Martha Castex-Tatum, council member and Mayor Pro Tem

City Council voted unanimously to keep the rate at 51.919 cents per $100 of appraised value.

“I want to look under all the rocks, and then when I think that we’ve done all that, we’ll have a conversation with Houstonians,” said Martha Castex-Tatum, council member and Mayor Pro Tem. “As a taxpayer, I like that approach. I also see needs in the city.”

Adding that state allowances can vary, Castex-Tatum said that after reducing the deficit from $209 million by changing operations in city departments based on an efficiency study by Ernst & Young and consolidating departments, the deficit fell to $88 million.

“I’m going to take that as a win,” she said.

Why the gap grew

Dubowski told the council that property tax collections are expected to come in about $63 million below budget. She cited four causes:

• Collections: The city’s collection rate has slipped over the past five years, which she partly attributed to residents’ ability to pay.
• Protests: Value lost to appraisal protests grew from about $3.7 billion in fiscal 2022 to about $5.8 billion last year.
• Refunds: Refunds to successful protesters are nearing $70 million a year, up from about $25 million five years ago.
• Slow growth: Taxable value is growing about 2.9% this year.

Council Member Amy Peck called the revenue result “a big surprise.” Peck said she still backs the flat rate.

“Most residents, while they don’t want to pay extra taxes, understand that a thousand more cops cost money,” Peck said. “More firefighters cost money.”

Flat rate, not necessarily a flat bill

A frozen rate does not freeze every bill. Each bill also depends on a property’s taxable value, its exemptions, and the rates of other taxing entities. By this reporter’s calculation, the city’s share on a home taxed at $340,000 is about $1,765 a year.

Dubowski said a one-cent increase would cost the average homeowner about $3 a month, or about 74 cents for a homeowner over 65. Raising the rate to about 55 cents would have brought in roughly $87 million more and cost the average homeowner about $9 more a month.

Savings are the cushion

Dubowski said the shortfall will still be covered by dipping into reserves, though higher-than-expected sales tax and other revenue should offset most of it. 

She said the revised property tax estimate would leave the city with a projected fund balance of about 11.6% of expenditures, down from about 13% in the August projection but above the 10.45% assumed when the budget passed in June and the 7.5% minimum.

Council Member Sallie Alcorn, who chairs the budget committee, said she would vote for the rate but is wary of the mayor’s pitch. 

“You can’t do less with more,” Alcorn said. “We’re doing more with more.” 

She warned that Houston remains “a low tax, low service city,” noting that deficits above $100 million are forecast for the coming years, driven in part by public safety contracts.

What it could mean for Black Houstonians

• Affordability: Council Member Julian Ramirez noted that a tax increase would reach renters as well as owners, because landlords pass costs along. Rice University’s Kinder Institute found that 52.6% of Houston renters spend more than 30% of income on housing. Council Member Carolyn Evans-Shabazz said she and Pollard recently hosted an affordability panel at the Black Caucus. Taxes, she said, can put homeownership “out of their reach.”
• Homeownership. The Kinder report found Houston lost about 7,750 Black-owned homes, a 5.4% drop and a record, in 2024. Harris County Commissioner Rodney Ellis called the trend “not just a housing problem; it is a generational wealth problem.”
• Protests: The revenue shortfall is driven in part by appraisal protests, which are not applied evenly. A Kinder analysis of 2019 appraisal district data found that predominantly Black and Latino neighborhoods were less likely to protest, and that their protests were less likely to succeed. The data are old and cover the whole county. The mayor said most of this year’s commercial reductions were downtown, and that businesses hire professionals to press their cases. Councilwoman Peck said the city has no seat at those hearings.
• Services: Alcorn said parks and animal control are badly underfunded. Council Member Fred Flickinger said he does not expect the city to cut necessary services. The city has not said which departments or neighborhoods would absorb any reductions, so who bears the cost remains unknown.