The property tax appeal process gives property owners the opportunity to challenge the taxing authorities estimated value of their real estate. The process follows these high-level steps:
- County or municipal assessors conduct an assessment of all properties (typically annually).
- The new assessed values are published on the county website and/or mailed to the property owners or their agents.
- Property owners evaluate the proposed valuation and can file a protest with the assessor if they disagree.
- Owners or their agents typically have a 30- to 60-day period to file an appeal.
- The county conducts hearings for each protest.
- The post-appeal values are published and sent to the collectors to levy the annual property tax.
Harris is the largest county in Texas and provides detailed data around the annual property tax appeal cycles. CoreLogic examined this data to identify key trends and analyze whether the COVID-19 pandemic affected activity. For this study, we focused on appeals between 2016 and 2021 for only real estate properties.
The Harris County Assessor assesses its nearly 1.5 million real estate parcels every year. Each parcel is classified by a county land code that describes the type of real property. For example, the “A1” code represents all Real, Residential or Single-Family Home parcels. These codes enable the analysis of protests by property category types.
High-Level Protest Trends
The following table shows the total number of protests Harris County agents and owners filed between 2016 and 2021.
|Year||Total Protests||% year/year change||Owner Protests||Agent Protests||% year/year change||% by agent|
Over four hundred thousand protests are filed every year in Harris County. Overall, almost 30% of the Harris County real estate parcels are appealed every year. While 2020 and 2021 saw an increase in the number of protests, the gain was not significant (less than 2%), so a COVID-19 related wave of appeals was not observed.
One key trend is the gradual increase of protests filed by agents. The proportion of agent-filed protests has steadily increased and represented 70% of those filed in 2021. Agents have become the primary source of protests across the full spectrum of property types. 88% of all protests in 2021 covered Single-Family Home parcels (A1 code), Commercial/Industrial and Residential Multi-Family parcels (B1, F1 and F2 codes), or vacant parcels (C1, C2 and C3 codes).
- 302,702 (70%) of protests were filed for Single-Family Homes, and agents accounted for 213,601 (71%) of them. In 2021, protests were filed for 28% of these parcel types.
- 49,136 (11%) of all protests were filed for commercial, industrial and residential multi-Family parcels, and agents represented 44,571 (91%) of them. In 2021, protests were filed for about 67% of these parcel types.
- 30,171 (7%) of all protests were for vacant land properties, and agents filed 25,339 (84%) of them. In 2021, protests were filed for 23% of these parcel types.
|State Class||Description||Total parcel counts (2021)||Total protests (2021)||Protest intensity (% of parcels)||Total Agent protests||Total owner protests Owner||% of total protests|
|A1||Real, Residential, Single-Family||1,078,744||302,702||28.1%||213,601||89,101||70%|
|C2||Real, Vacant Commercial||28,792||13,044||45.3%||11,552||1,492||3%|
|C1||Real, Vacant Lots/Tracts (In City)||54,772||12,176||22.2%||9,530||2,646||3%|
|Z4||Condo – Apartment Style||27,836||8,950||32.2%||7,258||1,692||2%|
|C3||Real, Vacant Lots/Tracts (Not in City)||34,813||4,951||14.2%||4,257||694||1%|
|B1||Real, Residential, Multi-Family||5,706||4,713||82.6%||4,284||429||1%|
|Z1||Condo – Apartment Conversion||11,819||4,522||38.3%||3,750||772||1%|
|Z5||Condo – High Rise||10,265||4,141||40.3%||3,567||574||1%|
Table: 2021 protests and total real parcel counts by asset state class
High-Level Hearings Trends
After the filing of protests, Harris County schedules hearings for all valid claims. Every year, a small fraction of protests fail to materialize into hearings. The following table shows the rate of “no hearing” protests for agent and owner protests in 2016 and 2021:
|“No hearings” protests||Total Protests (2016)||“No hearings” rate (2016)||Total Protests (2021)||“No hearings” rate (2021)|
“No hearing” rates stay consistent at 2-3% for both agent and owner protests.
One interesting observation in the Harris County data is that owners can decide to use agents for only one portion of the process. Owner protests can be taken up by agents for the hearings, and agent protests can lead to owner hearings. To understand this trend, we analyzed statistics of hearings by protest sources in 2016 and 2021.
|Hearing method||Agent hearings % (2016)||Agent hearings % (2021)|
Two key trends from the data:
- In 2021, owners used agents for protests only in a larger number of cases. For 42% of agent protests, the owners represented themselves in hearings. In 2016, only 18% of agent protests were represented by owners in the hearing. This trend was particularly strong for single-family homes in 2021, where more than 110,000 owners followed that process.
- Owners were more empowered in 2021 and did not use agents for hearings when they filed their own protests. Only 2% of these owners used agents for hearings, a decrease of more than 60,000 since 2016, primarily in the single-family home space.
These two trends are driving a general trend in Harris County toward a consistent increase in the percentage of hearings being managed by owners versus agents.
|Year||Total hearings||hearings Agent||hearings Owners||% by Agent|
Since 2019, owner hearings consistently made up a larger percentage of the number of appeals than agent hearings.
The increase in owner hearings is driven by a change in behavior from single-family homeowners. The following table lists the share of agent hearings for different property types in 2016, 2020 and 2021.
|Year||SFH||Vacant land||Commercial and MultiFamily|
Agent hearings remain the predominant appeal method for commercial and multi-Family properties, but they have declined in the overall share of activity since 2016. This trend is the primary driver of the decreased activity in agent hearings. Through technology, Harris County has empowered owners of single-family homes to prepare and support their own appeal hearings.
Hearing Results Trends
To simplify and accelerate the hearing process, Harris County has initiated an informal system that enables an expedited review of cases. In this analysis, we examined the success rates of both formal and informal hearings.
Each hearing results in a decision that is either a reduction in the assessed value or a decision of no change. We classify any change in assessed value as a success to analyze the results of the appeal decisions in 2016 and 2021. At the time of data collection, a small number of cases were undecided, so that percentage is included in the 2021 results.
|Year||SFH success rate-formal||SFH success rate-informal||SFH success rate-total|
|2021||63%||91%||72% (3% undecided)|
The success rate for formal and informal hearings has remained consistent for single-family homes. Around 70% of hearings ended successfully, with the largest number coming from informal hearings.
|Year||Vacant success rate-formal||Vacant success rate-informal||Vacant success rate-total|
|2021||25%||40%||26% (4% undecided)|
For vacant land, only around 30% of hearings ended in a successful outcome. For formal hearings, only 25% drove a reduction in assessed value, which underscores the riskiness of these appeals.
|Year||Commercial success rate-formal||Commercial success rate-informal||Commercial success rate-total|
|2021||84%||88%||85% (2% undecided)|
For commercial and multi-family properties, which account for most agent protests and hearings, we observe a higher percentage of success — more than 80% — for appeals. While the appeals can be more complex, owners and agents can gain significant rewards from reduced taxes.
|Year||Average reduction for success – SFH||Average reduction for success – Vacant||Average reduction for success – Commercial|
The final statistic we analyzed is the average percentage reduction in assessed value for successful appeals in 2016 and 2021 for each property type in the study.
The reduction rate for successful appeals for both commercial and single-family home properties is around 7%. That is consistent with 2016 results for single-family homes, so the migration from agent to owner hearings has not affected the success rate of results for these owners. For commercial and multi-family properties, there was significant drop in the reduction in assessed value from the appeals. A drop was observed in the reduction achieved for vacant land, but the decline is still much larger than with the other property types.
While the success rate for vacant land appeals is lower, the resulting average decrease for successful appeals makes the appeal attractive.
Summary of COVID-19 Impact on Harris County
In 2016, the appealed value of the properties under appeal was around $267 billion, and the post-appeal value totaled $241 billion, an overall reduction of around 10%. In 2021, the pre- and post-appeal values of properties with an appeal decision (at time of the data download) were $347 billion and $327 billion, for an overall decrease of around 6%. As Harris County Assessors drive a higher accuracy in their initial assessments, they are likely to observe a lesser effect of the appeal processes in the overall valuation of the real estate parcels. With this higher accuracy, counties can forecast budgets earlier. The appeal process reduces the overall value for the county and local municipalities. As the first source of funding for local services, real estate property tax is critical for local jurisdictions. Our study found that the appeal activity was not materially affected by COVID-19. There were no major changes in the appeal activity and disposition for 2020 and 2021.