Houston Apartment Assessments Skyrocket

Scott Gilchrist, Managing Consultant 281.409.3456 | scottgilchrist@mfpoer.com

Looming just around the corner is an increase to your highest operating expense—property taxes. Apartment properties in Houston jumped an average of 18% from last year. There will be an enormous amount of apartment litigation for 2022 in an effort to mitigate the property tax increase year over year.

The Houston apartment market is starting to shift downward because of higher interest rates, gas prices north of $4.00 per gallon, and inflation greater than 7.5%. The apartment market is reverting to its previous state where occupancies are heading downward, while rents and concessions are on the rise. In the last four to six months, cap rates have increased 50 to 75 basis points because of the rise in interest rates and inflation.

Developers continue to build apartments in the Houston metroplex area, hoping there are enough people to occupy the units. Nevertheless, capital continues to flow into Texas from the East and West Coasts. For 2022, Texas Appraisal Districts continue to push apartment values upward to levels never seen before. Major large companies are relocating their headquarters to Texas. Since COVID-19 began in early 2020, Tesla, Oracle, Caterpillar, CBRE, and Hewlett-Packard have moved to the Lone Star State.