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Real Estate Valuations and Rental Rates Have Soared Since the Financial Recession, So Why Hasn’t Judge Higginbotham’s Properties Enjoyed the Same Growth?

Property rental incomes and valuations have remained noticeably static on Judge Patrick Higginbothams’ Financial Disclosures for the past 13+ years despite the boom in rental rates and property values. The question is why is that?

Report: Austin rent increase highest in U.S. in the past decade

Numbers show rent has increased in Austin nearly 93% since 2010, the highest mark of any major city in the country.

Published:  December 20, 2019

 

AUSTIN, Texas — People talk about how expensive Austin has become over the years and they may not be exaggerating when it comes to rent prices.

A new report from Zillow showed Austin’s rent increased the most in the past decade compared to any major city in the country.

The real estate database company calculated the amount people paid in rent in Austin between 2010 to 2019. The numbers from the report show rent has increased nearly 93% since 2010.

Kevin P. Scanlan, the president of the Austin Board of Realtors, admitted that percentage seemed pretty high, but also said he’s not surprised. The Austin Chamber of Commerce reported more than 150 people move to the Austin-metro area every day and he said that’s led to an increase in rent.

“It’s created a problem actually because the housing shortage here in Austin is significant,” said Scanlan. “It seems that every year we break the record for having the fewest number of listings on the market at any one given time and it’s because the demand is so high. Apartments especially are able to increase their rents because they’re at 95%, 99% occupancy at any given time. So in both the sales market and the rental market, the economy has really been a driving force in making it harder to find affordable homes.”

Raleigh, North Carolina, and Denver, Colorado, were next on the list with a 91% and 88% increase, respectively. New York tops the list for total rent paid over the decade. These numbers significantly surpass the national average increase, which is nearly 50 percent.

Scanlan said a part of Austin’s growth can be attributed to big tech companies like Facebook and Apple moving offices. With more growth expected, he doesn’t see the rent prices coming down any time soon.

HIGGINGBOTHAM, PATRICK E.

If you visit LIT’s profile page for Judge Patrick Errol Higginbotham, a Senior Judge on the Court of Appeals for the Fifth Circuit, you’ll see LIT has analyzed 5 years of financial disclosure reports filed by Judge Higginbotham, as required in law.

We’ve included a screenshot of a page from the 2013 Financial Disclosure Report for Patrick Higginbotham where it shows his disclosed “RENTAL” properties. In 2013, he had 3 locations where he held rental properties, namely Tarrant County and Austin, Texas. Out of state; Pensacola in Florida.

185 World Of Tennis Sq., Lakeway, TX 78738

3 beds3 baths1,682 sqft

Beautiful home away from home. This is the largest of all the 3 bedrooms in World of Tennis. Lakeway and the World of Tennis are located in the Hill Country on one of Texas most beautiful lakes. Lake Travis is more than 25 miles long. Great for skiing, sailing, or just boating, with numerous outstanding restaurants located on the lake with easy access.

Lakeway is a community developed originally as a resort for Houston and Dallas residents as a weekend and summer retreat. With the development of four golf courses and one of the premier tennis facilities in the United States, Lakeway is not only a great summer retreat, but also, an excellent alternative for the “Snowbirds” seeking a winter escape.

As the Lake Travis School District has become one of the top school districts in the Austin area, Lakeway has become a primary residence for more than 5,000 residents. Tenant to pay electric and cable/internet.

Do I Need a Primary Residence to Use a Vacation Home as a Tax Write-off?

A vacation home can provide you with a number of valuable tax write-offs, even if you don’t write off a primary residence — perhaps you’re renting a home, living with someone else, or you own your home outright. The IRS treats vacation homes much like primary residences and allows you to deduct many of the same deductions for your second home as you would for a first home.

IRS Requirements

In order to take advantage of tax write-offs for a vacation home, you must file a form 1040 and you must itemize your deductions. Your vacation home must meet the IRS definition of a qualified home: it must be a house, mobile home, condominium, cooperative, house trailer, house boat, or other lodging that has sleeping facilities, cooking facilities and toilet facilities. A tent, tree house or other such structure that doesn’ t meet these requirements doesn’t qualify.

Mortgage Interest

If you finance the purchase of your vacation home, you can deduct the interest you pay on your mortgage loan. The loan must be secured by your home in order to be deductible. For example, if you borrow money against investments you own and use this money to purchase a vacation home, the interest on the loan isn’t deductible. You can deduct the interest you pay on the mortgage each year. If the loan was issued by a bank or other financial institution, you’ll receive a 1099 from the lender each year, showing the amount of interest you paid and may report on your taxes. If your seller carries the mortgage, you’ll need to track the interest yourself.

Property Taxes

You can also deduct the property taxes you pay on your vacation home each year, whether you pay these taxes directly to the taxing authority or through an escrow account with your lender. You can’t deduct any fees associated with these taxes, or special assessments for items such as street paving or sewer improvements.

Insurance

Insurance on your vacation home can provide another tax deduction. The IRS limits the amount of interest you can deduct if your adjusted gross income exceeds a certain amount. For example, in 2011, if you were married filing jointly and your adjusted gross income was $109,000 or more, you couldn’t take the mortgage insurance deduction.

Rentals

If you rent out your vacation home part of the time, you must also stay at the house at least 14 days during the year, or more than 10 percent of the time it’s rented out, in order to claim tax deductions related to the house. For example, if you rent the house for 200 days, you must stay there more than 20 days in order to write off your mortgage interest, insurance and property taxes.

According to Wikipedia, Blanco “Ranch” is or was the main residence for Pat Higginbotham and his family for many many years. See excerpt below.

Present

Higginbotham continues to maintain a full workload on the court, though he has taken senior status. He is Jurist in Residence at St. Mary’s University School of Law in San Antonio, Texas, where he teaches courses in Constitutional Law and Federal Courts. He has also taught at the University of Texas School of Law, the University of Alabama School of Law, the Southern Methodist University Dedman School of Law, and the Texas Tech University School of Law. The University of Alabama School of Law maintains an endowed scholarship in his name. He was married to Elizabeth O’Neal Higginbotham until her death on June 10, 2017, at the age of 78.[8] They have two daughters, Anne Elizabeth and Patricia Lynn, and 6 grandchildren. He lives on his ranch in Blanco, Texas.

In 2018’s financial disclosure, Judge Higginbotham lists ‘Blanc’ as land (which we believe is a typo for Blanco). As at January 2020, Zillow appraises the property and 25 acres at $849k. It is uncertain if he has split the land and property and we’ve not researched that question – at this time.  Higginbotham values the “Blanco Land” at Category N, which is $250-500k. Property records indicate Higginbotham purchased the property in March 2005, which is just shy of 15 years ownership.

IRS; Topic No. 415 Renting Residential and Vacation Property

If you receive rental income for the use of a dwelling unit, such as a house or an apartment, you may deduct certain expenses. These expenses, which may include mortgage interest, real estate taxes, casualty losses, maintenance, utilities, insurance, and depreciation, will reduce the amount of rental income that’s subject to tax. You’ll generally report such income and expenses on Form 1040, U.S. Individual Income Tax Return (PDF) or Form 1040-SR, U.S. Tax Return for Seniors (PDF) and on Schedule E (Form 1040 or 1040-SR), Supplemental Income and Loss (PDF). If you’re renting to make a profit and don’t use the dwelling unit as a residence, then your deductible rental expenses may be more than your gross rental income. Your rental losses, however, generally will be limited by the “at-risk” rules and/or the passive activity loss rules. For information on these limits, refer to Publication 925, Passive Activities and At-Risk Rules.

Rental Property / Personal Use

If you rent a dwelling unit to others that you also use as a residence, limitations may apply to the rental expenses you can deduct. You’re considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for more than the greater of:

  1. 14 days, or
  2. 10% of the total days you rent it to others at a fair rental price.

It’s possible that you’ll use more than one dwelling unit as a residence during the year. For example, if you live in your main home for 11 months, your home is a dwelling unit used as a residence. If you live in your vacation home for the other 30 days of the year, your vacation home is also a dwelling unit used as a residence unless you rent your vacation home to others at a fair rental value for 300 or more days during the year in this example.

A day of personal use of a dwelling unit is any day that it’s used by:

  • You or any other person who has an interest in it, unless you rent your interest to another owner as his or her main home and the other owner pays a fair rental price under a shared equity financing agreement
  • A member of your family or of a family of any other person who has an interest in it, unless the family member uses it as his or her main home and pays a fair rental price
  • Anyone under an agreement that lets you use some other dwelling unit
  • Anyone at less than fair rental price

Minimal Rental Use

There’s a special rule if you use a dwelling unit as a residence and rent it for fewer than 15 days. In this case, don’t report any of the rental income and don’t deduct any expenses as rental expenses.

Dividing Expenses between Rental and Personal Use

If you use the dwelling unit for both rental and personal purposes, you generally must divide your total expenses between the rental use and the personal use based on the number of days used for each purpose. You won’t be able to deduct your rental expense in excess of the gross rental income limitation (your gross rental income less the rental portion of mortgage interest, real estate taxes, and casualty losses, and rental expenses like realtors’ fees and advertising costs). However, you may be able to carry forward some of these rental expenses to the next year, subject to the gross rental income limitation for that year. If you itemize your deductions on Schedule A (Form 1040 or 1040-SR), Itemized Deductions (PDF), you may still be able to deduct your personal portion of mortgage interest, property taxes, and casualty losses from Federally declared disasters on that schedule.

Net Investment Income Tax

If you have a rental income, you may be subject to the Net Investment Income Tax (NIIT). For more information, refer to Topic No. 559.

Additional Information

For more information on offering residential property for rent, refer to Publication 527, Residential Rental Property (Including Rental of Vacation Homes).

For more information on residential rental property income and expenses, refer to Topic No. 414 and Is My Residential Rental Income Taxable and/or Are My Expenses Deductible?

FROM THE COMPTROLLER OF TEXAS: VALUING PROPERTY; PROPERTY TAX ASSISTANCE

With few exceptions, Tax Code Section 23.01 requires taxable property to be appraised at market value as of Jan. 1. Market value is the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:

  • it is exposed for sale in the open market with a reasonable time for the seller to find a purchaser;
  • both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use; and
  • both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other.

How Property is Valued

Each county appraisal district determines the value of all taxable property within the county boundaries. Tax Code Section 25.18 requires appraisal districts to reappraise all property in its jurisdiction at least once every three years. Tax Code Section 23.01 requires that appraisal districts comply with the Uniform Standards of Professional Appraisal Practice if mass appraisal is used and that the same appraisal methods and techniques be used in appraising the same or similar kinds of property. Individual characteristics that affect the property’s market value must be evaluated in determining the property’s market value.

Before appraisals begin, the appraisal district compiles a list of taxable property. The list contains a description and the name and address of the owner for each property. In a mass appraisal, the appraisal district then classifies properties according to a variety of factors, such as size, use and construction type. Using data from recent property sales, the appraisal district appraises the value of typical properties in each class. Taking into account differences such as age or location, the appraisal district uses typical property values to appraise all the properties in each class.

Three common approaches that the appraisal district may use in appraising property are the sales comparison (market) approach, the income approach and the cost approach.

The market approach to value is based on sales prices of similar properties. It compares the property being appraised to similar properties that have recently sold and then adjusts the comparable properties for differences between them and the property being appraised.

The income approach is based on income and expense data and is used to determine the present worth of future benefits. It seeks to determine what an investor would pay now for a future revenue stream anticipated to be received from the property.

The cost approach is based on what it would it cost to replace the building (improvement) with one of equal utility. Depreciation is applied and the estimate is added to the land value.

Notice of Appraised Value informs the property owner if the appraisal district intends to increase the value of a property. Chief appraisers send two kinds of notices of appraised value.

A detailed notice contains the description of the property; taxing units allowed to tax the property; preceding year’s appraised value; preceding year’s taxable value; current year’s appraised value; an explanation of available partial or total exemptions; last year and current year exemptions; estimate of taxes based on previous year’s tax rates if the appraised value is greater in the current year; statutory language; explanation of how to protest; ARB hearing information; and an explanation that the appraisal district only determines a property’s value and does not decide on tax increases. A detailed notice is sent if:

  • the value of a property is higher than it was in the previous year (The appraisal district’s board can decide that it will send detailed notices only if a property’s value increases by more than $1,000.);
  • the value of a property is higher than the value the property owner gave on a rendition (see next section);
  • the property was not on the appraisal district’s records in the previous year; or
  • an exemption or partial exemption approved for the property for the preceding year was canceled or reduced for the current year.

Tax Code Section 25.19 requires the chief appraiser to send the notice of appraised value by May 1 or April 1 for residence homesteads, or as soon thereafter as possible. If a property owner disagrees with this value, the property owner may file a protest with the appraisal review board (ARB).

The notice of appraised value includes a protest form and information about how and when to file a protest with the ARB if the property owner disagrees with the appraisal district’s actions.

The appraised home value for a homeowner who qualifies his or her homestead for exemptions in the preceding and current year may not increase more than 10 percent per year.

Tax Code Section 23.23(a) sets a limit on the amount of annual increase to the appraised value of a residence homestead to not exceed the lesser of:

  • the market value of the property; or
  • the sum of:
    • 10 percent of the appraised value of the property for last year;
    • the appraised value of the property for last year; and
    • the market value of all new improvements to the property.

Tax Code Section 23.23(e) defines a new improvement as an improvement to a residence homestead made after the most recent appraisal of the property that increases its market value and was not included in the appraised value of the property for the preceding tax year. It does not include repairs to or ordinary maintenance of an existing structure, the grounds or another feature of the property. Tax Code Section 23.23(f) states that a replacement structure for one that was rendered uninhabitable or unusable by a casualty or by wind or water damage is also not considered a new improvement.

The appraisal limitation only applies to a residence homestead. As stated in Tax Code Section 23.23(c), the limitation takes effect Jan. 1 of the tax year following the year in which the homeowner qualifies for the homestead exemption. It expires on Jan. 1 of the tax year following the year in which the property owners no longer qualify for the residence homestead exemption.

rendition is a form that may be used by a property owner to report taxable property owned on Jan. 1 to the appraisal district. Both real and personal property may be rendered. The rendition identifies, describes and gives the location of the taxable property. Business owners must report a rendition of their personal property. Other property owners may choose to submit a rendition.

Persons filing renditions who are not the property owner, owner’s employee or affiliated entity or a secured party must have the rendition notarized.

If the total taxable value of personal property is less than $500 in any one taxing unit, the property is exempt in that taxing unit.

Advantages

A property owner who files a rendition is in a better position to exercise his or her rights as a taxpayer.

The property owner’s correct mailing address is established on record so taxing units send tax bills to the right address.

The property owner’s opinion of his or her property’s value is on record with the appraisal district. The chief appraiser must send a notice of appraised value if he or she places a higher value on the property than the value listed on rendition by the property owner.

 

Rendition Statements and Reports Deadlines Allowed Extension(s)
Property generally April 15
  • May 15 upon written request
  • Additional 15 days for good cause shown
Property regulated by the Public Utility Commission of Texas, the Railroad Commission of Texas, the federal Surface Transportation Board or the Federal Energy Regulatory Commission. Tax Code 22.23(d). April 30
  • May 15 upon written request
  • Additional 15 days for good cause shown

Property Inspection

Tax Code Section 22.07 authorizes the chief appraiser or a representative to enter the premises of a business, trade or profession to inspect the property to determine the existence and market value of tangible personal property used for the production of income and if it has taxable situs.

 

Penalties

A penalty of 10 percent of the total amount of taxes imposed the on the property for that year could be incurred for failing to timely file a rendition statement or property report.

A penalty of 50 percent of the total amount of taxes imposed on the property for the tax year of the statement or report could be incurred for filing a false report or statement or for altering, destroying or concealing any record.

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Laws In Texas is a blog about the Financial Crisis and how the banks and government are colluding against the citizens and homeowners of the State of Texas and relying on a system of #FakeDocs and post-crisis legal precedents, specially created by the Court of Appeals for the Fifth Circuit to foreclose on homeowners around this great State. We are not lawyers. We do not offer legal advice. We are citizens of the State of Texas who have spent a decade in the court system in Texas and have been party to during this period to the good, the bad and the very ugly.

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