Getting to Yes
TCAD and Mueller settle tax appraisal dispute
After months of disagreement and some acrimony, the Travis Central Appraisal District and the Mueller Foundation announced this week that they have resolved their dispute over property tax appraisals of homes included in the Mueller neighborhood development's Affordable Homes Program. Three homeowners had filed suit over the appraisals after losing their TCAD appeals, but legally required mediation intervened before the scheduled late-June trials. Under an agreement among the parties, TCAD will recognize the contractual resale limitations placed on the affordable homes, and the Foundation agrees to limit the movement of homes out of the affordable program.
In an announcement released Monday, Foundation Executive Director Patti Summerville said, "We're pleased with the result, and we're moving forward to place more deserving and qualified families into quality homes in the heart of Austin." Summerville's sentiments were echoed by TCAD's attorney Judith Hargrove, who told the Chronicle, "We were finally able to sit down, really listen to each other, and see the situation from each other's perspective. That enabled us to resolve the disagreement to everyone's satisfaction."
The atmosphere was not so friendly last November, when the various parties appeared before TCAD's board of directors, laying out their disagreement over what standards should be used in appraising the affordable properties. Homeowners, their attorneys, and Foundation representatives accused TCAD of changing its initial practice of evaluating the homes under the contractual covenant with the Foundation, which limits a homeowner selling the property to an annual 2% accrual of any additional equity. TCAD's representatives responded that the Foundation had effectively abandoned those limitations when it resold some of the homes at market value to help fund the program.
That left remaining homeowners without protection against rising valuations and taxes: Homes that were originally appraised at $170,000, for example, were suddenly issued appraisals above $325,000 – and steadily rising, even under the state-mandated 10% cap. "Under these rising appraisals," Janeka Rector, a Mueller homeowner and development specialist at UT-Austin, told the board, "my home will become unaffordable within five years." (See "Mueller vs. TCAD: No Room for Affordability?" Nov. 6, 2015.)
At that meeting, Hargrove had replied that the Foundation's actions had made it impossible for TCAD to reduce the evaluations. "TCAD is being blamed," Hargrove said, "for a situation that the Mueller Foundation created in the way it established this program."
This week, following the mediation and a Memorandum of Agreement among the parties, everyone was singing a friendlier tune. "All of us were in the room together," said Summerville, "and we were all determined to do whatever we could to work this out." The solution involves revised purchase contracts to be signed by the homeowners, making more explicit the restrictions on resale, as well as limitations on the Foundation's ability to resell homes it purchases under "first-refusal" provisions.
Summerville acknowledged that the revised agreements – in combination with ever-rising property values – will make it more expensive for the Foundation to maintain the city-established program, under which 25% of the homes in the Mueller neighborhood are to remain affordable for residents earning 80% or less of median family income. (More than 300 homeowners in the development are currently within the 2% program or an earlier, more complex version; rental units are covered by a parallel program using a lower MFI standard.) Nevertheless, Summerville said, the Foundation remains "committed to sustain the program at that level of affordability."
The agreement means the withdrawal of three pending lawsuits by homeowners, while other neighbors waiting in line can breathe a sigh of relief that their appraisals will not be spiking to ever-rising market prices. Moreover, the agreement preserves a nationally innovative program that maintains affordability beyond the initial purchase. Last fall, such a resolution seemed remote without (unlikely) legislative action, and state Rep. Celia Israel urged the parties instead to solve the problem together. "Find a way to make it happen," Israel said. "Find a way to get to yes."
Summerville's announcement answered Israel's appeal. "This process has proven the nationally recognized Mueller Affordable Homes Program is working as intended," Summerville said. "Through this settlement, I think everyone realizes this original and ambitious affordable housing model created by national experts to sustain affordability beyond the initial home purchase has worked, but it has required some tweaks along the way."