Investors That Bought Up Sun Belt Housing See Spikes In Tax Bills
Investors who drove record activity buying up rental properties in Sun Belt cities are facing a new threat to their revenues: increased property taxes.
Single-family rental landlord American Homes 4 Rent said in its earnings report that it expects its property taxes at its Texas properties to climb by more than 20% this year, Bloomberg reports, while Invitation Homes said its tax bill will rise by between 7% and 8% this year for its Florida and Georgia properties.
Invitation Homes CEO Dallas Tanner said in a statement that home price appreciation is driving the increases. Sun Belt states saw a huge influx as people migrated to warm-weather, lower-tax states during the pandemic. A shortage of housing inventory in those states pushed rents up, with cities struggling to meet demand and developers scrambling to deliver projects in their pipelines.
Some landlords, including Invitation Homes, are pushing back against property tax assessments, but the process involves paying the full amount and waiting for a rebate. Higher taxes are also affecting smaller landlords, with some saying they are unable to keep making money amid the increased costs.
Matthew Haines, a north Texas landlord who has three apartment complexes and several single-family rental properties, said that his taxes have doubled during the last four years. Haines said he is selling a 60-unit building he owns.
“We can’t make money with it anymore,” Haines told Bloomberg. “Seven days a week, my wife and I are trying to keep our heads above water.”
There are further headwinds facing recent investors in the U.S.' high-growth markets. Rents were already beginning to decline month-over-month in cities including Miami, Phoenix and Dallas-Fort Worth, an August report from CoStar found.
Nationally, multifamily rent growth and apartment demand went negative during Q3 this year — with an especially strong pullback in cities in Florida and Arizona. If inflation fails to cool, owners in need of refinancing may struggle to hold on to properties, experts told Bisnow.