Average Vs. Median. What's The Best Way To Calculate Effects To Property Tax Bills?
Did Travis County lower the typical homeowner’s property tax bill in the last year? It depends on how you look at it. Travis County took issue with a KUT story that said despite the county lowering its tax rate, most homeowners ended up paying more in county property taxes.
According to Travis County’s current budget, owners of an average-priced home (roughly $285,000) saved 4 cents on their property tax bill compared to the year before. But, the owner of a median-priced home (roughly $219,000) paid an additional $10 in property taxes this year. This difference doesn’t actually change your property taxes. It’s just about how the numbers are presented.
That raises this question: Which measure more accurately shows what’s happening for a typical homeowner? The answer requires a trip back to, say, fourth grade.
“When you get an average, you’re simply taking every home or every property in that classification, adding the values up and the dividing by the total number there might be,” said Rahul Patel, a property tax lawyer with firm Patel Gaines, which has offices in San Antonio and Fort Worth. A median, on the other hand, is calculated by stacking up the values and picking out the literal middle number.
Patel said he thinks there are more disadvantages to using an average home value, including the fact that an average is more easily swayed by outlying values.
“So you could have a particular segment where you have a few very, very high-dollar properties and significantly more lower-dollar properties, but you end up getting an average that’s somewhat in the middle or higher than that,” he said.
Charles Gilliland, who studies land value at the Real Estate Center at Texas A&M, said he is always more inclined to use the median home value.
“If you’re trying to describe what is typical for the housing stock," he said, "you would probably focus on the median more than the average because the average is unduly influenced by those really large outliers."
Gilliland said home values tend to be unevenly distributed, and because of that, a median value can get closer to a more real middle number.
But Deece Eckstein with the Travis County Intergovernmental Relations Office disagreed.
“We think that the average is a more helpful indicator of what’s going on in the quote unquote average person’s tax bill,” he said. He said he favors the average for its melting-pot approach to numbers.
“[Values] all get kind of blended together into a beautiful frappe of information,” Eckstein said.
Travis County Executive Jessica Rio said the county uses average because state law requires that tax notices published by taxing entities include average home values. The county publishes the median so the public can see both.
“Just for transparency issues," she said, "I think it’s important to have both out there."
The City of Austin, on the other hand, uses median home value when calculating the property tax impact of its budget on the public. In a statement, the city reiterated much of what Patel and Gilliland said.
“The City of Austin uses median over the average because we think it is more representative of the ‘typical’ homeowner. The average is going to skew higher because of very high-dollar properties, but this doesn't necessarily represent where someone truly in the middle is at,” wrote Bryce Bencivengo, a city spokesperson. “Whereas, by definition, the median means that there are an equal number of properties valued both higher and lower and really provides the homeowner that is located right in the middle.”