San Antonio City Council plans to vote Thursday on a plan that would increase the homestead exemption from city property taxes from .01% of the home’s assessed value, or $5,000, to 10%, effective on 2022 tax bills. 

The plan also includes increases on homestead exemptions disabled people and those 65 and older can receive on the assessed value of their homes. The new exemptions must be approved by the council by July 1 in order for them to be applied to 2022 property tax valuations.

Skyrocketing property valuations in San Antonio are creating a revenue surplus the city can’t legally keep, thanks to a 2019 Texas law that mandates large counties, cities and other taxing units must keep their revenue from growing more than 3.5% over the previous year. If tax revenue exceeds that threshold without measures being taken to provide relief, the taxing entities would be forced to hold an election that would allow taxpayers to vote on lowering the rate.

“Our strategy was to give everybody something,” City Manager Erik Walsh said of San Antonio’s plan to direct exemptions toward homeowners who live in their homes, people who are disabled and people at least 65 years of age. 

San Antonio’s proposed 10% homestead exemption comes in contrast to other major Texas cities, which have given taxpayers the maximum homestead exemption allowed by the state, 20%. Bexar County also approved a 20% homestead exemption for its portion of a resident’s property taxes earlier this month, citing the need to direct tax relief toward young families.

“We know that the greatest demographic of people who are financially stressed are people with children,” said Commissioner Marialyn Barnard (Pct. 3), who crafted the county’s plan. 

San Antonio is going a different route, one city officials say will allow them to come back and lower the overall property tax rate later this year.

Documents provided by the city show an estimated reduction in the property tax rate, from $0.558 per $100 of valuation to $0.545 per $100 of valuation, though exact numbers won’t be known until revenue is finalized later this fall.

“We looked at [a 20% homestead exemption] as part of our modeling,” Deputy Chief Financial Officer Troy Elliott told City Council last month while presenting the city’s proposal. “The way it impacts the tax rate is, it moves the tax rate up almost equivalent to what the tax rate is today, and so that would not be providing any relief” to commercial and multifamily property owners.

As corporations and other investors are rapidly scooping up real estate in San Antonio, proponents of simply lowering local governments’ property tax rates say focusing relief only on homestead deductions unfairly hurts people who lease and rent.

“We’ve seen that across the state, whether it’s businesses or hedge funds coming in and buying up property, they’re going to pass along those higher property taxes to those that are leasing out that property … so it’s a good idea to lower property taxes for everyone,” said Vance Ginn, chief economist at the conservative Texas Public Policy Foundation, which advocates for the eventual demise of property taxes altogether.

Under the plan City Council is set to consider Thursday, a property assessed at $300,000 would see about about $164 in total savings from the increased homestead exemption, according to the San Antonio Board of Realtors, which favors the measure. Roughly 247,000 homes in San Antonio currently qualify for a homestead deduction.

The plan also would allow people 65 years of age and older claiming a homestead exemption to reduce the assessed value of their home by up to $85,000 — an increase from $65,000 in previous years. That exemption would apply to roughly 103,000 households, according to the San Antonio Board of Realtors.

People who are fully disabled and receive benefits under Federal Old-Age, Survivors and Disability Insurance would get an exemption worth up to $85,000, up from $12,500 in previous years. This exemption currently applies to about 7,000 residents.

“It’s a really good thing for our disabled community,” said Councilwoman Adriana Rocha Garcia (D4), who pushed for the increased exemption for disabled people after learning that San Antonio currently has one of the lowest homestead exemptions among major cities for people who are disabled. Rocha Garcia said she plans to support Thursday’s proposal.

Elliott said that while other Texas cities have focused their property tax relief toward homesteads, San Antonio has instead traditionally focused on older adults.

Thursday’s proposed changes come in addition to a freeze San Antonio approved in 2005 that keeps the property taxes for people who are disabled or at least 65 from increasing as long as the property is occupied by the homestead owner. That rule applies to roughly 45% of San Antonio households.

“The one thing that they do not do that we do is … the senior tax freeze,” said Elliott.

That rule alone is expected to account for $30.5 million of the overall $72.4 million in property tax relief the city plans to offer through exemptions and freezes in 2022.

Of the seven largest cities in Texas, San Antonio was the last to adopt a residential homestead exemption. It currently has the lowest exemption that can be applied by a local municipality in Texas.

Andrea Drusch writes about local government for the San Antonio Report. She's covered politics in Washington, D.C., and Texas for the Fort Worth Star-Telegram, National Journal and Politico.