Who benefits from upping the homestead exemption?

To:               Interested Parties
From:         Jason Stanford, Office of the Mayor
Date:           July 8, 2016
Re:               Whom we helped by upping the homestead exemption


In June, the City Council approved on third reading Ordinance No. 20150604-101, increasing the homestead exemption by 2% to 8%. The projected total savings to Austin homeowners is $3.8 million. Raising the homestead exemption by 2% will save the owner of a $250,000 an extra $22.95 a year.

Questions have been raised, however, about who benefits most from cutting the taxes on Austin homeowners. This memo attempts to address those questions.



The property tax is a regressive tax because it takes a higher percentage of income from lower income homeowners than from wealthier ones. Cutting the property tax proportionally, as a homestead exemption increase does, does not increase the degree to which the tax is regressive.



Because a property tax takes proportionately more from lower-income homeowners than higher-income ones, then it follows that cutting those taxes by a set percentage benefits homeowners more the lower they fall on the income scale because they recover a greater share of their income.



Yes. According to census data, in 2013 Austin had 73,000 housing units with an annual household income of less than $25,000. Shockingly, 20 percent of those were owner-occupied.

Also, there were 84,000 housing units with a household income between $25,000 and $50,000. Of those, 29 percent of those units were owner-occupied.



d1Primarily, these lower-income homeowners are clustered in council districts 1 and 2 but can be found throughout the city. In the under-$25,000 income bracket, we find:

  • Only districts 1 and 2 had more than 2,000 low-income homeowners.
  • Only district 9 had fewer than 1,000.
  • The remainder had between 1,000 and 2,000 such homeowners.


In the $25,000-$50,000 income bracket, we see these homeowners clustered first in districts 1 d2and 2, followed by districts 5 and 7.

  • In districts 1 and 2, the number of homeowners in the $25,000-$50,000 range top 4,000, more than the number of homeowners making more than $100,000 or more a year in each district.
  • In districts 4, 5, and 7, the number of homeowners in the $25,000-$50,000 range exceeds the number of the homeowners making more than $150,000 a year.
  • Only in districts 6, 8, 9, and 10 do the number of wealthier homeowners exceed the number of middle- and lower-income homeowners.