Our state faces a unique appraisal consideration related to certain residential communities near Texas’ international border with Mexico. These communities—known as “colonias”—lack basic infrastructure such as water, wastewater, and paved roads.
All Texas counties within 50 miles of the border are subject to “Colonias Laws” that intend to assure infrastructure exists for new residential developments. However, existing state law effectively makes these properties unsalable, yet property owners are taxed for ad valorem purposes on the property’s full value.
The Texas Government Code prohibits selling, offering for sale, or even advertising a property for sale unless it is properly subdivided under the Model Subdivision Rules. This portion of the law applies only to areas along the border, and it carries a minimum fine of $10,000 per lot simply for advertising or offering such a property for sale.
The Texas Water Development Board has rules to assure water and sewer services in these areas and provides training for local officials about these areas; however, enforcement resides with the Attorney General’s office.
What does this mean for the real estate industry?
“Model subdivision laws” were put into place to address important infrastructure and health and safety issues; however, the practical effect is that these properties become virtually unsalable, which in turn sets their market value at zero.
This circumstance results in unfair and unjustified ad valorem taxation on property owners and negatively impacts the ability of property owners to freely sell or transfer ownership of this property. These laws are also unequal, being strictly applied only to properties based on their geographic location instead of being a universal standard for all property within the state.
Texas REALTORS® position
Texas REALTORS® understands the need to ensure that inhabited real property has adequate utility connections, such as electricity, sewer, and water.
However, the Model Subdivision laws that are applicable only to land within 50 miles of an international border have unfortunately created an unequal standard for those properties as compared to real property elsewhere in Texas, which infringes upon the ability and rights of property owners to sell or transfer that property.
Texas REALTORS® believes real property should be subject to uniform standards for development throughout the state. As such, our association supports full repeal of the Model Subdivision laws applicable to land within 50 miles of an international border.
Barring a full repeal of these laws, Texas REALTORS® supports modifications to the existing Model Subdivision standards to allow real property within 50 miles of an international border to be legally transferred without fines or other penalty or fear of retribution, while still upholding the need to ensure such property has adequate utility connections for habitability.
Modifications may include:
- Allow buyers to assume the responsibility of establishing utility connections, including septic tanks where appropriate, within a certain timeframe after purchase
- Allow transfers made to certain family members, such as from parent to child or among siblings
Further, property that is not saleable due to government restriction should be deemed to have no value for property tax purposes. Therefore, Texas REALTORS® supports legislation that states if a parcel of real property subject to Model Subdivisions Laws and located within 50 miles of an international border is not improved and therefore is not marketable or saleable due to existing state or local regulations, then any appraised market value shall be fully exempted for ad valorem tax purposes only.
This exemption does not necessarily indicate the property is valueless when being assessed for public or private taking or other real property transfer.
We expect to see legislation addressing these issues as the Texas Legislature continues to focus on reducing property tax burdens and increasing available housing supply across the state.
In 1989, colonias-prevention rules were first mandated by legislation known as the Economically Distressed Areas Program. The model rules were initially required to be adopted and enforced just by counties and cities seeking EDAP funding, but now they must be enforced by all counties within 50 miles of the border.
The rules were revised effective in February 2000 and codified in the Texas Administrative Code.