Housing Costs

[Soloist]

The way to encourage home ownership is to have generous homestead exemptions for owner occupants and then impose more of the tax burden on corporations and absentee investors. Which will encourage them to sell to families seeking to actually own a home.

Some years ago I had an acquaintance in Seattle who was a real estate agent. And she was employed full time by some sort of very deep pocketed religious order in China or Taiwan, I forget which. Thinking back on it now, it occurs to me that maybe it was the Falun Gong or something similar.

In any event, she made a very good living working full time buying up properties around the Seattle area as investments for this group and the purchases were all structured through various shell corporations. There are astonishing amounts of money sloshing around in the world looking for safe places to park and hide. And American real estate can be a plum investment due to US tax laws and laws around corporate ownership. So dozens upon dozens of Seattle-area properties were being taken off the market and converted into rentals by this Chinese group, or even just kept empty as a way to launder and deposit international money.

Localities can't do much about international corporate finance and things like hedge funds buying up properties by the thousands. But they can at least adjust their local tax codes to encourage local home ownership and discourage outside and international investors.

Wife: Ah, I was wondering why you'd have a beef with the homestead exemption. The rest of it is over my head.

No beef with it at all. I think it is a good thing and a useful way that taxing authorities can promote home ownership over corporate investors. We claim it ourselves

Wife: Yah, our area is horrible now with rent/housing, and I think a lot of it comes from people buying up properties for airbnbs, rentals, ect, or even leaving them empty to inflate prices, and I think I've heard some about one of the biggest companies being foreign based, but can't remember for sure. It's just painful when you have ridiculously low wages and ridiculously high cost of living compared to other places. Hubby works home health and makes a decent amount, and we are paying a family member interest free on our place, but hospitals and nursing homes around here start LPNs at less than 20 an hour and a lot of the 3 bed rentals for our size family start at 1300 and a lot more if you want them to be halfway safe. I still remember a decade ago when our last landlords in this town would have sold us our triplex for 27000 and now the Zestimate is saying 121000.

[ken_sylvania]

Wife: Ah, I was wondering why you'd have a beef with the homestead exemption. The rest of it is over my head.

No beef with it at all. I think it is a good thing and a useful way that taxing authorities can promote home ownership over corporate investors. We claim it ourselves

Wife: Yah, our area is horrible now with rent/housing, and I think a lot of it comes from people buying up properties for airbnbs, rentals, ect, or even leaving them empty to inflate prices, and I think I've heard some about one of the biggest companies being foreign based, but can't remember for sure. It's just painful when you have ridiculously low wages and ridiculously high cost of living compared to other places. Hubby works home health and makes a decent amount, and we are paying a family member interest free on our place, but hospitals and nursing homes around here start LPNs at less than 20 an hour and a lot of the 3 bed rentals for our size family start at 1300 and a lot more if you want them to be halfway safe. I still remember a decade ago when our last landlords in this town would have sold us our triplex for 27000 and now the Zestimate is saying 121000.

Interesting enough, the whole homestead exemption thing actually ends up making rent even more expensive, as the higher real estate tax gets passed on to the renters. Renters who often tend to be people who can't afford to buy.

[Soloist]

Interesting enough, the whole homestead exemption thing actually ends up making rent even more expensive, as the higher real estate tax gets passed on to the renters. Renters who often tend to be people who can't afford to buy.

Wife: Maybe so, but I think around here, insurance costs ect would have more impact, as well as supply and demand. We wouldn’t have been able to afford to buy were it not for people helping out, but I don’t think the solution would be to get rid of the exemption and it seems like they’ve been around for ages before the insane housing/rent price booms, so it’s probably not a major contributing factor in the grand scheme of things.

[ken_sylvania]

Interesting enough, the whole homestead exemption thing actually ends up making rent even more expensive, as the higher real estate tax gets passed on to the renters. Renters who often tend to be people who can't afford to buy.

Wife: Maybe so, but I think around here, insurance costs ect would have more impact, as well as supply and demand. We wouldn’t have been able to afford to buy were it not for people helping out, but I don’t think the solution would be to get rid of the exemption and it seems like they’ve been around for ages before the insane housing/rent price booms, so it’s probably not a major contributing factor in the grand scheme of things.

I'm not advocating for getting rid of the homestead exemption.

When you say you think insurance costs would have more impact - are you saying insurance costs are more for rental properties compared with owner-occupied dwellings? Or just mentioning that as a reason rents might be increasing?

[Ken]

No beef with it at all. I think it is a good thing and a useful way that taxing authorities can promote home ownership over corporate investors. We claim it ourselves

Wife: Yah, our area is horrible now with rent/housing, and I think a lot of it comes from people buying up properties for airbnbs, rentals, ect, or even leaving them empty to inflate prices, and I think I've heard some about one of the biggest companies being foreign based, but can't remember for sure. It's just painful when you have ridiculously low wages and ridiculously high cost of living compared to other places. Hubby works home health and makes a decent amount, and we are paying a family member interest free on our place, but hospitals and nursing homes around here start LPNs at less than 20 an hour and a lot of the 3 bed rentals for our size family start at 1300 and a lot more if you want them to be halfway safe. I still remember a decade ago when our last landlords in this town would have sold us our triplex for 27000 and now the Zestimate is saying 121000.

Interesting enough, the whole homestead exemption thing actually ends up making rent even more expensive, as the higher real estate tax gets passed on to the renters. Renters who often tend to be people who can't afford to buy.

No, it actually doesn't.

Rents are determined by supply and demand, not carrying costs which are going to be different for every single landlord.

Landlords in general are going to charge whatever the market will bear. You want to bring down rents? Increase housing supply.

[ken_sylvania]

Wife: Yah, our area is horrible now with rent/housing, and I think a lot of it comes from people buying up properties for airbnbs, rentals, ect, or even leaving them empty to inflate prices, and I think I've heard some about one of the biggest companies being foreign based, but can't remember for sure. It's just painful when you have ridiculously low wages and ridiculously high cost of living compared to other places. Hubby works home health and makes a decent amount, and we are paying a family member interest free on our place, but hospitals and nursing homes around here start LPNs at less than 20 an hour and a lot of the 3 bed rentals for our size family start at 1300 and a lot more if you want them to be halfway safe. I still remember a decade ago when our last landlords in this town would have sold us our triplex for 27000 and now the Zestimate is saying 121000.

Interesting enough, the whole homestead exemption thing actually ends up making rent even more expensive, as the higher real estate tax gets passed on to the renters. Renters who often tend to be people who can't afford to buy.

No, it actually doesn't.

Rents are determined by supply and demand, not carrying costs which are going to be different for every single landlord.

Landlords in general are going to charge whatever the market will bear. You want to bring down rents? Increase housing supply.

Are you a landlord?

[Ken]

Interesting enough, the whole homestead exemption thing actually ends up making rent even more expensive, as the higher real estate tax gets passed on to the renters. Renters who often tend to be people who can't afford to buy.

No, it actually doesn't.

Rents are determined by supply and demand, not carrying costs which are going to be different for every single landlord.

Landlords in general are going to charge whatever the market will bear. You want to bring down rents? Increase housing supply.

Are you a landlord?

My family has been. Then eventually gave it up as not worth the effort. I was happy about that because no more cleaning up, painting, mowing lawns, and late night helping my dad unclog plumbing and so forth. My wife’s family still is and it is a big headache. Especially during COVID.

Why are rents higher in say Manhattan than West Virginia? Supply and demand, not taxes.

In fact, economists track rent and vacancy rates in various cities over time and there is a clear and obvious relationship between the two. Vacancy rates go up (demand drops) rents fall. Vacancy rates go down (demand increases) and rents increase. All of this happens like clockwork when taxes remain stable.

Landlords might WANT to recover all their costs and make a profit from rentals. But it is a business there is no guarantee of profitability. Likewise, every single landlord has a different cost structure of which taxes are actually a minor part. One might have a big mortgage while another has none. One might have higher maintenance costs because the building is older. None of that really changes what they can charge in rent. What they can charge in rent is governed by the market.

[barnhart]

Ken, supply and demand are important but so is tax structure. The border between Queens and Nassau county is generally indistinguishable but the property taxes in Nassau are roughly double. This makes renting there much more expensive and less likely.

[Josh]

Overall, owners of their primary residence is a social good, and renters of their primary residence is a social ill. It is best to encourage the first and discourage the latter.

[Soloist]

Interesting enough, the whole homestead exemption thing actually ends up making rent even more expensive, as the higher real estate tax gets passed on to the renters. Renters who often tend to be people who can't afford to buy.

Wife: Maybe so, but I think around here, insurance costs ect would have more impact, as well as supply and demand. We wouldn’t have been able to afford to buy were it not for people helping out, but I don’t think the solution would be to get rid of the exemption and it seems like they’ve been around for ages before the insane housing/rent price booms, so it’s probably not a major contributing factor in the grand scheme of things.

I'm not advocating for getting rid of the homestead exemption.

When you say you think insurance costs would have more impact - are you saying insurance costs are more for rental properties compared with owner-occupied dwellings? Or just mentioning that as a reason rents might be increasing?

Wife: Just saying one of the many reasons why rent might be increasing locally. It’s the same with owned houses around here. Probably area specific though, so I’m not saying anything nationwide.