3 ms·

Property tax would just be passed on to the renters wouldnt it?

by boznz 7y ago

fountainofage 7y ago
Renters pay market rate for rent. If the landlords can pass on 100% of the property tax, then the supply is way out of sync with the demand.
- deleted 7y ago
  [deleted]
- ketzo 7y ago
  > “Supply is way out of sync with the demand” Welcome to California.
- mrep 7y ago
  What? How? If the renter is paying less than the property tax, then the owner is losing money just on the property alone and not accounting for the likely mortgage payments. Nobody would ever rent out a place if that was the case.
  - fountainofage 7y ago
    First of all, no one said renters are paying less than property tax? But even if they were, it's still the same logic. That's just the law of supply and demand. Renters pay the market rate. If an owner can't afford to rent at that market rate, then as you noted, they go out of the renting business. You'll find if you run the numbers on properties in SF, landlords are banking on property appreciation. The market rents don't pay the ownership costs, usually by a huge margin.
    - mrep 7y ago
      > First of all, no one said renters are paying less than property tax? You just said "If the landlords can pass on 100% of the property tax, then the supply is way out of sync with the demand". For growing areas, why would any investor develop any land to increase housing supply to rent out if the property tax alone would cause them to lose money based on the money they could make renting out places?
      - fountainofage 7y ago
        The economic term is "deadweight loss" and the most ideal scenario (outside of not having it) is to have both the supply and demand side share the deadweight loss equally. However, if either curve is out of sync with the other, then the portion of the deadweight loss paid shifts. So if a landlord can pass on 100% of the property tax, then demand is dramatically and catastrophically way outpacing supply. This is a bad situation to have if you want an efficient market where buyers have lots of choices and options. Edit: I see where you might be confused - I'm talking about passing on 100% of the property tax. In an ideal scenario, landlords would have to cut into their profits to pay for the property tax that tenants wouldn't. But in California, we obviously don't want a market where buyers have lots of options, so apparently everyone is ok with landlords passing along 100% of the property tax cost to the tenants.
dpc_pw 7y ago
Maybe not all of it everywhere, but yes. Any tax is always passed on to the "end users" to certain extent (-/+ elasticity and competitiveness) - something that a lot of people don't understand. If you tax 50% income of people who make a lot of money (like CEOs), with time they just demand about 2x more than before to compensate and the tax is being paid by the consumer anyway. If you tax all surgeons, regular people will pay in insurance, and so on.
- anoncake 7y ago
  They already demand what they think they can get. Taxing CEOs at 50% doesn't magically double what their labour is worth.
  - sieabahlpark 7y ago
    Their worth is originally calculated based on what they take home. If you cut what they take home in 50% they are making less than what they consider their worth.
solatic 7y ago
In the American model, yes. I live in Tel Aviv, where property tax is paid by occupants, not by owners. On the upside, this allows the government to give tax breaks to protected classes (e.g. the elderly, so that they're not kicked out of the apartment they've lived in and owned for decades just because property tax became unaffordable) directly. On the other hand, the carrying cost for owning real estate in a highly desirable market that you rent out is practically zero, so most apartments are owned by people who inherited them and are uninterested in selling, because a) urban renewal plans will eventually give owners a big financial windfall when their older buildings are chosen to be replaced with subsidized new construction, and the replacement apartment they will receive in the future is worth far more, b) people have children, and there is a huge value to being able to provide your children with housing in a desirable market when they get older, so owners rent their properties out in the interim. Ironically, property taxes paid by renters creates a landed class.
RickJWagner 7y ago
That 10%, plus more. Owners will be eager to increase profits, not just tread water. This could be used as an excuse to hike rates far beyond the 'break even' 10%.

Property tax would just be passed on to the renters wouldnt it?

by boznz 7y ago

Property tax would just be passed on to the renters wouldnt it?

Renters pay market rate for rent. If the landlords can pass on 100% of the property tax, then the supply is way out of sync with the demand.

deleted 7y ago
[deleted]
ketzo 7y ago
> “Supply is way out of sync with the demand” Welcome to California.
mrep 7y ago
What? How? If the renter is paying less than the property tax, then the owner is losing money just on the property alone and not accounting for the likely mortgage payments. Nobody would ever rent out a place if that was the case.
- fountainofage 7y ago
  First of all, no one said renters are paying less than property tax? But even if they were, it's still the same logic. That's just the law of supply and demand. Renters pay the market rate. If an owner can't afford to rent at that market rate, then as you noted, they go out of the renting business. You'll find if you run the numbers on properties in SF, landlords are banking on property appreciation. The market rents don't pay the ownership costs, usually by a huge margin.
  - mrep 7y ago
    > First of all, no one said renters are paying less than property tax? You just said "If the landlords can pass on 100% of the property tax, then the supply is way out of sync with the demand". For growing areas, why would any investor develop any land to increase housing supply to rent out if the property tax alone would cause them to lose money based on the money they could make renting out places?
    - fountainofage 7y ago
      The economic term is "deadweight loss" and the most ideal scenario (outside of not having it) is to have both the supply and demand side share the deadweight loss equally. However, if either curve is out of sync with the other, then the portion of the deadweight loss paid shifts. So if a landlord can pass on 100% of the property tax, then demand is dramatically and catastrophically way outpacing supply. This is a bad situation to have if you want an efficient market where buyers have lots of choices and options. Edit: I see where you might be confused - I'm talking about passing on 100% of the property tax. In an ideal scenario, landlords would have to cut into their profits to pay for the property tax that tenants wouldn't. But in California, we obviously don't want a market where buyers have lots of options, so apparently everyone is ok with landlords passing along 100% of the property tax cost to the tenants.

dpc_pw 7y ago

Maybe not all of it everywhere, but yes. Any tax is always passed on to the "end users" to certain extent (-/+ elasticity and competitiveness) - something that a lot of people don't understand. If you tax 50% income of people who make a lot of money (like CEOs), with time they just demand about 2x more than before to compensate and the tax is being paid by the consumer anyway. If you tax all surgeons, regular people will pay in insurance, and so on.

anoncake 7y ago
They already demand what they think they can get. Taxing CEOs at 50% doesn't magically double what their labour is worth.
- sieabahlpark 7y ago
  Their worth is originally calculated based on what they take home. If you cut what they take home in 50% they are making less than what they consider their worth.

solatic 7y ago

In the American model, yes. I live in Tel Aviv, where property tax is paid by occupants, not by owners. On the upside, this allows the government to give tax breaks to protected classes (e.g. the elderly, so that they're not kicked out of the apartment they've lived in and owned for decades just because property tax became unaffordable) directly. On the other hand, the carrying cost for owning real estate in a highly desirable market that you rent out is practically zero, so most apartments are owned by people who inherited them and are uninterested in selling, because a) urban renewal plans will eventually give owners a big financial windfall when their older buildings are chosen to be replaced with subsidized new construction, and the replacement apartment they will receive in the future is worth far more, b) people have children, and there is a huge value to being able to provide your children with housing in a desirable market when they get older, so owners rent their properties out in the interim. Ironically, property taxes paid by renters creates a landed class.

RickJWagner 7y ago

That 10%, plus more. Owners will be eager to increase profits, not just tread water. This could be used as an excuse to hike rates far beyond the 'break even' 10%.