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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

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.

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.