You paid much more than that. A substantial part of your rent is property taxes. I also doubt you included sales taxes in that number. Then there's more esoteric stuff like tariffs, etc
My parents lived in North County and paid 13k+ a year on a $350k house. Their current place in Tampa is about 400k and the taxes are less than half of what they were in NY. Maybe Florida is a special case?
I'm basing this off of apartments in NYC. I often see ~$600k co-cops with $800 monthly co op fees (of which half is maintenance half is taxes). That seems low to me compared with similarly priced homes elsewhere.
So, I made a comment that it was in the top 10. Then you listed one that was dramatically higher. While I agree that NY doesn't compete for the top spot; your example in no way invalidates my point.
Because they are responding to the OP (who is talking about NYC) and further elaborating on NYC taxes, while describing their (supposed) NYC tax burden.
Prices are determined by supply and demand. Both are rather inelastic, especially in a highly desirable city like NYC, so very of the property taxes gets passed to the renters. If this weren't true, then renters in California would see savings from prop 13, but clearly that isn't happening.
Bobby gave Lisa $10. Lisa then gave $3 to Uncle Sam. What percentage of Bobby's money went to Uncle Sam? 30%. It's that simple. Bobby gave Uncle Sam 30% of his money.
But if property taxes go up you'd still be paying the same rent. I don't see how it makes sense to say you're paying property taxes when they have next to zero effect on your cost of living.
- A substantial part of your rent is property taxes.
Without detailed analysis there's no way to know if this is true, or how true it is. It is entirely possible for an increase in taxes to lead to no increase in end prices or even a drop in rent prices. It's a complex system.
Landlords are price takers. Supply is fixed short/medium run so just charge the maximum people will pay. Property tax rates have next to 0 effect on that.
That's not how things work. When you file your taxes, your rental properties will be treated as a business and the taxes paid there are a business expense. They are deducted from any rental income before the income is counted for the landlord. It is essentially as if the renter is paying the government directly.
"To some economists, the question is moot: Americans already pay a massive “tax” to fund health care, they say. It just happens to go to private insurance companies, rather than the federal government."
...
"Health insurance costs raise the average effective tax rate on American labor from 29 percent to 37 percent, they said."
The point is, the apartment owner pays property tax and collect rent from tenants to pay for that. If property taxes go up, property owners raise rents to compensate. So the tenants are paying the property tax, albeit indirectly.
If one landlord raises the rent, this will tend to make renters go to other landlords who are not raising the rent. But if the taxes are increased on all the landlords, they will likely all raise their rents together and renters can't simply go to another landlord who isn't raising the rent to avoid the increase.
Its actually much more complicated then that, depending on factors such as the propensity of landlords to cease renting out units if their profit decreases, the propensity of renters to shift to smaller dwellings in the face of rent increases, etc.
This happens all the time. Deciding whether a raised rent price is justification for moving out is a complicated and personal process and yet it fuels all of the response to landlords that do this.
Also, 1-year leases are typical in the U.S. (at least Philly/NYC northeast U.S.), so from that contractual perspective, your rent can go up every year and that's totally legal.
Landlords are also competing with each other and tenants have limits based on what they can actually afford to pay. At some point they can be forced to move out of the city to a lower cost of living location, dropping demand. In fact it's entirely possible for a significant increase in tax rates to make rental units a poor investment, causing housing prices to plummet and rents to drop.
Your mistake is assuming that people who bought up housing stock are guaranteed future profit on their speculative investment.
> In fact it's entirely possible for a significant increase in tax rates to make rental units a poor investment, causing housing prices to plummet and rents to drop.
How does this logic work? Building apartments becomes a bad investment. Then developers don't build apartments. And somehow constrained supply is supposed to result in lower prices?
What if developers built too many apartments so there is no shortage? What if the builders all decided to tear down the cheap apartments and build a bunch of Luxury Condominiums when the the housing market is full broke college students who can't even afford to cover the taxes on individual units?
You can say the market won't let it happen, but the second case is the current real estate market for the town I went to school in.
I’m a landlord and yes it is. My taxes doubled last year because of the stupid housing bubble and so we had to raise rent as well. Gotta make a profit here for this investment to be worthwhile.
Sell your building. Your taxes went up because your property value went up. You aren't entitled to a profit on rent. If you sell your building below what it's valued at, you'll still make a hefty profit, and it'll cause the value of other buildings to lower.
Land owners seem to feel entitled to businesses with no risk. Costs are always passed down, even if it makes people homeless. I'm more than happy with you going out of business if an event that makes you richer isn't an event that you can handle in terms of cost.
Maybe if people didn't buy property they don't live in as an investment then things like the stupid housing bubble might not happen in the first place.
Personally I think owning a residence you don't actually live in should just straight up be illegal, but I'm admittedly pretty radical about parts of the system that seem to exist solely to make the rich richer.
So, if I am going to live in an area for a year... I should be required to purchase a house, including all the money, time, and effort that involves? I would hate to live in a world where that was the case.
I have both owned and rented at different points in my life. There have been times where renting was a better choice for me, for a variety of reasons. I am glad that renting is an option.
In a world where there was no rentals there would probably be new things we can't imagine such as community ownerships. The specific thing that shouldn't exist - in parent commentors and myself is that the renter is paying money so that the actual owner pays off the property for their benefit, not the renter.
If some kind of community property system exists (not for ALL properties but a large number of them) then any rent you pay in say New York is also paying down a virtual mortgage you have the the "community" that spans the country. Like a virtual HOA.
That's how it used to work in the UK with social housing. The local authority would collect the rent and it would be used for upkeep of the properties, with surplus going to other public works. This was set up in the decades following the Second World War as Britain rebuilt, and it generally worked really well.
But then a right-wing government came to power and sold most of the social housing off, while banning local authorities from building any more. So now, we have the situation here where the large majority of tenants are renting from private landlords, who are just pocketing all the rent for themselves and doing the bare minimum upkeep, while holding a rapidly appreciating asset.
Which is exactly what the right-wingers wanted, but of course doesn't help everyone else who isn't a landlord, and just wants somewhere decent and affordable to live.
> Maybe if people didn't buy property they don't live in as an investment then things like the stupid housing bubble might not happen in the first place.
Sure would be awful for a rental market to exist. Without rental there’d be only be home owners and homeless and that is clearly a better world.
There's no guarantee that builders will use the loosened restrictions to build the most efficient housing. In fact they will most likely build the most profitable housing instead.
The most profitable is on the high end - so marble countertops, stainless steel appliances, etc. All the builders will race to build as much of that as they can, as fast as they can. Then, when the market is glutted, they'll be unable to sell off their investments. Builders will end up with their capital all sunk in cheap land and expensive housing. no one can afford to buy. The builders can't sell the cheap land since they leveraged it to pay for developing the expensive housing. They can't sell the expensive housing because the market has temporarily dried up. The builders will just wait until the glut resolves and continue business as usual.
Meanwhile, there is not really that much more actual housing for the low end market. Some builders made a bunch of money and some craftsmen got extra work building houses they can never afford.
> Then, when the market is glutted, they'll be unable to sell off their investments. Builders will end up with their capital all sunk in cheap land and expensive housing. no one can afford to buy. The builders can't sell the cheap land since they leveraged it to pay for developing the expensive housing. They can't sell the expensive housing because the market has temporarily dried up. The builders will just wait until the glut resolves and continue business as usual.
If there’s a glut in the market prices fall. If you have invested a lot of money in something in the hopes of selling it at a profit and you can’t you go out of business and your assets are sold. So if you over leverage and prices fall you go out of business and lose all your assets and the bank may lose some of its assets. Housing supply increases though. In a market where there’s excess demand at current price points (rising prices) that’s good.
Capitalism doesn’t make ever increasing housing prices, zoning does.
I respect the honest response. In my case, I'm not rich. I’m just trying to build up enough passive income to retire someday. There’s no pension for me. I can’t depend solely on my 401K. I’m just trying to be moderately responsible about my own future.
> My taxes doubled last year because of the stupid housing bubble and so we had to raise rent as well. Gotta make a profit here for this investment to be worthwhile
Surely you see stuff like this is part of what is driving this very bubble?
I mean you’re sort of right. There’s no such thing as a free lunch. So stuff is all ultimately paid by the consumer since that’s the end of the line.
There’s really no way to increase taxes without impacting consumers. Unless you try to limit rents, but then you have other problems with people not wanting to invest in apartment buildings.
That assertion depends on an efficient market though, and that is provably not true - the existence of corporate profits demonstrates this, because in an efficient market everyone makes 0 profit, and any rent-seeking will cause every single one of your customers to flee to a competitor who doesn't rent-seek. Everyone has to price as aggressively as possible given the costs, or lose customers to someone who does, and that means zero profit above the actual cost of production/service.
In a world where corporations make profits, some competitors choose to eat the taxes and retain customers, while others may increase prices and lose some customers, and some customers may eat the increased price and remain even though they're getting a worse deal than before. This is the concept of "consumer surplus" vs "producer surplus", and taxes are cutting into those surpluses differently depending on the specifics of each market participant.
All of this has been debated endlessly by economists, in terms of just how much of corporate taxes get passed along to consumers and so on. And the answer seems to be "not zero, and not 100% either", and everything beyond that is up for debate. So no, not "everything is ultimately paid by the consumer", that is the 100% answer and that's pretty clearly wrong in a market where producer-surplus exists.
In reality, real-estate and rents are probably one of the least-efficient markets imaginable. The frictional costs to buying and selling property, and finding a new tenant who might be a problem/deadbeat/etc, or spending a bunch of time apartment-shopping, picking up your life and packing your stuff, and moving, are immense, and all parties involved are highly emotionally invested as well. Landlords are trying to make a long-term calculation about whether the property is going to appreciate - even if they are losing money today, if they expect to make capital gains in the long term it could be worth it. And all parties are operating with minimal information. Out of all the markets in the world, real-estate and rental living spaces are probably one of the least efficient possible.
Yes. Companies are legal fictions and all people buy goods and services. Some people buy those services through those legal fictions so they consume the fraction of them corresponding to their to ownership fraction. Ultimately a person pays all taxes and all people are consumers.
