What author is saying is that if a property has a high yearly ongoing costs, it becomes tougher to just hold onto it and not put it into the market i.e. this causes increase in supply. If I have a $10k/year expense on a property, I am forced to at least generate a yearly $10k+ from the property. This would keep the rentals and property prices in the area in check
The elephant in the room is the amount of housing supply being held by banks and private equity in an effort to shore up housing prices. They can afford high property taxes. Your elderly parents might not be able to.
Obama should have let the bankers twist in the wind when the citizenry was out for blood in 2008. They repaid him by channeling money to Republicans. Put them all in jail.
> They can afford high property taxes. Your elderly parents might not be able to.
Texas has an interesting solution to this. Homeowners over 65 can elect to defer the payment of their property taxes indefinitely, although the taxes eventually get paid when the house changes owners.
So it's basically taking an interest-free home equity loan against the property, in a round-about way? You're basically de-valuing the property since whoever buys it next will have to pay a lump sum in taxes to take ownership.
I guess that doesn't matter to you if you're dead.
What happens if the deferred taxes exceed the cost of the house?
The estate has to pay the taxes, so they can pay the taxes and keep the property, or sell it and pay the taxes using the proceeds. I believe that interest also accrues during the deferral.
I'm not sure what happens in the case where the accrued taxes exceed the value of the house, though.
Basically they put a tax lien on the property, they just don't collect on it while the original homeowner is occupying the property.
I'm not a lawyer, but my basic understanding of this is that if it exceeds the value of the property, the estate can just let the city/county seize the house. Otherwise, they'd need to pay the deferred taxes in order to transfer the title to the heirs.
Homeowners over 65 in Texas (along with certain widower situations and disabled veterans) are also eligible for exemptions that “freeze” the amount of tax they are required to pay (if the property is their homestead) irrespective of the appraised value of the property.
Banks/investors don't let property to just sit there if the cost of renting out is small. (Ie. if the risk of getting into an long eviction fight is low, then they will not let it sit empty.)
On the other hand, it also increases the demand to rent property on AirBnB, if that's allowed and it's a desirable area. Tourists can pay more than locals.
In general, as costs go up, the more there is incentive to try to cater to wealthier customers.
That can be right in the short term, but in the long term you'd expect developers to stay out of the market, so how is it that Chicago has a "glut of high quality housing at very low prices"?
My guess is that this probably indicates that the primary obstacle to construction currently isn't developer capital. It could be that housing construction is still profitable, as there's comparatively less political resistance and less of the budget has to go to legal fees and bribes.
In the interest of being intellectually honest though, that's probably not the full story. It's worth pointing out that Chicago's population peaked in the 50's and that property taxes were probably lower back then.
Also worth pointing out that there's a lot of directions for sprawl to help meet housing demand. I actually grew up in Indiana and my dad worked in Chicago. We lived in Indiana because the property tax was significantly lower even though housing prices were comparable.
I don't think this statement is true because in high cost areas developers still don't develop because higher price also mean higher land costs. On top of that places like NY have lower taxes but not enough development over a long term scale. This taxes codes don't change on a whim. There is also a factor of zoning when it comes to build there very well might not be any land to develop near a city because it's all saturated from long term speculation
In NYC property taxes are almost certainly the least relevant issue. In NYC there is a tremendous amount of political friction around new high-rise construction.
