Anti-Poverty Groups ID Property Taxes as Culprit in Affordable Housing Shortage | Hacker News Reader

Anti-Poverty Groups ID Property Taxes as Culprit in Affordable Housing Shortage

thecity.nyc

13 pointsPaulHoule18 comments

A single family home is presumably owned by a single family that is actually living in that home. A large building with many apartments is owned by a wealthy landlord who is less likely to be living there. Of course the wealthy landlord should be taxed much more than the single family, that’s just common sense.

The problem is that the single family that can afford a whole house in a city, while less wealthy than the big landlord, is likely more wealthy than the tenants in the apartment building. Because the landlord is able to pass down the burden of the property tax to the tenants, the property tax becomes regressive.

There is no way to solve this problem by simply changing the rates around. If you lower the property tax on large buildings, it is not guaranteed to ease the burden on tenants. You will likely just end up increasing the profits for the landlords. A true solution requires a systemic change that taxes the landlord, but prevents that tax burden from being passed down to the tenants.

> A true solution requires a systemic change that taxes the landlord, but prevents that tax burden from being passed down to the tenants.

We have a solution that does that. It's called rent control.

Does rent control work for new tenants? It doesn't in NYC. It only works for long term tenants.

It doesn't, but I have a gut feeling that it may impact the prices for new rents in some unexpected ways. For example, people who are living in a rent controlled place may be less likely to leave, this may impact the supply/demand ratio (relatively to the total) and affect the market. Also the apartment owners are aware of the rent control law and so they may try to increase the initial price to try to compensate for it.

> Because the landlord is able to pass down the burden of the property tax to the tenants, the property tax becomes regressive.

Here's the flaw that sinks your argument. Lessors aren't able to pass through taxes to tenants. They charge what the market will bear and leave nothing on the table. When a new tax arrives the increment comes entirely out of the owner's share because the tenants were already paying the market-clearing price.

If that’s the case, then the articles premise is wrong. Property taxes aren’t hurting tenants, and they should be raised on landlords.

The article has a few salient points that apply to NY and their peculiar tax regime, but nowhere else.

It’s a complicated pricing issue. The ability to pass a tax onto customers is a function of supply and demand and their relative elasticities. The assertion that the price of housing is a direct function of the costs is false. Consider the inverse: my landlord has their building paid off, but do they pass their savings onto me? The fed drops rates and allows the landlord to refinance: does that make my apartment cheaper? Inversely if my landlords costs go up, they can’t necessarily pass the cost onto me. There are situations where a tax can be passed directly to the customer but it is not guaranteed.

The title should really be changed to reflect how this is related to New York’s Byzantine property tax scheme and not property taxes in general.

In Ithaca, NY property taxes have become a left-wing issue as tenants realize that they pay them too. It's particularly tough in Ithaca because so much land belongs to Cornell, Ithaca College and local government so only a fraction of the land carries the whole tax burden. Last year the school district tried for a 13% tax increase which was handily voted down in an area which values education and developers, who expect a tax break for anything new they build, are facing more and more scrutiny over it.

Fair. Property tax can be one of the most reliable and effective ways for a locality to raise revenues, but that doesn’t mean that we can’t mess it up. I mentioned how New York has some wonky laws and this is doubly true where real estate is concerned. But these are not issues with property tax per se but with New York’s government. In California there are huge issues with property tax owing to prop 13 and its consequences. But these are very different and a lot of people suggest that California’s lack of a property tax is highly regressive. My point is that the specificity is important for establishing the context.

IMHO there is one rule all countries should instantiate to ensure affordable housing: Residence duty. Ie. the obligation to have someone living in a unit whether this is the owner who occupies it or it is rented out.

To my knowledge it is only Norway and Denmark who has this as a formalized law.

You can simulate this by greatly increasing property tax and the homeowner’s exemption at the same time. The result will be discouraging rentals - but you can create an “active rental” credit to offset if you wish.

But perhaps reducing rentals is a good goal?

Personally, I think the issue is affordable housing. Whether it is renting or owning is another discussion.

High taxes will definitely encourage people to utilize their housing stock.

But encouragement is not really enough for foreign investors.

Instead the local government should be able to use housing with no registered occupants and rent it out to people in need. naturally there will be a due process, and the owner should be able to collect their rent payments at the municipality offices and take over the lease themselves.

This would generate realistic housing prices.

But then again - the oligarchy wouldn't like that an asset it made less speculative for them.

There are always people for whom renting is a better idea than ownership. Especially younger people and many single people, but also those who want to be able to move easily for career or family reasons.

Also, capital upkeep and repairs are difficult to save for for those living hand-to-mouth. (And some people just like not having the logistical responsibility for said capital upkeep and repairs.)

I feel like the groups bringing this lawsuit think that it will force changes that will make rentals cheaper, when it reality it'll probably be easier for the city to simply change the laws around residential property taxes to match what's there for rentals today.

As always, a Land Value Tax would fix this.

For perfectly spherical land...

https://worksinprogress.co/issue/the-failure-of-the-land-val...

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