I just looked on Redfin - I could buy a 3300 square foot house in Austin for under $900k with a huge pool and that was a 5 second search.
No offense all you Austin folk, but you literally have no clue.
[1] https://taxfoundation.org/high-state-property-taxes-2021/
The two are directly linked, so this makes sense. A higher property tax means that the future annual rent (real rent if you're a landlord, imputed rent if you're a owner-occupier) you get from property will be reduced, so the capitalized present value will decrease correspondingly.
My mom has a million dollar home in California and pays around 1.5k/year in property taxes because she's owned it since the 70s.
EDIT: and we’ve owned this house since 2008.
The idea that property tax is passed down to renters 1:1 is just something you made up.
The concept you need to look into is called tax incidence: https://www.maxwell.syr.edu/uploadedFiles/cpr/efap/Notes%20o...
1. Property owners make a lot of money and own a lot of property.
2. When you increase property taxes, people who own a lot of property pay a majority of that increase.
3. Rent prices don't immediately increase 1:1 when property taxes rise, based on one data set.
Basically, property taxes are mostly paid by people who own property. Most property is lived in by the owner. So property taxes aren't regressive, since rich people end up paying the majority share.
People have been trying to create a model for the impact of rent shifting since the 60s. No one has a good model yet. It's hard to model.
If I sign a lease for 2000/mo, and the state increases property tax on the owner, the owner can't immediately increase my rent. Rents increases are generally governed by local laws. But over time, they can raise it, and it can be reset when the current occupants leave.
So an owner's profit margin takes a hit when property taxes rise, and renters bare a smaller percent of the burden of the new tax than the absolute amount raised in the short term. Long term, renter's are still covering the owner's total cost of that property, otherwise the owner would be losing money on the property – which, if that were prevalent business practice, we wouldn't have that many landlords.
So yes, renter's pay property tax.
But, definitionally your rent must cover the mortgage and property tax of the property you occupy, plus profit. If you rent is less than property tax and mortgage, the land lord is underwater and will soon sell to someone else who will charge more or evict you for remodeling.
In the current situation, when the realty appreciates at >10% per year (in Austin, at least) it's not a very smart decision to sell or renovate the house if you cannot find a tenant willing to cover all your expenses.
For example: Zillow shows my house appreciating 10K per month, my mortgage+tax+insurance is 3K, assuming Zillow is in the right ballpark, it makes sense for me to keep the house even if I can't find tenants for 3K (similar houses in the area used to rent for 2K-3K last time I've checked).
Under less insane circumstances, a land lord who is charging less for rent than the house costs to own is going broke. As a general rule most land lords rent to make a profit, and therefore won’t charge rent below the cost of ownership.
0 - A poorly capitalized land lord will still go broke in this circumstance, since they’ll eventually fail to pay their mortgage without refinancing.
It's not relevant to the current discussion though. Right now rents are lower than mortgages in general so the assertion that the tenant pays all landlord's expenses is demonstrably false.
If you have evidence that it’s the norm for landlords to rent below their operating costs, by all means provide it. But from what you’ve provided so far, I am unconvinced.
Seeing how in general rents had been lower than mortgage for quite a while it's sane to assume that I am not an owner of a unique house with a selected group of friends who are in this completely extreme situation.
> Note that I am not making a statement about every house, to rebut your assertion that all renters pay no less than the landlord's taxes + mortgage + insurance it's enough to show some (even one) counter example and not to prove that all or, even, typical renter does not do so.
Don’t be a pedant, we were clearly talking about the typical renter.
Are you talking about paying property taxes via an escrow account that your mortgage lender takes care of for you? That's not your "mortgage payment", which is a function of your loan size, interest rate, and term, and nothing more. The monthly mortgage payment (assuming same term and interest rate) is the same in CA and TX for the same amount of loan.
(I guess we could also talk about things like PMI, but that won't raise your payment by all that much.)
Property taxes might be quite a bit higher in TX, but I'm not convinced a $900k home in TX is the equivalent to a $1.2-1.3M home in CA. I would expect that's closer to $1.7-2M, and then the property tax amounts end up being not that different.
From there tax basis more or less tracks market value, but it’s possible to protest the assessor to keep it below market value (though it’s time intensive and requires in-person hearings).
To get ahead of any artificial attempts at deflating tax basis, Dallas also maintains a comprehensive public lot value database that assigns a land value for tax purposes based on census tract (initially likely a product of redlining, but now based on average census tract market value) — so, similar to a pure land value tax, even if you’re sitting on an unimproved piece of land, you’ll still be taxed similar to the average home in the neighborhood, which has the effect of setting a tax floor.
Austin is similar, I believe. Most cities have to, as aside from sales tax property tax is their only source of revenue, because any sort of income tax is constitutionally banned.
No income tax, but property taxes are at least 2% of the assessed value, and sometimes 3. You'll see that on the Zillow listing.
But ultimately it seems like they get you one way or another, through sales, Income, and or property tax.
How is the sprawl in Austin compared to the Bay Area?
A lot of times land/housing is cheap/er, but you 'pay' for that will long/er commutes in bad traffic. And often with few/no options for public transit.