Nope. If the landlords could raise the rates, they already would. This whole "cost X gets passed onto consumers" flies in the face of basic economics: the price is what people are willing to pay, separated from what costs/fees/taxes are applied to the supplier.

Nope? Who would rent property for less than it costs to carry it? If you want to speculate on real estate there are much better ways than renting to low-income tenants below cost.

Speaking of Econ 101, when taxes shift the supply curve, what happens next? Some renters are priced out, others get less house for more money. Under no circumstance does some fat-cat middle man reach into their own pocket to help a brother out.

Sorry, but you're just saying the same thing: that the basic economic principle of price being determined by what the market will bear doesn't apply to housing.

Either people will pay more, in which case landlords will raise their rents until people stop being willing to pay more, or people won't pay more, no matter what the cost to the landlord.

Nowhere in this does the landlord show up with a tax document and say "see folks, now you gotta pay MOAR TAX".

I'm saying that increased taxes cause landlords to try to increase rent or exit the rental market due to the increased expense, leading to decreased rental supply at a higher average cost. In a competitive rental market, you are renting the property for pretty much exactly what it costs you to rent it. If free money rained from the sky by pushing the "rent" button, more people would do it, increasing supply, and decreasing cost.

Similarly, lowering the tax rate would provide greater profit to landlords, which would cause new entrants to the rental market, leading to greater supply and a lower average cost.

That's just the basic theory of competitive markets, at least as I remember it. It starts with the 'X' shaped chart of supply vs demand which you draw over and over in Microeconomics 101. Macro takes the concepts from Micro and connects the dots to get from increasing taxes -> higher rental prices.

There are many leases with tax escalation clauses included. My last two apartment leases (2000-2002 and 2002-2007) in MA included those (3-part) clauses. http://www.masslegalhelp.org/housing/private-housing/ch5/tax...

The reasoning is multi-part:

1. It aligns tenant and landords by encouraging renters to vote against property tax increases. Renters can now think whether the services increase is worth the tax increase instead of only worrying about the benefit side as the cost side is 100% someone else problem absent an escalator.

2. It allows landlords to offer their property for rent without including a "holdback" for their guess as to their property tax increase.

If that were true, then how come home prices drop when interest rates rise? Are taxes somehow special?

Home prices drop because affordability per $ financed decreases. How is that in contradiction with increasing taxes leading to increasing rent cost?

Take an extreme example, if taxes were $5000/mo for a 800 sq ft 1BR then rent for a 1BR would be greater than $5000/mo. There might be very few units renting at that price and home prices would approach zero or could even become significantly negative if owners had no other way to escape the tax bill.

You see this for some properties in Detroit where the tax bill is more of a liability than the house and land are worth so the plot can be purchased for $1 for any sucker who will take it (or is willing to carry to tax liability in the hopes the asset will eventually appreciate beyond the accumulated taxes)

Except the price people would be willing to pay would be more as rents increased. You have to live somewhere.

Landlords don't eat tax increases. Anywhere, ever.

If all the people are currently getting a deal on rents, then all the rents are too low, and the landlords will start raising rents until they stabilize on what people are willing to pay. Nowhere does the landlords' cost come into this equation.

This whole "taxes get passed onto the consumers" fallacy is just another bit of anti-tax/anti-gubmint propaganda.

You're right, but in the end you're wrong. The missing step here is people who own properties have other places they can put their money. If, as a result of increased taxes, owning rentals isn't bringing in enough profit to justify the extra hassle, there will be people getting out of the business.

This trickles down to developers not getting the prices they need to get and not building new developments. With constrained supply rents will go up.

The other option is landlords will do the same sort of "decontenting" car companies do in a tight market. They'll cut maintenance staff, paint less, spend less on renovations. Over time your rent will be the same, but the value of what you receive will go down.

The idea that "taxes get passed on to consumers" is not a fallacy - you can see it at work every time taxes go up. Business owners are like anybody else - when their wages get cut they take a look at their options.

>My quibble with your assertion is that if property taxes were higher it would also hit the lower income citizens as well. Those property taxes would just be passed along as an increase in their rent.

Rent is determined by supply of housing and demand for housing, not taxation. Property owners would eat the cost and the price of properties would probably drop accordingly (higher taxes = a less attractive purchase).

It's true in SF, NY and few other places in US where cost of housing is determined by ability to pay. In the rest of the country cost of housing is a cost of building a house/rental property with a reasonable margin on top - with almost no correlation with local ability to pay (as long as it's higher than cost of building or maintaining a housing unit). If you increase property taxes, it will increase rental prices.

So you're saying that supply and demand only works in SF, NY and a few other places?

I am saying that supply and demand are not working in SF/NY and a few other places. Or to be more exact supply is non-elastic - increase in demand does not increase supply. In cities with available land if there is a demand for housing, you just build more housing.