Re:Why Billionaires Don't Pay Property Taxes in New York
by sokoloff on Tuesday May 12, 2015 @08:19PM
(#9535919)
Anything that affects the cap rate also affects the marginal conversion of that building from rentals into owner-occupant usage (especially in jurisdictions where there's a homestead or owner-occupant partial abatement of taxes).
It may not seem like there's a direct effect because Unit 2 on 123 Main Street is still a rental for the same price after a $50/mo tax increase. But, some other unit ends up being sold to an end-user (or a condo-conversion developer) instead of staying as a rental. Across the body of rentals, I believe that tax increases show up in rent over the long-run. Landlords aren't in the business to give renters breaks. (Nor are they evil Scrooge McDucks; the good ones are just smart businesspeople who can do math and put up with people... :) )
The biggest beneficiaries of the current system are the property developers. Fairer property taxes on these high end units may mean lower sales prices, and that seems just fine.
One error in the article is the idea that landlords pass through taxes as higher rents. That completely misunderstands landlord psychology. Landlords will charge as high a tent as they can. Tax rates affect the value of the property when sold by reducing the cap rate, they don't affect rents.
Fairness shouldn't impact the requirements for low income units. Those should be traded for the right to build, not for a tax break.
The article suggests the complexity in the laws are based on the difficulties in 1980 of calculating year to year increases in property values. Much more data is available now and lots of work has gone into such algorithms, that should be less of a barrier now. It's probably less important that the algorithm be perfect than that the methodology should be apply equally to everyone.