Author Topic: Why are we subsidizing property taxes of millionaires?  (Read 235 times)

Offline TimG

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How are they not directly affected by it?  They're paying it, even if they don't get a property tax bill.
The amount rent goes up each year is not related to changes in property taxes. The only way renters see the impact of property taxes is through reduced supply as some landlords get out of the business because they can't recover their costs. This leads to higher rents in the long term but there is no obvious connection to property tax rates.

Offline jmt18325

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The amount rent goes up each year is not related to changes in property taxes.

You don't think that costs factor into what rental owners (globally) charge?

Offline TimG

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in what ways?
http://business.financialpost.com/news/property-post/think-your-property-taxes-are-high-try-being-a-commercial-landlord

Quote
A new survey shows commercial landlords continue to do the heavy lifting on property taxes and this is especially true in Canada’s three largest cities.

Toronto, Vancouver, and Montreal continue to post the highest commercial to residential tax ratios, all in excess of 4:1.

Offline TimG

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You don't think that costs factor into what rental owners (globally) charge?
That is what I said. But renters don't know this. If a property taxes go up and the landlord raises rents do renters blame "greedy landlords" or "spendthrift politicians"? I bet it is former in most cases because most renters have no appreciation for the  costs incurred by a property owner.

Online wilber

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Property taxes pay for municipal services which used by renters as well as owners. The system is inherently unfair to expect property owners to pay for all of it. If we wanted a fair system then everyone living in a city would contribute to its tax base whether they rented or owned. The only people who are being subsidized are renters who get to used the roads, parks and community centers but pay nothing towards their up keep.

Rental properties don't get the homeowner grant. There will always be inequities, subsidies or no. A local pet peeve of mine, unlike the US Border Patrol, the CBSA only functions at border crossings, they don't actually patrol the border. I don't like it that my municipal taxes pay for my city police department to be responsible for 30 km of this country's border. That's the Fed's responsibility.

Offline msj

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http://business.financialpost.com/news/property-post/think-your-property-taxes-are-high-try-being-a-commercial-landlord

Except property taxes are flowed through to paying customers (although perhaps less so now thanks to Amazon, for example).

The payers are always going to be those living in the homes (homeowners or renters) and those payong for the product/services. 

The rest is just a shell game.
I've gotta have more cow bell! -Bruce Dickinson

Offline TimG

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The rest is just a shell game.
That is why I think it is not productive to talk about "fairness".  I personally do not think paying taxes embedded in the cost of things is the same paying a tax directly because the line of accountability between the cost and the reason for the cost is broken. This leads to bad decisions on the part of the customer that is paying the hidden cost (i.e. how many people would use credit cards if the 2% fee was added to the purchase price?).

What is worth talking about is how laws and regulations can be adjusted to increase the supply of rental properties. Extending the home owners grant to properties that are actually rented could be one of those measures. Simply eliminating the grant and reducing taxes on properties held like gold bullion would not be helpful.

 

Offline msj

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I would prefer to just divide the total amount of property taxes collected (or required by the municipality) by the prorata total fair market value of all properties (especially including churches) and have everyone pay on that basis.

I've gotta have more cow bell! -Bruce Dickinson

Offline cybercoma

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Property taxes pay for municipal services which used by renters as well as owners. The system is inherently unfair to expect property owners to pay for all of it. If we wanted a fair system then everyone living in a city would contribute to its tax base whether they rented or owned. The only people who are being subsidized are renters who get to used the roads, parks and community centers but pay nothing towards their up keep.
It's funny how you note that CO2 tax gets passed on to the consumer (which is true depending on a number of factors that influence how much people are willing to pay for a thing), but you don't see that property tax is rolled into the cost of rent.

Offline cybercoma

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Rental properties charge what the market will bear.
All businesses "charge what the market will bear" on all goods. It just so happens that people need shelter to survive, so they're willing to pay whatever it costs in most cases (unless they relish the idea of living on the streets).

Offline kimmy

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In my area, the rental vacancy rate is vanishingly close to zero, and "what the market will bear" is pretty outrageous.  I know what property taxes on apartments like mine are, and I know what similar apartments in my area are renting for, and I can say with complete confidence that property taxes are a trivial factor in rental prices.


That is why I think it is not productive to talk about "fairness".  I personally do not think paying taxes embedded in the cost of things is the same paying a tax directly because the line of accountability between the cost and the reason for the cost is broken. This leads to bad decisions on the part of the customer that is paying the hidden cost (i.e. how many people would use credit cards if the 2% fee was added to the purchase price?).

That's the assumption?  People have chosen to rent because they're making a bad decision? If they were aware that their rent includes money that the landlord will use to pay property tax, they'd make a different choice such as buying a home of their own?

What is worth talking about is how laws and regulations can be adjusted to increase the supply of rental properties. Extending the home owners grant to properties that are actually rented could be one of those measures. Simply eliminating the grant and reducing taxes on properties held like gold bullion would not be helpful.

How many landlords actually create rental properties?  Not many.   Some turn their basements into rental suites... but most landlords are buying properties condominiums off the real estate market and renting them out.  Making landlordship even more profitable is primarily going to increase demand for real estate even further, putting home ownership even further out of reach for the less wealthy and giving the more wealthy even more advantage.

Here in my town the city council approved a subsidy for a developer to create Affordable Housing. The developer went out and built an apartment building with smaller, less luxurious units, intended to be ideal "starter homes" for first time buyers and young single working people and that sort of thing. And before the mortar was even dry, rental listings started showing up for apartments in the new building, renting at the same outrageous prices as everything else in this town.  So much for "affordable housing".  City council accidentally subsidized yet another way for the wealthy to cash in.

 -k

Offline TimG

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It's funny how you note that CO2 tax gets passed on to the consumer (which is true depending on a number of factors that influence how much people are willing to pay for a thing), but you don't see that property tax is rolled into the cost of rent.
I made it clear that taxes impact the cost of rent. I just said that people paying rent don't realize that they are paying taxes and this matters because people tend to be less concerned about rising taxes if they do not realize that they are paying them. The same goes for carbon caps or any other scam designed to pretend to do something to reduce CO2 emissions.

All businesses "charge what the market will bear" on all goods. It just so happens that people need shelter to survive, so they're willing to pay whatever it costs in most cases (unless they relish the idea of living on the streets).
And when rents go up there is an incentive for more people to offer more rental housing which brings rents down. This is not true with property taxes which keep going up year after year.

Offline TimG

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That's the assumption?  People have chosen to rent because they're making a bad decision? If they were aware that their rent includes money that the landlord will use to pay property tax, they'd make a different choice such as buying a home of their own?
I was using the term "bad decision" as a statement of economics rather than morality. Credit cards hide the costs and therefore charge more than they would be able to charge if the cost was in the open. This is bad from an economic perspective.

How many landlords actually create rental properties?  Not many.   Some turn their basements into rental suites... but most landlords are buying properties condominiums off the real estate market and renting them out.  Making landlordship even more profitable is primarily going to increase demand for real estate even further, putting home ownership even further out of reach for the less wealthy and giving the more wealthy even more advantage.
These activities are called "creating rental properties". People do not have to rent out basements if they do then those are new rental properties that never existed. Investors can and do buy properties for capital gain. They do not have to offer them as rentals. Choosing to offer them as rentals is expanding rental supply.

Here in my town the city council approved a subsidy for a developer to create Affordable Housing. The developer went out and built an apartment building with smaller, less luxurious units, intended to be ideal "starter homes" for first time buyers and young single working people and that sort of thing. And before the mortar was even dry, rental listings started showing up for apartments in the new building, renting at the same outrageous prices as everything else in this town.  So much for "affordable housing".  City council accidentally subsidized yet another way for the wealthy to cash in.
The prices are not going to be affected by a single building. It takes time for prices to adjust to new supply and a city that encourages people to rent out housing will see lower rents than a city that puts up barriers..
« Last Edit: February 06, 2017, 11:03:35 am by TimG »

Offline cybercoma

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I made it clear that taxes impact the cost of rent. I just said that people paying rent don't realize that they are paying taxes and this matters because people tend to be less concerned about rising taxes if they do not realize that they are paying them.
Okay, I agree with that. People who rent apartments generally don't pay too close attention to property taxes because it has an indirect effect on them. I don't agree with your overly simplistic idea of supply and demand when it comes to rentals though.

Offline Blueblood

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Okay, I agree with that. People who rent apartments generally don't pay too close attention to property taxes because it has an indirect effect on them. I don't agree with your overly simplistic idea of supply and demand when it comes to rentals though.

It's also a bit harder to control rent in bc vs the prairies due to extremely limited building space.  Rents go up in the prairies and it's a bit easier to pop up an apartment complex or build houses.  Once again the prices are reflective of demand.  People want to live in bc and there is limited space to build and demand has to unfortunately be rationed.  That's why I'm hopeful for an increase of high speed internet on prairies so that people don't have to be going to the office and can work at home and are able to have more options of where they live.