Hacker News Reader

Comment by awakeasleep | Hacker News Reader

Property taxes should basically kill the dream of "and don't pay a fucking thing to anyone" for anyone that lives in the US.

Especially city dwellers. I was surprised to see tax for properties I could technically afford cost more per year than I had been paying in rent.

View on HN

Property taxes are what keeps housing affordable. Look at California for an example of what happens when they go away.

To be precise, property tax increases the liability of holding a house as an investment relative to other investments, so higher property taxes make capital that was invested in real estate move to other sectors. That means that fewer properties are owned by speculators, so more are owner-occupied. This is why California has one of the lowest homeownership rates in the country (alongside New York and Nevada, which are much more urbanized than Cali):

http://www.census.gov/housing/hvs/data/rates.html

(Homeowners don't like to believe this, because the economic reality is basically that investors can buy whatever they want and the middle class picks up the scraps; that's sort of undignified, but true, so people should get used to it)

Which is why many places give property tax discounts to owner occupied homes.

Yes. Because renters don't pay property taxes /s

In fact renters would pay more property taxes to cover the lack of landlord's homestead tax exemption.

Of course they do. It's part of the rent.

edit: oh that was saarcasm

Though they do usually pay less since they usually live in less property.

This. I rent a small apartment near downtown. If I bought property, it would most likely be in the same area, but not a small apartment.

Yep. You don't own property in the US. You either rent from someone else, or you rent from the government.

Well, in some areas, but it really depends on the market - the property taxes on my home in a University city of 200,000 are 1/3 of what I was paying in rent - with the interest on my mortgage the amount of "lost" money comes out to roughly the same amount for now.

As long as property taxes do not outstrip my interest rate, that ratio should stay in my favor going forward.

My yearly property tax is barely a bit more than half of what people pay for one month's rent for a similar place.

Tax being 1/3rd of rent indicates rather low rents or rather high tax.

Absurdly high taxes (my parents pay half my tax on a non-rural property twice as big about 120 miles north of me), but still, owning a home is hardly a fiscally ruinous proposition around here.

My property taxes this year were ~$4200 on an average sized lot and home, or roughly $350/month.

My last apartment cost $1050/month for a small two bedroom condo rental.

This is similar to my situation. Renting a crappy 2BR apartment was $1700/month thanks to the tight rental market. Mortgage and taxes on a townhouse in a nicer part of town? $1200/month. And theoretically after 30 years I would have an asset I could sell, unlike the renters. Renting just didn't make sense unless you're highly itinerant and don't stick around any one area for more than a year or two.

"Renting a crappy 2BR apartment was $1700/month thanks to the tight rental market. Mortgage and taxes on a townhouse in a nicer part of town? $1200/month."

So you take a mortgage and you're happy and there is a chance that you'll stay happy because your present reckoning may remain as good in the future as it is now. But it also may not. By mortgaging you become a sitting duck against the change, and that rental business of $1700/month seems attractive enough to invite further involvement and development thus driving the prices much lower not only compared to its current figure but also with the praised rental figure. What would you do then if this happens? Refinance in order to stretch that mortgage for more than 30 years?

What if you had rented and invested that 500/month (and the maintenance costs you had to pay along the way) in index funds?

Uh, I was paying $500 more per month to rent than to own. Most people I know around here who bought a house saw their monthly payment go down.

Also, it seems a bit odd to hedge against downturns in the housing market by investing in the stock market. The latter is far more volatile.

"paying in rent - with the interest on my mortgage the amount of «lost» money comes out to roughly the same amount for now"

But there is also the opportunity cost. Having a mortgage may be equivalent financially, but it's a liability when considering your freedom to change or to invest in something profitable that may pop up along the way.

Homeowners also get a lot of deductions too. In general you end up paying more owning vs renting, but you want to make a good investment when purchasing a home. So, in the end you typically end up ahead when owning, unless you didn't make a wise investment.

Running water, sewage and garbage collection/recycling are nice, though. The birds have to fly somewhere else just to get a drink of dirty water.

(speaking of the US here)

Property taxes have nothing to do with water/sewage/garbage/electricity.

You pay separate bills to separate providers for all of those things in a simple, fee for service arrangement.

Conversely, if you live on a property that does not, or cannot receive water/sewage/trash/etc. from a provider, you still pay full property taxes.

I'm confused about the last statement. Are you implying that your landlord is renting to you and it is costing him money?

fwiw you do get to deduct property taxes from your taxable income.

Not under AMT.

[edit] I misread your post, my bad! I originally responded to HELOC vs. mortgage interest, sorry.

Yes, the AMT interaction with municipal taxes is a sizable pain point.

"fwiw you do get to deduct property taxes from your taxable income."

property taxes != mortgage interest

EDIT: OPs ninja edit/delete makes this comment seem quite confusing. It was in response to OP getting confused and talking about mortgage interest.

Reply on news.ycombinator.com