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Do lower property tax rates = higher home appreciation?

RICHMOND, Va. – April 20, 2018 – Nobody likes getting tax bills, especially homeowners who are burdened with ever-escalating local property taxes. Last year, property taxes collected by local and state governments rose by an average 6 percent – $293.4 billion in total – almost three times the annual rate of inflation. But the tax […]

April 23, 2018/0 Comments/by support_8dba

Don’t blame Airbnb for rising rents in popular cities

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THU, APR 19, 2018 – 5:50 AM NOAH SMITH I RECENTLY returned from a trip to Japan. Travelling in that country – especially for longer periods of time – is infinitely easier than it was just a decade ago. One of the main reasons is Airbnb. With a few button clicks on a smartphone or […]

April 23, 2018/0 Comments/by support_8dba

Do lower property tax rates = higher home appreciation?

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April 23, 2018/0 Comments/by support_8dba

Don’t blame Airbnb for rising rents in popular cities

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Do lower property tax rates = higher home appreciation?

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RICHMOND, Va. – April 20, 2018 – Nobody likes getting tax bills, especially homeowners who are burdened with ever-escalating local property taxes.

Last year, property taxes collected by local and state governments rose by an average 6 percent – $293.4 billion in total – almost three times the annual rate of inflation.

But the tax rates you pay are probably very different from what owners pay elsewhere. In Essex County, N.J., the average property tax on a single-family home last year was just under $12,000, according to a new study by ATTOM Data Solutions, a firm that tracks information on 155 million U.S. properties. In West Virginia, by contrast, the average was just $807.

Sure, average home values in New Jersey and West Virginia differ dramatically, as do the effective tax rates imposed by local governments to pay for the services they provide.

But here’s a question: Is there a link between property tax rates and the rate at which your home appreciates in value? Are areas with high housing costs and tax rates less likely to see high appreciation rates? Do markets with more affordable prices and low tax rates do better on appreciation?

It’s a complex subject. But ATTOM Data’s voluminous property tax files, plus its trove of current and historical home value and price information, open the door to take at least a peek.

For this column, I asked ATTOM to conduct a new statistical analysis, comparing recent appreciation rates and home-value data with effective local property rates around the U.S.

The findings are intriguing:

Homes in areas with the highest effective property tax rates – that is, the average tax rate expressed as a percentage of estimated home values – appear to have appreciated more slowly during the past year and the past five years on average than homes in markets with lower tax rates. Homes in those areas increased in value by an average of 28 percent during the past five years and 3 percent in 2017.

Homes in the middle third of markets, where effective tax rates are more modest, experienced higher rates of home-value appreciation – 35 percent on average over five years, 7 percent during the past year.

Homes in the bottom third in terms of effective tax rates saw values increase faster – an average 42 percent over five years, 5 percent in the past year.

Daren Blomquist, senior vice president of ATTOM, cautions that there are exceptions to the overall trend here, “notably markets in Texas with high property-tax rates but also very strong home-price appreciation over the past year and five years.” Illinois has high tax rates (2.2 percent) yet saw average values statewide increase by 10 percent last year.

As a general rule, the highest effective tax rates in the nation are in the Northeast and the Midwest, with a smattering in Florida and Oregon. New Jersey had the highest overall rate (2.28 percent and an average five-year price appreciation rate of just 6 percent). Connecticut’s 1.99 percent effective tax rate ranked it seventh-highest nationwide. But the state experienced a one-year average price gain of just 1 percent and a five-year average of just 5 percent.

Maryland and Virginia average home prices are relatively high, but their effective tax rates are surprisingly moderate compared with the nation overall. Maryland posted an average rate of 1.03 percent and experienced a five-year, 15 percent average home-price gain.

Virginia’s average tax rate was 1.05 percent; its five-year average gain 20 percent. The District of Columbia is a mixed bag – a below-average 0.65 percent effective rate on an average home value of $789,391, a 1 percent average value gain last year and a 26 percent appreciation rate over the past five years.

California had a below-average effective property tax rate of 0.76 percent in 2017 and a one-year average gain in value of 8 percent.

What to make of these results? The study’s three general conclusions above are noteworthy, but keep in mind that the study’s scope and methodology were limited. Taxes alone do not determine demand – or home-appreciation rates. Multiple combined factors can also be important: local economic conditions, employment and school quality, among others.

But on average, low to modest tax rates appear to be connected to higher recent appreciation. If you’re on a fixed income and looking at potential retirement areas, or you’re a first-time buyer and affordability is key, tax rates may be an essential consideration.

Related Topics:Property taxes, Trends

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April 23, 2018/0 Comments/by support_8dba

Don’t blame Airbnb for rising rents in popular cities

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THU, APR 19, 2018 – 5:50 AM

NOAH SMITH

I RECENTLY returned from a trip to Japan. Travelling in that country – especially for longer periods of time – is infinitely easier than it was just a decade ago. One of the main reasons is Airbnb. With a few button clicks on a smartphone or laptop, you can book a reasonably priced, centrally located private apartment with all the furnishings of a well-kept Japanese home.

Airbnb’s success in Japan is due in large part to the government’s far-sighted embrace of the room-rental service. In mid-2017 the government passed a law legalising Airbnb, subject to the approval of local authorities. Japanese apartment owners can rent out their rooms for up to 180 days out of the year – much more than in many other cities.

This leniency is just one factor powering a record boom in tourism: Even as tourism to the US falls, Japan is raking in tens of billions of dollars a year from foreign visitors.

A recent National Bureau of Economics Research working paper by Chiara Farronato and Andrey Fradkin used a simple supply-and-demand model of the short-term rental market to argue that Airbnb has held down hotel revenues, making short stays cheaper everywhere that the company operates. Meanwhile, the company’s revenue continues to increase rapidly.

McGill University urban planning professor David Wachsmuth recently looked at New York and concluded that Airbnb listings were rising in rapidly gentrifying neighbourhoods where rents have also been skyrocketing. But this could mostly be a coincidence – travellers may enjoy staying in hip, up-and-coming neighbourhoods.

As evidence that Airbnb is actually driving rent increases, Prof Wachsmuth cites a recent paper by three economists that if a given area is a big draw for tourists, with lots of F&B places, and that if that area receives a sudden surge in online search interest for Airbnb, then any subsequent jump in Airbnb is caused by increased demand from visitors for short-term rentals.

Under this assumption, the true impact of Airbnb on rents would be very small. The effect is so small that in their presentation at the American Economic Association meeting in January, the authors referred to it as a “zero effect on rental rates” overall. This means that the advent of Airbnb probably doesn’t require much of a policy change. Its small impact can easily be cancelled out simply by building a bit more housing. Tokyo itself has done this, with great success.

But the research paper also found that one reason Airbnb’s impact is so small is that most people offering rentals are owner-occupiers sharing their own residences, rather than commercial operators operating fly-by-night mini-hotels. If cities allow the latter, the effect on rents will probably be bigger.

One approach is to do what New York has done and simply ban commercial Airbnb operators. But, given the benefits for travellers, a smarter approach might be to allow commercial Airbnb operation but to tax and regulate it like the hotel industry. Finally, a tax could be applied to commercial Airbnb operations, with the proceeds used to fund affordable housing. Allowing regulated commercial Airbnb operations would allow travellers to enjoy a more home-like alternative to hotels, while mitigating or eliminating negative impacts on locals – a win-win situation. BLOOMBERG

The writer, a Bloomberg View columnist, was an assistant professor of finance at Stony Brook University.

AIRBNB

Link to original article: https://www.businesstimes.com.sg/real-estate/dont-blame-airbnb-for-rising-rents-in-popular-cities

April 23, 2018/0 Comments/by support_8dba

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