House Rich, Dirt Poor

New Orleans    During farm crises, as prices get lower for crops and property taxes get higher, the old saying in rural areas about being “land rich, and dirt poor” comes to mind, especially in the states that have property taxes.  Talking to a relative about his aging father’s house, he mentioned that his son would love to have the house but couldn’t afford the likely $30,000 in carrying costs to hold onto the property in insurance, maintenance and property taxes.  Talking to a fair housing specialist recently about changing neighborhood demographics triggered by natural and speculative gentrification, it was hard to escape the fact that rising property taxes were making it harder for older, especially fixed income families, to avoid trying to cash in as the market rises, because they have little choice when their combined taxes and insurance have them against the wall, and they’ve become “house rich and dirt poor” as well.

How can we continue to avoid the regressive nature of property taxes as an income source for local governments when it so disproportionately burdens lower income and working families and exacerbates the gap between the real rich and the rest of us?

So, first things, first.  A progressive tax is one that equally distributes the burden based on income, like for example the income tax, not because it is a fixed percentage, but because it is based on ability to pay.  The wealth tax being promoted by some politicians has this notion at its heart.  A regressive tax is set at a flat rate and therefore takes a larger bite out of lower income or fixed income families than it does for the rich.  The best examples are sales taxes, especially when they do not exempt food and medicine, classic ACORN campaigns I might add, and property taxes, because these taxes do not make any allowances for income or the ability to pay.

Looking at property taxes, if they increase willy-nilly without any exemptions or caps for fixed income and lower income families, as gentrification raises its ugly head, there’s no way a family can survive without serious bucks.  Gentrifiers and developers are callous about this issue.  They will rationalize that the lower income family made a couple of dollars when forced to sell and will be better off somewhere else without taking into account their love and seniority for their community, travel distances, and the likely lack of affordability of alternative housing for them when they are dislocated, much less the value of diversity in the urban scene.  All of which will create cities of the rich, if there are not diverse sources of city income and hard and fast public policies to allow everyone to be able to live and thrive in the city.

Inability to grow food on farms will get someone’s attention someday.  Maybe even the problem of boomers and their families not being able to save their homes because of the burdens of taxes will be noticed eventually.  We might hope change will be triggered as well by displacement due to gentrification in cities that is happening throughout the world now.

Hope is not a plan, so sadly it may be too late for most people.

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Rents Rising

Milwaukee       Before dawn a chart ran on the TV screen at the airport hotel’s breakfast room that listed cities where rent was rising the fastest across the country.  I was in Milwaukee huddled with airline personnel grabbing something for early flights to Detroit and Chicago.  The news readers were huffing about Milwaukee supposedly leading the list with the highest percentage increase in the country over the last year.  I could see that New Orleans was second on the screen.

Once back on the internet I tried to track down the chart, but was unsuccessful.  I did find some support for the local Milwaukee news.  The area had recorded increases in recent years of up to 8% which some data ranked as the 3rd highest market increase in the country.  Other data sets indicated over five years Milwaukee’s rent had risen about 15%, but only 1.5% in 2018.  New Orleans was in fact close behind at 14.5% over 5 years with a median rent of $1400 to Milwaukee’s $1350.

Of course, as painful as those figures are for local residents, Oakland’s median rent has soared over 50% in 5 years, Seattle’s almost 40% in the same period, Tacoma and Anaheim more than 33%, Nassau County 36%, Boston 23%, Memphis 21%, Little Rock almost 18%, Nashville over 25%, and so forth.  You get the picture.  I’m not even talking about New York City or some other places where rents are simply moving from absurd to ridiculous.

Once you start crawling down the figures in some of these websites, it’s a rat hole with no way out, although that’s not necessarily the picture many of the promoters are pushing.  Some will argue that house prices are rising more quickly, so you should buy now.  Others are arguing over whether or not apartment rents are going up faster or slower than inflation. Yet again, a few will argue that new construction will make a difference.

Regardless, any way you shuffle the deck median rents have increased across the country about 20% since 2012, and that’s higher than inflation.  Home prices have risen from a low median sales price of $154,600 in 2012 to a post-bubble high of $264,800, and that is higher than inflation and the rental increases.  The reason all of this feels somewhere between atmospheric and catastrophic to the average family and especially low-and-moderate income families, is that wages haven’t grown anywhere near either of those figures.  According to the Social Security Administration’s Average Wage Index the percentage rise in wages over the same period of 2012 through 2017 is only 13.5%.

I probably don’t even need to note that most low-and-moderate income families are on the under side of averages, so the crisis in rising rents hurts them the worst, and housing prices are now marketing to families who are way above average wage levels.  Minimum wages are not going up fast enough and are frozen in many areas, welfare and other payments are frozen or decreasing, inflation is predicted to begin rising aside from gas prices, and new construction doesn’t define affordability anywhere near what could provide lower income families safe and decent housing.

Where’s the good news in any of this?

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Please enjoy Hard Case from the Tedeschi Trucks Band.

Thanks to KABF.

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