From: ahk@chinet.com   
      
   Stephen Sprunk  wrote:   
   >On 30-Mar-15 21:20, hancock4@bbs.cpcn.com wrote:   
   >>On Monday, March 30, 2015 at 7:34:34 PM UTC-4, Stephen Sprunk wrote:   
      
   >>>If property taxes go up, the rent has to go up too because the   
   >>>landlord obviously isn't going to _lose_ money renting out the   
   >>>property; if so, he wouldn't have bought it in the first place.   
      
   >>But property taxes can, and do, go up faster than rents, and the   
   >>landlords do end up losing money.  In the short term, they still have   
   >>a mortgage to pay, so they'll have to eat the loss in the hope rents   
   >>will eventually catch up.  In the long term, the property will be   
   >>abandoned if rents don't catch up.  (Other urban conditions play a   
   >>part, too).   
      
   >Absent rent controls, rents _will_ go up to keep pace with taxes; the   
   >tenants have no choice since _every_ landlord will be raising rents.   
      
   This I don't agree with. Yes, there are individual cases of tenants   
   overpaying. Generally, they won't do that.   
      
   A tenant simply doesn't care about the landlord's operating expenses.   
   He won't pay more than the place is worth to him. Two buildings of   
   approximately the same quality (ignoring location value) should be   
   rented for similar amounts. It doesn't matter to the tenant that one   
   landlord took on a short-term loan to pay for major ongoing maintenance   
   but the other building won't need major maintenance for 10 years. A   
   tenant will pay a premium if the kitchen has brand-new appliances.   
      
   Anyway, if taxes are shifted OFF the improvement and ONTO land, then   
   the landlord isn't punished with higher property taxes for doing something   
   economically useful with his property: Keeping the building in good   
   repair or even improving it.   
      
   >Aside from slumlords, who operate on a very different financial model,   
   >landlords _don't_ lose money or abandon properties.  Slumlords' profits   
   >come from not reserving money for normal maintenance--and when the bill   
   >comes due, abandoning the property is cheaper than fixing it.  It's not   
   >as good a long-term return as letting good tenants pay your mortgage   
   >off, but it works well enough in the short term, particularly when you   
   >_want_ the building to be condemned--or when you need a front to launder   
   >money from another shady business. . . .   
      
   Shift taxes from the improvements to land, then slumlords pay relatively   
   high taxes on land that has a building with significant deferred maintenance,   
   since the negative incentive for having a poor quality building   
   goes away.   
      
   >To give you a sense of scale, Warren Buffet's $1.5B development near me   
   >is a mere 433 acres (175 ha), probably too small to assure a profit if   
   >he had to get bank mortgages like most developers. . . .   
      
   Hehehe. Most developers aren't in a position to buy a bank when they   
   need to give themselves a mortgage.   
      
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