BATTLE OF THE MID-WAY
In recent months, the Trump administration and congressional Republicans have been trying to hammer out details of their proposed tax legislation. The fate of the mortgage interest deduction (MID) has been much bandied-about. One report will say it’s on the chopping block; another says it’s safe. With both houses of Congress and the White House solidly in Republican hands, this is the best opportunity in a generation for the GOP to push through its long-sought tax cuts. But how (and whether) it will pay for the cuts comes down to the old issue of “whose ox is gored.”
Negotiations and backroom dealings continue in Washington, so it might still be months before we find out what the tax legislation is and how it affects San Francisco property owners and renters. Some people are using that timeframe to pit renters versus homeowners.
Andrew Woo and Chris Salviati of Apartment List argue “The mortgage interest deduction has long been a benefit enjoyed mostly by high-income households, living in more expensive homes, with a greater amount of interest to deduct and higher marginal tax rates. This dynamic has made the MID a ‘regressive’ benefit to tax experts.”
Comparing MID costs to the federal government with the government’s spending on Section 8 rental assistance, Woo and Salviati report that in 2015, “the MID cost the federal government $71 billion, more than double the $29.9 billion funding for Section 8. Additionally, the MID is a highly regressive benefit, with 85 percent of expenditure going to high-income households.
“While more than half of high-income households claim the MID, only 11 percent of low-income households receive assistance with their housing costs. This results in $1,549 in government spending per household for high-income households, nearly four times the $416 spent per low-income household. Geographically, expensive coastal areas receive the most expenditure per household, led by San Francisco and San Jose at the metro level. Given the failure to allocate funds to those in need, we recommend reforming the MID to provide more benefit to low-income and middle-income homeowners, while reinvesting the savings in Section 8 programs to benefit low-income renters.”
LEAST SURPRISING HEADLINE OF THE MONTH
“North Bay housing costs likely to spike after wildfires, economist says” — San Francisco Business Times
PIER-TO-PIER IDEA SHARING
A batch of old piers stretching from North Beach to AT&T Park need more than $100 million to be made safe for use, and the Port of San Francisco is looking for ideas from developers or other organizations about what to do with the properties on our shore, according to the San Francisco Chronicle.
The Port is willing to go outside its comfort zone in allowing uses for the properties it wouldn’t usually consider. “Those rules generally don’t allow housing or hotels, and require that any project have a balance of maritime and other uses, such as restaurants, retail and some office,” reports J.K. Dineen.
Ideas — and money — will determine the future of the historic piers.
San Francisco ranks 10th in the nation in how much it taxes property in its central business district, according to Commercial Cafe and Yardi. With nearly 25 million square feet of office space, San Francisco reaps $112.7 million on a tax per 1,000 square feet of $4,357.65. No surprise New York is tops in total square footage (more than 210 million), tax volume (more than $3.4 billion) and tax per 1,000 square feet ($16,302.42).
San Francisco’s central business district, however, does have the highest average office property taxes in the state of California.
BUBBLE, BUBBLE …
And what would a San Francisco real estate column be without an update on our science fictional status of house prices? A new report from UBS says that San Francisco and Los Angeles are “overvalued” but are not in the highest “bubble risk” category. CNBC reports that UBS rates San Francisco as having “limited bubble risk, given its strong economic fundamentals amid the astonishing boom of tech companies.” UBS even names San Francisco as a “Superstar city,” meaning it outperforms other markets and will continue to do so due to its constrained housing supply.
Interestingly, the San Francisco Business Times reported the story as “San Francisco more at risk for housing bubble than any other U.S. city, analysis says.”