Monday, May 01, 2006

Monday Round Up...

Just a couple of comments on stories from yesterday’s Sun…

More details on the Republican tax proposal: In addition to making it possible for seniors to age in place and for regular families to buy even larger houses, the tax relief measure being paraded around by five Republican county council candidates will also: 1) make it easier for working families to buy homes; 2) increased county revenue; 3) not promote further development. Sadly, for the equine enthusiasts, there’s no word on whether it includes Free Ponies.

Chances are, if something sounds too good to be true (especially in the middle of campaign season), it is neither true nor good. Because I don’t want to write it off yet, I’ll just say that projections of the measure’s success seem a little, um, optimistic.

Without question, the bill would lower the tax burden for current Howard County homeowners who move into new homes, but I don’t think that fact alone is enough to sell the plan county-wide. So, its proponents tack on a few of other benefits, each characterized by varying degrees of dubiousness. To wit:

More Homes for Working Families: The premise behind this claim is that a non-trivial number of current homeowners are desperately longing to move up, but out of fear of increased tax burdens, theyÂ’re staying put. If they did move up, the reasoning goes, more lower priced housing would be available to first-time and low-equity families. The benefits, therefore, would trickle down from the "wealthy" (in terms of equity) to the not-so-wealthy. Is this really the case? Even if it is, is there any way for us to know this?

My guess is that increased taxes aren't preventing a significant amount of people from moving. The decision to move is based on so many factors -- location, family size, income growth -- that a few hundred dollars of tax savings each year isn't going to have a noticeable effect. Because this idea is still new (it has been proposed, though not passed, in parts of Florida), there are no examples for us to use as guidance. If I'm wrong -- that is, if you are looking to move but won't because of extra taxes -- let me know in comments.

Increased County Revenue: This one is similar to the argument peddled by supply-siders everywhere -- namely, cutting taxes leads to increased economic growth that is strong enough to offset tax-rate reductions, resulting in increased revenue. Originally formulated on a napkin, or so goes the story, this idea is known as the Laffer Curve and, according to a study by the non-partisan Congressional Budget Office (.pdf doc), does not live up to its promise. Of course, the CBO study looked at income and not property taxes, but anytime you have a completely counterintuitive idea that matches your ideology perfectly, a sea red flags should be waving.

Won't Increase Development: This may or may not be the case. It's really hard to say, but given the massive development pressures we're seeing now (and will likely see for many years to come), I wouldn't be surprised if there was little or no impact on development as a result of this proposal.

More generally, a plan that encourages unstable neighborhoods because of increased incentives to "move around" the housing market is probably not the best approach. As I said, I support in concept making it easier for seniors to age in place, but when a major proponent of senior issues -- Democratic candidate in District 5 Donald Dunn -- is against the policy, you should probably think twice. Like the Democrats quoted in the Sun's story, I'm apprehensive about any policy that exists only in the vacuum of thoughts. Right now, the debate is strictly theoretical. There is no data or experiences of other counties to look at before making a decision.

It's baaaaaccccckkkk: Belmont. The county's decision to buy Belmont, which seemed like it would make everything hunky-dory on the Ridge of Elk, is apparently not without it's own complications. Grossly oversimplying things a bit, it sounds like even though the county is going to relieve Howard Community College of the public relations disaster it is in, the root cause of the PR snafu remains, which is that a developer still has a valid, contractual claim to some of the land.

Preservationists are opposing an earmark in the capital budget that would provide funds for renovations to the property on the basis that the situation could become a great big legal mess for all parties. Here's an excerpt from the story:

"The contract grants rights, some irrevocable, to the trustee [developer Chip Lundy] that presents severe if not insurmountable fiscal limitations for the county and the college," [Preservation Howard County President Mary Catherine] Cochran said at Thursday night's County Council budget hearing. "We now know that this agreement has put the college and Belmont at risk."

Lundy said Friday that Cochran's fears are unfounded.

"There is no intention - never will be, in my view - of going to court on any issue with this," he said. "We want to cooperate fully with the foundation and the county. There will not be a cloud on the county's title."

Lundy, a prominent county builder, originally hoped to construct upscale senior housing on or next to the Belmont property, which is surrounded by state-owned parkland.

"That's all history now," he said. "There will be no conflict with me."

At the same time, his lawyers have told the foundation that it is premature to refund his $1 million, since his purchase options on land at Belmont don't expire until Dec. 31 next year, he said.

"We have some time," Lundy said. "We have a contract."

It sounds to me like Lundy knows he's got something and he's not backing down, which probably isn't a good thing for Belmont supporters. And, which probably also means that the whole situation could get a lot messier in the future than it ever was in the past.


hocoblog said...

Ralph said...

Diclaimer: I am not an economist or a real estate professional.

In my experience, in today's real estate market, most Howard Countians spend very close to the maximum that they can afford on their house payment. Mortgage lenders will qualify buyers for much higher payments than the typical housing formula thinks they can afford.

If you take $100/month off their payment, most buyers will be able to afford a higher principal+interest which means they will be able to make a significantly higher offer on the house they wish to buy. The most obvious result -- the housing market will only get hotter.

Yes, this is good news for homeowners, but it only makes a bad situation worse for potential first-time buyers.

The last think the Howard County real estate market needs is for the government to subsidize higher prices.

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