Tag Archives: tenants

5 Signs You Probably Need an Accountant

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Alan Cleaver

WiseBread quoted me in 5 Signs You Probably Need an Accountant. It reads, in part,

Do you dread filing your income taxes each year? Does preparing your taxes take weeks of your time? And once you’ve sent your papers to the IRS, do you have the sneaking suspicion that you might not have taken all the deductions to which you are entitled?

You might need to hire an accountant.

“Hiring an accountant depends on whether your knowledge, time, and money are best spent on bookkeeping, loan application, and tax preparation, or whether you have higher priorities,” says Valrie Chambers, associate professor of taxation and accounting at Stetson University in Celebration, Florida. “A business owner who excels at sales should probably use her time increasing sales rather than learning and doing accounting. That strategy is just more profitable for the business.”

Here are five signs that you need to hire an accountant.

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4. You Own Rental Real Estate

Renting an apartment or two is a great way to earn passive income. But doing so can also complicate your finances. That’s why it makes sense to hire an accountant to make sure that you don’t miss any important tax deductions related to rental income, and that you file all the paperwork necessary when working as a landlord.

“There comes a point when personal tax software is not sophisticated enough to take into account the complexities of real estate investments,” says David Reiss, professor of law and research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School in New York City. “If a taxpayer has multiple properties that have both a personal and investment component, tax software may not be able to accept all of the relevant inputs and generate the correct output.”

Severely Cost-Burdened Renters

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Geoff Stearns

Enterprise Community Partners and the Joint Center for Housing Studies of Harvard University have issued a report, Projecting Trends in Severely Cost-Burdened Renters: 2015-2025. The report opens,

At last measure in 2013, over one in four renters, or 11.2 million renter households, were severely burdened by rents that took up over half their incomes. This total represented a slight reduction from the record level of 11.3 million set in 2011, but remains dramatically higher than the start of the last decade, having risen by more than 3 million since 2000. With substantial growth in renter households expected over the next decade and little sign of a turnaround in the income and rent trends that produced these record levels of cost burdens, there is little prospect for substantial improvement in these conditions over the coming decade. (4)

And it concludes,

Overall, our analysis projects a fairly bleak picture of severe renter burdens across the U.S. for the coming decade. Under nearly all of the scenarios performed, we found that the renter affordability crisis will continue to worsen without intervention. According to our projections, annual income growth would need to exceed annual rent growth by 1 percent in order to reduce the number of severely burdened renters in 10 years. Importantly, that decline would have a net impact on fewer than 200,000 households, only because continued increases in burdens among minorities would be offset by declines among whites. Under the more likely scenario that rents will continue to outpace incomes, the number of severely rent-burdened households would increase by a range of 1.7 – 3 million, depending on the magnitude.

Given these findings, it is critical for policymakers at all levels of government to prioritize the preservation and development of affordable rental housing. Even if the economy continues its slow recovery and income growth improves, there are simply not enough quality, affordable rental units to house the millions of households paying over half their income in rental costs. (16)

It is unsurprising that the policy takeaway of these two housing organizations is to prioritize the preservation and development of affordable housing. But given the pervasive nature of the problem, I wonder if it is better to just say that this is an income inequality problem and address the root cause — low-income families just don’t have enough money to make ends meet.

Strange Love for Homeowner Tax Rates

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                                  Peter Sellers as Dr. Strangelove

With a nod to Dr. Strangelove, David Hasen has posted a scary little thought experiment, How I Learned to Stop Worrying and Love our Homeowner Tax Rules on SSRN. The essay “estimates the magnitude of life-cycle tax benefits available from home ownership for representative taxpayers.” (1)

Hasan starts with a not-that-far-fetched example of a couple who purchases a California home in the 1960s. The home passes to their daughter and son-in-law in 2013. he documents a federal and state tax savings of about $15,000 per year for every year the home is owned by the family.

Hasan concludes,

A large literature has examined the distributional and allocative effects of the homeowner tax rules described above. Summarizing, the literature notes that the rules favor homeowners over renters, owners of larger homes over owners of smaller ones, and residents of states with a large owner-occupied housing sector over residents of other states. The literature also notes the efficiency costs associated with the rules, as taxpayers respond by adjusting their economic positions in ways that reduce total social wealth. The responses may include holding property rather than selling it, occupying it rather than renting it, and swapping it rather than selling it for cash, all as described above. Each of these choices, when tax-motivated, creates real economic costs.

The contribution of the present discussion is modest. One largely hidden aspect of the rules has been just how large the dollar tax savings can be relative to affected taxpayers’ overall tax liabilities, especially when considered in life-cycle terms. The discussion above gives a sense of the numbers for a relatively typical, albeit profitable, course of investment over two generations for an upper-income, but by no means wealthy couple. The bottom line is that for such a couple, taxes are reduced by 40 to 50 percent.

Benefits that are heavily skewed to higher income taxpayers and, consequently, that undermine the general distributional structure headlined in the law promote neither civic pride nor a sense of common purpose; benefits that have massive allocative effects create a large drag on the economy. If I hadn’t learned to stop worrying and love our homeowner tax rules, I might even be upset myself. (10, footnotes omitted)

Academics, myself included, rail against the way that federal housing policy overwhelmingly favors owners (wealthier, on average) over renters (poorer, on average), primarily through the tax code. It does not seem like the political will is there to change that dynamic at present. Nonetheless, it is important to keep reminding everyone of the facts:  federal housing policy heavily favors the wealthy over the poor, a sure sign of a poorly designed social policy.

The Silent Housing Crisis

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J. Ronald Terwilliger

J. Ronald Terwilliger

The J. Ronald Terwilliger Foundation for Housing America’s Families, a new entity, has issued its first white paper on the Silent Housing Crisis: A Snapshot of Current and Future Conditions. The paper covers some of the same ground as another recent Urban Institute report that I had recently blogged about (and, indeed, it is informed by the work of those UI researchers, as can be seen in the endnotes), but it raises some interesting issues of its own.

The white paper opens with a quotation from President Truman’s Statement upon signing the Housing Act of 1949, which

establishes as a national objective the achievement as soon as feasible of a decent home and a suitable living environment for every American family, and sets forth the policies to be followed in advancing toward that goal. These policies are thoroughly consistent with American ideals and traditions. They recognize and preserve local responsibility, and the primary role of private enterprise, in meeting the Nation’s housing needs. But they also recognize clearly the necessity for appropriate Federal aid to supplement the resources of communities and private enterprise. (3)

The white paper argues that the United States

is unprepared for the tremendous challenges that a rapidly expanding renter population will pose to the already strained housing system. Absent a comprehensive and sustained policy response, it is likely that rental cost burdens will only grow in intensity and scope, undermining the stability and dampening the hopes of millions of American families. These conditions, in turn, will exacerbate income inequality, diminish the prospects of social mobility for countless individuals, make us less competitive in the global marketplace, and ultimately hinder America’s economic growth. (6)

While the white paper has a lot to offer in diagnosing problems in the American housing sector, I was surprised to find that it failed to discuss the role of restrictive zoning in increasing the cost of housing, particularly in the vibrant communities that are the main engines of job creation. Any serious effort to address the lack of decent and affordable housing has to tackle the problem of restrictive zoning.

The Terwilliger Foundation was founded in 2014 and “seeks to recalibrate federal housing policy so that it more effectively addresses our nation’s critical affordable housing challenges and meets the housing needs of future generations. The Foundation will offer a set of practical suggestions for tax, spending, and mortgage finance reform that is responsive to the ongoing crisis in housing and the profound demographic changes now transforming America. ” (2) It is good to have another voice in the mix on these important issues. The foundation’s namesake is the Chairman of Terwilliger Pappas Multifamily Properties and is the Chairman Emeritus of Trammell Crow Residential Company, the largest multifamily developer in the U.S. for many years.

Renting in America’s Largest Cities

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Following up on an earlier graphic they produced, the NYU Furman Center and Capital One have issued a report, Renting in America’s Largest Cities. The Executive Summary reads,

This study includes the central cities of the 11 largest metropolitan areas in the U.S. (by population) from 2006 to 2013: Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York City, Philadelphia, San Francisco, and Washington, DC.

The number and share of renters rose in all 11 cities.

The rental housing stock grew in all 11 cities from 2006 to 2013, while owner-occupied stock shrank in all but two cities.

In all 11 cities except Atlanta, the growth in supply of rental housing was not enough to keep up with rising renter population. Mismatches in supply and demand led to decreasing rental vacancy rates in all but two of the 11 cities in the study’s sample.

The median rent grew faster than inflation in almost all of the 11 cities in this study. In five cities, the median rent also grew substantially faster than the median renter income. In three cities, rents and incomes grew at about the same pace. In the remaining three cities, incomes grew substantially faster than rents.

In 2013, more than three out of every five low-income renters were severely rent burdened in all 11 cities. In most of the 11 cities, over a quarter of moderate-income renters were severely rent burdened in 2013 as well.

From 2006 to 2013, the percentage of low-income renters facing severe rent burdens increased in all 11 cities in this study’s sample, while the percentage of moderate-income renters facing severe rent burdens increased in six of those cities.

Even in the cities that had higher vacancy rates, low-income renters could afford only a tiny fraction of units available for rent within the last five years.

The typical renter could afford less than a third of recently available rental units in many of the central cities of the 11 largest U.S. metro areas.

Many lower- and middle-income renters living in this study’s sample of 11 cities could be stuck in their current units; in 2013, units occupied by long-term tenants were typically more affordable than units that had been on the rental market in the previous five years.

In six of the cities in this study, the median rent for recently available units in 2013 was over 20 percent higher than the median rent for other units in that year, indicating that many renters would likely face significant rent hikes if they had to move. (4)

While this report does an excellent job on its own terms, it does not address the issue of location affordability, which takes into account transportation costs when determining the affordability of a particular city. It would be very helpful if the authors supplemented this report with an evaluation of transportation costs in these 11 cities. This would give a more complete picture of how financially burdened residents of these cities are.

Gen X & Millennial Renters

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Gen X

Jason Michael

MainStreet quoted me in Generation X and Millennials Are Choosing to Remain Renters. It opens,

Although James Crosby is getting married later this year to his college sweetheart, the financial analyst said they do not have plans to buy a home in Atlanta in the next few years.

While Crosby, who is 25, said he loathes paying rent and not building up equity in a home, renting has its benefits. Right now, it’s easy for him to budget for rent in an apartment, because the amount he pays each month is static and he will not be faced with any costly surprises such as repairing an air conditioner.

Like Crosby, fewer Americans are drawn to owning a home and plan to keep renting as wages remain stagnant and home prices have risen. A recent Gallup poll found that many people are content to be renters with 41% of non-homeowners who said they do not plan to purchase a home in “the foreseeable future.” The gap is widening since only one of three people agreed with this sentiment two years ago. The percentage of people who own homes has dropped to 61%, which is the lowest figure in almost 15 years, the poll revealed.

Tepid Economy Plays a Factor

Both the desire and ability to buy a house is waning among some individuals, because “the economy has kept young people from forming their own households as quickly as they had before the financial crisis,” said David Reiss, a law professor at Brooklyn Law School.

Some Gen X-ers and Millennials are also living at home longer than previous generations and wind up deferring homeownership. The weak and soft job markets have impacted Millennials who are also faced with carrying a heavy debt load from having to finance their undergraduate degrees.

“I would predict that if the economy warms up for a reasonable time, expectations about homeownership are likely to change quickly,” Reiss said.

Reiss at TechSalon on Tenant Rights

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I will be the lead discussant at a Technology Salon Brooklyn event on Thursday morning: How Are ICTs and Social Media Supporting Tenant Rights? The invitation reads,

Gentrification is top of mind of many Brooklynites, as they are pushed out of their communities by large-scale economic development and wealthier groups moving in. One effect of the gentrification process is often the shuttering of local businesses and skyrocketing rents for residents as landlords make way for those who can pay more.

The New York City Office of the Comptroller reported in April 2014 that median rents in the city had risen by 75% since 2001, compared to 44% in the rest of the US, while at the same time, real incomes declined overall for New Yorkers. At the same time, the numbers of rent-regulated properties has decreased. The harshest consequences of rising rents and lowering incomes are felt by the poor and working classes (those earning less than $40,000 a year).

This situation is contributing to an increase in homelessness, with the city’s shelters receiving an all time high number of people seeking support and services. The negative impacts of gentrification also tend to differentially impact on communities of color. Tenants do have rights — however, enforcing those rights can take years when landlords have deep pockets. In 2003, a tenant advocacy group found that in cases initiated by tenants, only 2% resulted in fines for landlords.

Residents of gentrifying areas have not been silent about the impact of gentrification. Numerous community groups have formed and are fighting to keep communities intact, cohesive and affordable for residents. Social media and better data and data visualization can help to track and create evidence bases that can support residents, or to connect them to support services and legal aid.

Please RSVP now to join us at the Brooklyn Community Foundation for a lively roundtable conversation on tenant rights and ICTs. We’ll hear from community organizations, technology developers, legal advocates and others with an interest in technology and social activism around tenant rights, including such questions as:

  • How are community organizations successfully using ICTs and social media to support tenant rights?
  • What is working well, and what are some of the lessons learned about using ICTs and social media for outreach?
  • What are some new ways that organizations could use ICTs to support their work?
  • What support do community organizations need to do this work?

Please RSVP now to join Technology Salon Brooklyn for a lively discussion! Be sure to arrive early to get a good seat, hot coffee, and morning snacks before we start.

ICTs, Social Media and Tenant Rights
Thursday, April 16, 2015, 9-11am
Brooklyn Community Foundation
1000 Dean Street, Suite 307
Brooklyn, NY 11238
RSVP is Required to Attend

The Foundation is a short walk from the A, C, S 2, 3, 4 or 5 trains (Franklin Av stop) (map).