How Would Ending Tax Credits Effect LA Real Estate? (Gardena: real estate market, mortgage)

[NyWriterdude]

We always here about the housing shortage in LA, but one thing that supports the high cost of real estate in LA is the tax credits developers and other companies get from federal and state governments for developing urban areas. If these tax credits were revised, or allowed to expire, things could end up quite different.

[majoun]

Originally Posted by NyWriterdude

We always here about the housing shortage in LA, but one thing that supports the high cost of real estate in LA is the tax credits developers and other companies get from federal and state governments for developing urban areas. If these tax credits were revised, or allowed to expire, things could end up quite different.

That would be a great idea, and would help restore a measure of sanity to the market.

[thelopez2]

There will just be a new normal. The market will take some time to adjust, people will flee the market. Those with cash will just buy more at a lower price.

[Hippityhop]

Originally Posted by NyWriterdude

We always here about the housing shortage in LA, but one thing that supports the high cost of real estate in LA is the tax credits developers and other companies get from federal and state governments for developing urban areas. If these tax credits were revised, or allowed to expire, things could end up quite different.

Originally Posted by majoun

That would be a great idea, and would help restore a measure of sanity to the market.

Since its creation in 1986, the LIHTC has helped to finance more than 2.4 million affordable rental-housing units for low-income households
https://www.occ.gov/topics/community...ax-credits.pdf


According to the Census there are 134,789,944 housing units in the United States.
Therefore, something on the order of 1.8% housing in the US are tax credit units.

LA would probably have smaller percentage than the US as a whole as the majority of LIHTC deals are in more rural areas. Bottom line, there would be a negligible effect on the overall housing market, but there would be more slumlord properties and rundown buildings. At least LIHTC buildings look nice.

[BRinSM]

One of the driving factors for my home purchase 5 years ago was the tax benefit. I wouldn't say that I'm completely against removing these benefits from people like myself as a benefit to the greater population, but for me to support this removal it would need to be done in some sort of gradual process in order to not effect my balance sheet and cash flow significantly. I think this is a non-starter though as there are just too many homeowners who are reliable voters who would keep this from happening. Even though it is costly to own real estate in LA, if you work hard and give up spending money elsewhere, you may be able to afford property at some point and also be able to take advantage of the tax shelter real estate provides.

[Hippityhop]

Originally Posted by BRinSM

One of the driving factors for my home purchase 5 years ago was the tax benefit. I wouldn't say that I'm completely against removing these benefits from people like myself as a benefit to the greater population, but for me to support this removal it would need to be done in some sort of gradual process in order to not effect my balance sheet and cash flow significantly. I think this is a non-starter though as there are just too many homeowners who are reliable voters who would keep this from happening. Even though it is costly to own real estate in LA, if you work hard and give up spending money elsewhere, you may be able to afford property at some point and also be able to take advantage of the tax shelter real estate provides.

I believe in Canada they don't get the interest expense deduction and their RE prices in Vancouver, Toronto, and Montreal are just as screwy as ours are.


However, I think the OP is talking about Tax Credits (LIHTC, Historic, Energy, etc that are issued by the State) NOT Interest Expense tax deductions (which every US homeowner with a mortgage gets).

[ashpelham]

It's an idea, to get that real estate market settled down some. But there are much larger, macro-issues to address:

1- Interest rates that have been too low for too long. Propping up a lot of housing markets.
2- International buyers who are purely there for the investment. I don't know what to do with that. Any ideas?

[thelopez2]

Originally Posted by Hippityhop

However, I think the OP is talking about Tax Credits (LIHTC, Historic, Energy, etc that are issued by the State) NOT Interest Expense tax deductions (which every US homeowner with a mortgage gets).

You are right. I too was thinking about the interest expense.

Originally Posted by NyWriterdude

We always here about the housing shortage in LA, but one thing that supports the high cost of real estate in LA is the tax credits developers and other companies get from federal and state governments for developing urban areas. If these tax credits were revised, or allowed to expire, things could end up quite different.

There are two ways to create incentives, give people money by collecting it from someone else (Bonds), or give people tax breaks. Tax credits are a tool used by about every city and state. Incentives are used to attract film production out of California. It is also used to attract business such as in Texas. So if you take the incentives away, less will be built further limiting the supply of addition units available.

Here is an example of the impact of removing a tax break.

Larry Flynt | Gardena | Normandie Casino

What specific tax credits are you asking about?