YOUR HOME IS A BAD INVESTMENT
Common sentiment is that real estate Ėspecifically the home - is one of the best investments that a family can make. For most of the country thatís true. Not here, though. New York is one of the few states in the Union in which real estate is not a wise investment. Thatís because, simply put, our property taxes are too high. The onerous amalgamation of local, county, and school taxes strip real estate of any future returns it might have because your payment of these taxes must be considered a part of the investment in your home.
In Niagara County the median home value is $95,800 and the property tax burden on said home is $2,800. Suppose someone buys that home as a starter home and hopes to sell it off in a decade or two. To come out even, based on taxes-paid alone, he would have to sell that home for $123,800 after 10 years or $151,800 after 20. Thatís completely impossible in the Buffalo-Niagara region.
Making matters worse, that basic analysis makes two major assumptions. One, taxes wonít rise in every one of those years. As weíve recently seen, even the tax cap canít stop them. And, two, the property owner will put absolutely no money into that home for remodeling or repairs. Those unaccounted-for factors Ė 100% guaranteed to happen Ė have the lack of a payback on housing set in stone.
This is a uniquely-NY problem. Property taxes in the Empire State are 57% higher than the national average. For every $100 other Americans pay, we pay $157. And thatís the average; letís look at one of the extremes. I know someone from Tennessee who pays a paltry $660 per year in property taxes for his 2,800-square-foot suburban new-build. In comparison, my coworker who lives in North Tonawanda has a similar home for which he pays $6,800 in taxes annually. Another coworker pays $5,480 on his like-sized abode in Amherst. Think about it: they will have paid $68,000 and $54,800 in property taxes, respectively, after just 10 years. They will never make that up in resale value. Never. But, the man from Tennessee will for sure; what he pays in taxes over 1 decade is even less than what the North Tonawanda resident pays in 1 year. For him, and many other Americans, it makes complete sense to invest in real estate, be it housing or land, because their taxes are so low.
This takes on greater meaning since weíve all lost faith in the stock market because of the Great Recession and the continued fiscal woes in Europe. As 401(k)s and pensions have plummeted, weíve all looked for other options to save for our retirements and our heirs, things like hard assets such as gold or real estate. Only in New York State is the latter an even poorer investment than a down market. Main Street, NY is absolutely no better an option than Wall Street, NY. Itís depressing because our homes are the single largest investment that we will ever make in our lifetimes.
Letís put this into historical perspective. A tea tax - but a pittance - was the straw that broke our colonial backs and jumpstarted the American Revolution. Our property taxes are far more extravagant. Will that someday ignite that same fire of change in New Yorkers? Letís hope so, and soon. Weíll never be a rich people as long as the status quo is maintained in local and state leadership.
Bob Confer is a Gasport resident and vice president of Confer Plastics Inc. in North Tonawanda. E-mail him at email@example.com.
This column originally ran in the 13 Feb 2012 Greater Niagara Newspapers
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