> So, say the property is worth 1mil$, and you pay 1% tax. That's 10k. You charge 3k rent. The taxman makes the tax 4%, now you have to pay 40k. You decide to pass 30k to the renter. So now they pay 36k+30k rent per year. 4x tax, 2x rent.
The price of the property is based on the return that the landlord can return. This should be obvious.
If you increase the tax by 4x, the most likely result is the market value will drop from $1 million to something like $250k-500k. The renters will be paying the same value. The new owner will have the same ROI that the previous owner had. Just different buying price and lower return per rental.
Or they sell it to someone for $1 million who is happy to live in it and pay the 1% tax without renting it out. (It may decrease in value some as it's no longer attractive as a rental property--especially if it isn't setup ideally as a home to live in.)
Not only that, but if I can afford it I will now buy all the land around me to insulate myself and make sure it doesn't get developed.
Also, what people don't get is that the same people that set the tax are the people that have the land and the political and economic power. Why would they do something that goes againt their best interest? We're all cool and open to all kinds of things until it happens in out backyards.
> If you increase the tax by 4x, the most likely result is the market value will drop from $1 million to something like $250k-500k.
Not really. This assumes it must remain a rental property.
What will happen is that this $1M property which was previously a rental now becomes a ~$1M property which is owner-occupied. The owner isn't going to take a 500K-750K loss just to keep it a rental.
The price of the property is based on the return that the landlord can return. This should be obvious.
If you increase the tax by 4x, the most likely result is the market value will drop from $1 million to something like $250k-500k. The renters will be paying the same value. The new owner will have the same ROI that the previous owner had. Just different buying price and lower return per rental.