Monthly Archives: April 2016

Licensing the property and licensing the landlord have both been political issues

Rental housing has always (well at least since rent controls were enacted in the 1970s) a political issue in Ontario generally and Toronto particularly.

Then: Cira 2010:

Now: 2016

But, condominiums and co-ops are to be excluded.

Is it better to rent or to own if you are living on a fixed income?

For many Canadians the family home is their biggest asset. Therefore, they must consider how to best make use of that home as part of their retirement plan.

The question is:

Is it better to sell the home and use the capital (but if  you are a U.S. citizen see the warning below) from the home to provide income to rent? Or is it better to retain the home and continue to live in it so that one doesn’t have to rent. Renters can be subject to unpredictable rent increases. Furthermore, at the present level of low interest rates, it is difficult to achieve predictably high returns on investment capital.

So, what’s a poor potential retiree to do?

Excerpts from the article referenced in the above tweet include:

A big financial disadvantage for older renters, however, is that as rising rents take a bigger portion of a fixed income, there is no offsetting increase in equity like there often is when you own a home. And rental prices can double over a 25-year period.

Charles Farrell, a financial planner with Northstar Investment Advisors LLC in Denver, says if a rental starts out at 30% to 40% below the prior mortgage payment, it may be worth considering. But he advocates that seniors not spend more than 15% of their annual retirement income on housing—rented or owned—because as the years progress, medical expenses typically rise. (Other financial planners says seniors should spend no more than 25% on housing, and less if they own a home outright.)

Do property taxes turn owners into renters?

The following two comments appeared in conjunction with this article:

One of the largest expenses for owning a home at any age are the property taxes. As seniors on fixed incomes, the battle against voracious local government spending can easily turn owners into renters. Seniors should not have to pay property taxes for services they no longer use,e.g., schools which are typically the largest component of property taxes. Take school district taxes out of the equation and the housing expense largely goes away.

Some states and counties, in recent years, have become more tax-friendly for seniors.

Georgia allows all retirees 65 and older to pension and investment income from state taxes: up to $65,000 for an individual and $130,000 for a married couple filing jointly.

Cobb County (northwest Atlanta suburb) exempts all homeowners 62 and older from all school and school bond taxes.

The aim of the exemptions is to attract law-abiding financially secure seniors. They, in turn, will create demand for new housing, and more health care and service industry jobs.

Smart policy.


Finally, this question may be answered by whether you are a U.S. citizen!!!

Remember that those Canadian residents who are U.S. citizens will be subject to capital gains tax on the sale of their principal residence. Therefore, for U.S. citizens, the sale of the principal residence will be less advantageous than for those who are NOT subject to the burdens of U.S. citizenship!




Am important element of @RetirementPREP may be to own your home

The above tweet references an article that appeared on April 1, 2016 in the Wall Street Journal. The article includes:

With fewer seniors owning homes and having fixed mortgage payments, they have become susceptible to rent increases, particularly in high-demand areas. In San Mateo County, just south of San Francisco, where Ms. Plymale lives, more than 54,000 new jobs have been created since 2010, but only about 2,100 new housing units have been built in that time, according to the county. In the past four years, monthly rent for two-bedroom apartments in highly marketable multifamily buildings surged nearly 52%, to an average topping $2,800.

Of all renters, those age 75 and older have the greatest incidence of “severe” cost burdens, meaning more than half of their incomes go to rent, according to Harvard research. The typical renter ages 65 to 69 has household income of $24,700 annually, about 40% less than the median renter household income for those ages 45 to 49, according to an analysis of census data for 2014 by Enterprise Community Partners, an affordable-housing nonprofit. “You can’t really go and renegotiate with Social Security about how much you’re getting paid,” said Chris Herbert, managing director of Harvard’s Joint Center for Housing Studies.

Adding more housing is a daunting task, particularly in suburbs where locals are wary of more residents and traffic. Community Legal Services in East Palo Alto, a nonprofit, is pressing several Bay Area jurisdictions to institute new tenant rules, including capping rent hikes to a percentage of the consumer-price index. Deliberations are roiling communities, and pitting those who believe governments should impose new regulations on landlords against those who say such measures violate private-property rights.

Landlords in San Mateo County and other high-cost areas often say many rent hikes are necessary to pay for overhauls of aging buildings as well as other escalating expenses like increased property taxes. New owners in particular can face big tax increases because California law generally allows for a jump in assessed values after a property changes hands from a longtime owner.

“If you’re paying rent of $1,000 for a two-bedroom unit but the market is now $1,800, you really can’t expect the property owner to not ask for $1,800, because what you’re really asking the landlord to do is to subsidize somebody,” said Tom Bannon, the chief executive of the California Apartment Association, the country’s largest statewide association for rental-property owners and managers.

It strikes me that owing one’s own home will provide less volatility in housing costs. That said, ONLY renters can can live free of the costs of owning a building! But, renters do pay the cost of property taxes. Interestingly, in Toronto many tenants subsidize the property taxes of home owners.