EEF33646-832E-47C7-9329-A006153AD436 A Way To Make Housing More Affordable | Baghdad By The Bay

A Way To Make Housing More Affordable

Rent-or-BuyAbout eight years ago I was unemployed for almost two years. A friend of mine told me that I wasn’t unemployed, but that I made $40,000 per year. I looked at him and shook my head. That made no sense, but he pointed out that because I had been lucky and inherited my parents home I didn’t have to pay rent which [at the time] would have worked out to about $40k/year.

While that number has increased nowadays, it hit me hard. There are some things that many people don’t understand about owning a house that is different than renting and I feel that should change. While it’s a change that should happen nation wide, it’s something that makes a lot more sense in San Francisco.

If you own a house you must pay property tax. The thing that some of you might not know is that property tax is tax deductible. I met a woman who recently bought a house and is paying over $11k/year just in property tax. All of that is deductible from her tax return every year as a living expense. With rental rates at an all time high in San Francisco this is a bit of a drop in the bucket, but getting to cut $11k+ off your yearly income is still nothing to sneeze at. She can also claim her mortgage payments as a living expense and deduct them from her income.

This is why I believe that rent should be tax deductible as a living expense. I recently saw an article where an elderly couple in the Sunset District who were paying $2100/month in rent had their new landlord remove an in-law apartment from their house thereby making the home a single family dwelling. The landlord was then able to increase their rent because the home was no longer under rent control to $8900/month.

San Francisco is one of the few places in the United States where something like this could happen, but there are places where it is happening more often. Most of the Bay Area is quickly approaching the rental prices of San Francisco because when you leave San Francisco the homes are bigger thus demanding a higher price. Even the apartments are larger outside of San Francisco.

So why isn’t this happening? I can only make a guess, but let’s use San Francisco as an example. If residents were to be able to deduct their rent from their income as a living expense San Francisco would look like a very poor city. Yes that new techie family that’s paying $10k/month for a house in the Mission would suddenly have a $120k deduction from their income each year which would probably qualify them for financial aid unless they were pulling in closer to $200k/year in salary. This also probably wouldn’t help reduce rent because hey, it’s a tax deduction.

Overall, San Francisco has for a long time been difficult to live in due to the increasing rental prices and that also increases expenses in the Bay Area. To make this change so that rent was tax deductible would probably make a large number of people in the U.S. look much poorer than we realize, in California where Proposition 13 is in effect so that property tax can only increase by 1.1%/year, home ownership even with these high purchase prices currently has advantages over other parts of the country. Perhaps this is more of a state wide thing, but I believe it’s something a lot of our politicians should start talking about.

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