California homeowners are seeing a substantial impact from the new tax plan. The state is home to the five most impacted metros in the US, including Los Angeles, according to an analysis from The Apartment List. Los Angeles homeowners will lose $3,300 in housing-related tax deductions this year. It is the third most impacted market in the state and the county, on a list that includes San Jose, San Francisco, Oxnard and San Diego.
“We estimate that the median homeowners in the L.A. metro will lose $4,000 in housing-related tax benefits in the first year of the new tax code,” Chris Salviati, a housing economist at the Apartment List, tells GlobeSt.com. “This is a bit less than the losses for the median homeowners in the San Jose and San Francisco metros, who will lose $5,400 and $4,500, respectively, but still greater than the losses for homeowners in many other parts of the state. The differences across metros within California is driven by differences in home values.”
California is hit so substantially by the tax code because it has a combination of high home prices and high state taxes. “The value of housing-related tax benefits is tied directly to home values, as well as local property tax rates,” explains Salviati. “Since California has a combination of high property values and high local tax rates, many of the state's homeowners are hit particularly hard by the changes to homeowner benefits under the new tax code.”
Nationwide, homeowners in 15 states will see increases to the home-related deductions, so the tax plan is unlikely to have an impact on homeownership in most US markets. However, in areas like Los Angeles, the losses could delay homeownership for some would-be buyers and drive housing prices down to offset the new costs. “In many parts of the country, the changes will likely have relatively little impact, but in the hardest hit areas, including most of the major markets in California, the effect could be more substantial. The loss of benefits makes homeownership less attractive, and may cause some potential homebuyers to wait longer before buying or consider buying in a different area. Home values may also dip in response to the loss of benefits.
While Los Angeles is among the most impacted cities, San Jose topped the list, followed by San Francisco. Following Los Angeles, Oxnard and San Diego took the fourth and fifth positions, while Honolulu, Hawaii; Bridgeport, Connecticut; Boston, Massachusetts; Washington D.C; and New York rounded out the remaining five positions on the national list. Interestingly, the states to see the most substantial losses are states where Hilary Clinton won the previous presidential election by a margin of 20% or greater. “Left-leaning markets tend to have higher property values and higher local tax rates, and are thus hit hardest by these changes,” explains Salviati. “I can't really comment on whether or not that's a coincidence or by design.”
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Kelsi Maree Borland
