I am grateful to have a roof over my head, and while I do not know personally four of the five people who suffer through my mental iterations, I too am grateful that you have a roof over your heads as well.
That said, beyond the safety of shelter, how much is that roof worth? How is that roof, four walls, and floor priced? How should it be priced?
The king (government) wants to extract yield from his domain. He grants you land for consideration i.e., a fee and in return you pay him an annual tax. To meet your tax obligations, you can farm the land, generate a yield in crops, sell the crops, and pay the king (government) a tax. Or, you can rent out your son’s room between August and May while he is away at the University of Florida ( a choice he made as a way of getting back at you for being an annoying Seminole fan) to make the legal tender that is accepted by the king for his payment.
As you get older and prepare to punch that one-way ticket out of the realm, the king hits you with a death tax, levying a final claim on a portion of your property. (So much for the generational wealth argument.)
But if you are like a large number of property owners, not only do you not grow crops or have tenants, you have been duped by real estate agents into thinking that just because Janine and Francine sold their house for $500,000 that your house is also worth that much even though you have no intent on selling.
Remember. Your son is at UF, mortgage rates are floating between six and eight percent, twice as high as the rate you got twenty years ago, and mortgage payments are also going to be much higher coinciding with a peak in your income.
Your house is not worth $500,000. It is worth zero. The house and the land it sits on does not generate an income. It was sold to you as an end-user and until you put it on the market and conduct price discovery, the value to me and everyone else is zero. Again, I am happy you have a roof over your head, but I am not interested in your four walls.
Who is interested in maintaining the myth about valuing your abode according to what your neighbors received for their house sales is the king. He bases his legal argument for coercing from you a tax on your property by using the comp mechanism. Simply hitting you with a tax just because you have a roof over your head looks too confiscatory. It would be like taxing a person simply because they took a gulp of oxygen. But claiming a piece of your economic gain in exchange for the infrastructure he provides that allows you to obtain that gain is his pound of flesh.
Before that special breed of property owner, the landlord, gets too happy, she should be reminded that she does the same thing to her tenants. She confiscates a portion of the tenant’s income, between 30% to upwards of 50% in exchange for someplace to rest his head and eat a Happy Meal from Mickey Dees.
Given this top-down pressure by the king to extract yield in the form of income from landlords and property owners and indirectly from tenants, why not a focus on the property’s value in production versus seizing a portion of the property owner’s personal income?
Alton Drew
25 December 2024
If you are in need of a legal or political risk assessment regarding your trading environment, reach out to me on LinkedIn or email me at altondrew@altondrew.com.
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