Real Estate – R&R – Reachout and Rebuild

Climate and Real Estate

David Posnett — Fri, 03 Jan 2020 03:58:28 +0000

January 1, 2020

There is already evidence of a real estate slump in the United States. A housing recession is predicted for 2020. The average price of luxury home sales is falling, as is the number of sales. Long Island specifically is suffering as sales decrease and homes lose value. This is rather astonishing given that the rest of the economy is still on steroids.

What are the reasons? The following have all been suggested.

First, baby boomers from New York are downsizing and moving to lower-tax states. Second, millennials seem to have a distaste for buying second homes and would rather rent. Third, bonuses on Wall Street fell 17 percent in 2018 compared with 2017.

Fourth, the tax changes brought on by Donald Trump: a cap of $10,000 on the amount of state and local taxes (SALT), including property taxes, that can be deducted from federal income tax. For an expensive home with property taxes of $50,000 per year, this means that $40,000 can no longer be deducted.

Fifth, as mentioned by some real estate professionals: chronic flooding, which threatens the values of houses here. According to Aidan Gardiner writing for The Real Deal, a website focusing on New York real estate news: “Chronic flooding threatens to sink the value of Hamptons homes. Hamptons homes are very likely to lose value given that they’ll face chronic flooding as climate changes and sea levels rise over the coming years, according to Bloomberg. Behind only central California, the area has the second-highest level of its property tax revenue at risk among U.S. municipalities with a high likelihood of chronic flooding in the next 12 years. Climate change is expected to bring constant floods that would tank property values, erode infrastructure, and sink tax revenue, all of which will make it harder to fund projects to battle the rising seas.”

You can check for yourself on ss2.climatecentral.org, where you can find a “risk zone map for surging seas.” See the figure appended below. You can input anything from “unchecked pollution” to “extreme carbon cuts,” depending on how you predict future policies will rein in carbon emissions.

I assumed unchecked carbon emissions along the lines of our present-day emissions, and I asked for maps of a 10-foot water level rise. The program produces maps with dark blue shaded areas that will be underwater. Here are some of the highlights for the not so distant future (2050 to 2100).

Montauk will become an island, the Napeague stretch will be underwater, and much of downtown Montauk will be too, including Route 27. Flooding of Route 27 across Napeague will start with just a three-foot rise in sea water levels, shutting down access to Montauk.

Homes all around Accabonac Harbor will be flooded. Gerard Drive and Louse Point will be submerged. Maidstone Park, Sammy’s Beach, and Cedar Point will be gone. Barcelona Point and the Sag Harbor Golf Course will become an island.

Beach homes in Amagansett, homes along Two Mile Hollow Beach, homes around Hook Pond, Georgica Pond, and Wainscott Pond will all be underwater. Indeed, a few homes on Beach Lane in Wainscott will be submerged. That is where the cable from the South Fork Wind Farm is proposed to come ashore and where some of its opponents own property.

Much of Sag Harbor Village will be underwater, and North Haven will be a real island.

Up and down Long Island, the homes close to the South Shore will be underwater, and Fire Island will no longer exist.

The North Shore, too, will be flooded, and Greenport will be on an island.

Kennedy International Airport will be underwater.

It is not just someone else’s problem. Loss of value of high-end homes means loss of significant local business and loss of jobs, and it spills over, resulting in loss of the value of your own property regardless of whether it is in particular danger of flooding.

Showtime’s “The Affair” recently wrapped up its final season, and part of it was set in mid-21st-century Montauk, with warming temperatures and rising seas. The show forecasts what life will look like in 34 short years, including mass transit that routinely short-circuits because of flooding, coastal communities plunged into near-total darkness, and shoreline towns without basic municipal services.

We had better support clean energy (including offshore wind) and work to decrease our carbon footprint. It is urgent.

https://ss2.climatecentral.org/#12/41.0339/-72.0864?show=satellite&projections=0-K14_RCP85-SLR&level=10&unit=feet&pois=hide

Home Sales Plunge as a Result of Capping SALT

David Posnett — Sat, 02 Nov 2019 01:58:47 +0000

From the East Hampton Star comes a short notice burried on page B9: “Home Sales Have Plunged”.

By Jamie Bufalino

October 31, 2019

East End home sales in the third quarter were at an eight-year low, and the inventory of houses on the market has reached a 13-year high, according to a report from the Douglas Elliman Agency.

Sales over all have declined for the seventh quarter in a row, the agency reported. Sales of houses priced at or above $5 million were at their lowest level since 2013.

The slowdown in the real estate market continues to have an adverse impact on the Peconic Bay Region Community Preservation Fund. Revenues so far this year total $58.2 million, Assemblyman Fred W. Thiele Jr. announced on Friday, compared to nearly $73 million in 2018 — a decline of over 20 percent.

The preservation fund, which provides money for land preservation and water quality improvement, receives the proceeds of a 2-percent real estate transfer tax in the five East End towns: East Hampton, Southampton, Shelter Island, Southold, and Riverhead. Over the first nine months of the year, C.P.F. revenues from home sales fell 27.8 percent in East Hampton, 19.2 percent in Southampton, and 31.4 percent in Riverhead. Shelter Island’s were up 27.3 percent, and Southold’s increased by 6 percent.

Looking for a silver lining, Mr. Thiele said the 20-percent decline in overall revenue was an improvement from earlier this year. In May, C.P.F. intake was down 27.4 percent. Still, September’s intake, $5.38 million, was the lowest since March, when $4.56 million was collected.

The Douglas Elliman report attributed the slowdown in the real estate market to the 2017 tax reform law, which placed a $10,000 cap on the amount of state and local taxes — including property taxes — that can be deducted on federal returns. That cap, the report said, has made houses on the East End even less affordable.

Remember the Trump Tax law in Nov. 2017? Apart from a tax give away to the richest and to corporations, there was a mean spirited effort to punish coastal (democratic) states like California and New York, where real estate prices and taxes are high and state taxes too. We used to be able to deduct State And Local Taxes (SALT) from our federal tax income. But the Republicans drafted a bill that omitted these SALT deductions. Then it was amended and the SALT deductions were capped at $10,000. But voters did not like it! And Long Islanders, in particular, did not like it. Average real estate taxes are very high here.

Lee Zeldin had originally voted for Trump’s tax bill, but then the bill came back from the Senate (and a joint conference). Lee caught on that it was unpopular in his district. So he and a number of Rep. colleagues voted against the bill in the end (knowing that it would pass anyway).

At the time there were several blog posts on this tax bill on this site: https://resistancesuffolk.blog/2017/12/02/the-republican-tax-scam/

https://resistancesuffolk.blog/2017/11/11/zeldin-squirming-on-tax-bill/

https://resistancesuffolk.blog/2017/11/10/gaming-the-tax-plan-in-the-hamptons/

This last link (dated Nov. 10, 2017) states

“… the value of your home could decrease! Thanks Mr. Trump & Mr. Zeldin!”

Clearly, one of the concerns was that the capped SALT deductions might hurt housing prices. Now, just 2 years later, it is catching up with us and we are starting to see a major real estate slump.

https://www.leezeldinrecord.com/

There is a Russian Asset in the White House

David Posnett — Mon, 14 Jan 2019 00:40:48 +0000

From Peggy Backman:

https://www.facebook.com/NowThisPolitics/videos/1002264426639490/UzpfSTEwMDAyNjI5MzQ3ODUwODoyMzQzODg1NjQxMTQyNTg/

It’s really quite simple.

Gaming the Tax Plan in the Hamptons

David Posnett — Fri, 10 Nov 2017 20:47:23 +0000

I guess this should be expected. Even if you are not a 2nd home owner out here on the East End, the value of your home could decrease! Thanks Mr. Trump & Mr. Zeldin!

Hamptons Homebuyers Have Already Figured Out How to Game the Tax Plan

By Rob Urbanand, Prashant Gopal

November 10, 2017, 8:06 AM EST

Brokers see tax change adding to rentals in getaway spots
House bill kills vacation-home deduction, Senate to keep it

Westhampton Beach, Photographer: Walter Bibikow/AWL Images RM

Out in the Hamptons, Wall Street’s favored beach resort on Long Island, brokers and buyers already have a workaround for a tax-plan provision under consideration in Congress that would take away the mortgage-interest deduction for second homes.

A client of Brown Harris Stevens broker Jessica von Hagn who works at a hedge fund decided to turn the vacation home he’s buying into an investment property by setting up a limited liability company. That will allow him to deduct the interest and earn rental income at the height of the season from the modern home on Bridgehampton’s Lumber Lane, with four bedrooms, three baths and a swimming pool on an acre of land.

For the buyer: problem solved. For the Hamptons market: more high-end vacation properties getting listed as rentals, more competition and, most likely, falling rents.

“If you aren’t able to take advantage of the mortgage deduction for your second home, you’ll see more people putting their homes on the market and the inventory will grow,” von Hagn said. “There’s only a certain number of renters every season and we just keep adding more and more inventory.”

In second-home markets across the U.S., from Cape Cod in Massachusetts to Lake Tahoe, California, brokers are bracing for a hit. …

Should the final bill eliminate the tax deduction for vacation properties, the workaround — acquiring the home as an investment property — changes the nature of the purchase for buyers, turning their vacation home into a business….

If markets are flooded with properties for lease, rents will fall and so will values for those homes, she said.

The main focus of the tax debate on real estate has so far centered on mortgage-interest deductions for primary residences. The Senate version of the plan would preserve the existing write-off for up to $1 million of debt, while the House would reduce it for new purchases to $500,000 of debt.