Friday, 31 May 2013

"3 reasons why so many people are moving to Texas"

Dave H emailed in this from the BBC:
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2. It's cheaper

Once employed, it's hugely important that your pay cheque goes as far as possible, says Kotkin.

"New York, LA and the [San Francisco] Bay Area are too expensive for most people to live, but Houston has the highest 'effective' pay cheque in the country... The ratio of the median home price to median annual household income in Houston is only 2.9. In San Francisco, it's 6.7. In New York, San Francisco and LA, if you're blue-collar you will be renting forever and struggling to make ends meet. But people in Texas have a better shot at getting some of the things associated with middle-class life."

3. Homes

Land is cheaper than elsewhere and the process of land acquisition very efficient, says Dr Ali Anari, research economist at the Real Estate Center at Texas A&M University.

"From the time of getting a building permit right through to the construction of homes, Texas is much quicker than other states. There is an abundant supply of land and fewer regulations and more friendly government, generally a much better business attitude here than other states."

This flexibility, plus strict lending rules, helped to shield the state from the recent housing market crash.

4. Low tax

Texas is one of only seven states where residents pay no personal state income tax, says Kay Bell, contributing tax editor at Bankrate and Texan native.

The state has a disproportionate take from property taxes, which has become a big complaint among homeowners, she adds. But overall, only five states had a lower individual tax burden than Texas, according to Tax Foundation research.

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Simple, isn't it?

Reduce taxes on earnings and collect taxes from the rental value of land instead and wonderful things happen, even if you don't really understand the mechanism. Texas residential property taxes aren't even that high in absolute terms. According to the Home-Owner-Ists at the self-same Tax Foundation, Texas is third worst (i.e. third best) in terms of the annual tax rate divided by house prices at 1.81%.

But that is on a very low base - in Houston, Texas, the median home buyer is paying 1.81% tax on a house costing 2.9 times his earnings (i.e. not much more than actual build cost) = 5.2% of earnings. In San Fransisco, the typical property tax is only 1.2%, but that's on a house costing 6.7 times your earnings = 8%.

Surely, anybody who is sane would rather have a small mortgage and pay 5% of his income in tax than saddle himself with a huge great mortgage and pay 8%?

6 comments:

JimS said...

So why has the UK population increased by 50% in my lifetime?

Probably cheap housing and low taxes I expect.

The Stigler said...

There's a lot of IT businesses going into Houston. Apparantly, Houston is pretty sophisticated, non-redneck too.

Graeme said...

@JimS

were you really born between 1911-21, as would have to be the case for your comment to be true? Ie over 90 years old?

http://en.wikipedia.org/wiki/UK_population

Mark Wadsworth said...

JS, I don't know whether you see population growth as a good thing or as a bad thing or as evidence of either, but the facts are that the Texas population has grown by over TWO thirds in the last THIRTYy years while the UK population has grown by ONE third in the last SIXTY. So that's twice the growth in half the time.

TS, thanks.

G, exactly. Always stick to actual hard facts.

DBC Reed said...

Once got into an argument on the Net about whether Americans really needed LVT.This involved checking up on American house prices and land values (they used to give separate figures for land and "improvements").There were lots of low figures ,but a lot of these were totally whacked-out communities like Detroit. But Texas stood out as the exception: not only because of the effective State tax system but because it has massive IT industry (Dell is based there I think) also its own film industry and a bostin music scene with key festivals ( if memory serves there was a move to re-locate C&W there from Nashville.)
If the Texas State Publicity department wishes to reward me for these favourable comments I can be contacted easily: looking to move to the area near Wes Anderson's old school that Rushmore's based on .

Mark Wadsworth said...

DBC, what we observe is that land values are incredibly skewed towards urban centres.

In the UK (and no doubt it is little different in the USA), the farmland is worth 2% of the total, the suburban-residential is maybe 30% and the inner-urban and town centres is 68%.

So central London is easily a quarter of the whole of the UK, and if you take the inner urban bits of the ten largest/wealthiest cities in the USA is also (probably) two-thirds of the total rental value of US land.