New England Condominium December 2019
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December 2019       NEWENGLANDCONDO.COM  Since their insurgence over the last   dozen years, Airbnb, Homeaway/VRBO   and other home-sharing sites using a   similar  model have provided travelers   all across the globe with alternative – of-  ten more affordable – accommodation   to hotels, motels, inns, and B&Bs. The   home-sharing model certainly has been   an  economic  boon  to budget-seeking   travelers, locales with weak tourism, and   property owners who use the services as   an income stream. In many cases, how-  ever—particularly in larger cities in the   US — renting out one’s home on a short-  term basis (typically anything less than   30 days) is actually illegal.   In cities like New York, laws pre-  cluding these types of transactions have   been on the books for years; other cities   have recently passed or are in the pro-  cess of passing laws that are essentially   reactions to the deleterious effects of   home-sharing on city budgets, commu-  nity character, gentrification, housing   scarcity, and residential safety. The issue   has been the subject of pitched debate in   Boston as well. As of this last summer,   legal battles continued after a judge al-  lowed Boston to impose a $300-per-  night fine on Airbnb and other online   platforms for listings that failed to com-  ply with the city’s rules. The appeals pro-  cess is ongoing, and tensions are high on   all sides of the table.   Share and Share Dislike  Like with many of  the titans  of the   so-called ‘share economy’—ride-sharing   services like Uber and Lyft; office-shares   like WeWork—the practical application   of home-sharing has shifted from a lit-  eral ‘share’ to something  less personal,   and more transactional. Just as the car-  continued on page 8   In markets throughout the nation, 2019 was a year of uncertainty, reflecting change in the   basic mechanisms of how we view, buy, and sell real estate.  That uncertainty extended to all   markets, from traditional single-family homes to co-ops and condominiums, to commercial   properties – and the same factors that affected markets in 2019 are expected to continue to   reverberate in 2020.  Taxes, Real Estate, and…Taxes  When it comes to home ownership, the conventional wisdom of economists (and the gov-  ernment policy that followed it after World War II) held that appreciation of real estate as the   primary asset of middle-class families was the most successful and secure way to build wealth   and insure a comfortable retirement – particularly when combined with Social Security re-  tirement benefits.  As a result, and to encourage home purchases and long-term ownership,   government at all levels offered benefits to families in the form of tax deductions. The federal   government enshrined that approach by providing a deduction for state and local income and   real estate taxes against income in federal income tax filings.    Over the decades since the mid-20th century, the evolution of deductible taxes has devel-  oped in two main directions, sometimes simultaneously. Some states and municipalities have   enacted state and local income taxes, while others – especially at the local level – have levied   higher and higher real estate taxes to provide for superior schools and other civil services.    These state and local taxes (often abbreviated with the acronym SALT) became an important   consideration in home prices, as they had long-term effects on the after-tax cost of home own-  ership.  In most cases, these deductions made homes in high-tax areas more affordable, after   Economists often say that markets love   consistency. So do condos and HOAs – and   they share that preference for stability with   another important group: insurance com-  panies. Residential communities seek to   keep their costs stable, and insurance com-  panies seek to keep their profitability high   by reducing risk. In the coming year, how-  ever, residential communities and insur-  ance companies may find themselves on a   collision course due to these same factors.   Premiums – the cost  of insurance –  are   likely going up and by no small amount,   as co-ops, condos, and HOAs seek to keep   their operating costs down.  An Overview  Alex Seaman is a senior vice president   of HUB International, an insurer located in   Woodbury, New York.  He predicts a sub-  stantial increase in premiums for 2020.  “I   have been proactively providing updates   to my clients on the recent changes in the   insurance market which are now becom-  ing increasingly volatile,” he says.  “This   is especially true with respect to umbrella   liability.  Many \\\[communities\\\] have seen   several major market fluctuations, includ-  ing those caused by 9/11 and Superstorm   Sandy. Though the current changes are not   nearly as severe, the rationale \\\[for the fluc-  tuations\\\] is not nearly as clear.”   “Historically,” Seaman continues, “the   insurance industry has had numerous rat-  ing cycles based on a number of factors,   including interest rates, legal regulations,   natural and man-made disasters, indus-  try profits, and reinsurance requirements.   Cycles have been dramatic in some cases,   and they have typically lasted four to five   years or less. For the past eight to 10 years,   we have gone through an unprecedented   period of industry rate stability. Rates have   been largely flat, with relatively small in-  creases or decreases, depending on claims   experience and or property valuations. We   began to see indications a few months ago   that rates might begin to increase. We are   now seeing indications of more significant   increases nationally, and in virtually all   tax considerations were calculated in the cost of ownership.  The Tax Cuts & Jobs Act of 2017 changed that. While the new law   increased the dollar amount for a standard deduction by doubling   it, the change also capped SALT deductions at $10,000 per year for a   married couple filing jointly. That cap increased the after-tax cost of   home ownership, ultimately depressing or even permanently decreas-  ing values, and therefore prices.  2019-2020 Round-up   and Projection   The Year that Was, The Year to Come    BY A J SIDRANSKY  The Illegal    Home-Sharing Issue  Safety and Security Concerns   BY DARCEY GERSTEIN  Insurance Rates to   Rise in 2020  Communities Should Plan   for Increases    BY A J SIDRANSKY  205 Lexington Avenue, NY, NY 10016 • CHANGE SERVICE REQUESTED  continued on page 7   continued on page 9   THE CONDO, HOA & CO-OP RESOURCE  CONDOMINIUM  NEW ENGLAND

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