Howard County Maryland Blog

Local Politics and Current Events

Portability Example

Posted by David Keelan on Monday, May 1, 2006

We can run 1,000 scenarios on this if we wanted to. I am going to run this one just to see how it works out.

My neighbors teach in the HoCo school system.

Their house is currently assessed at $245,000 (property tax = $2,485 [Robey plan]) and will phase in to $350,000 in a few years (property tax $3,549). They could easily sell the house for $400,000 (that is conservative – worse houses are going for more than $450,00 in this neighborhood).

Their last kid just graduated from college and is moving to Michigan.

They aren't downsizing, but in case they wanted to downsize here is what it would mean to them.

$1,065 per year. Not much of an incentive, right? If the median income in Howard County is $87,000 then that represents a 2% raise (1.8% in reality – I am rounding up for this exercise). Who doesn't want a 2% raise?

Well, assuming they purchase a $350,000 condo in Town Center. They make $200,000 on the sale of their home and put it all down on the condo. Now they finanace the balance of $150,000 for 15 years and now have a $1,250 mortgage payment. Property taxes under current law balloon the payment to $1,550 per month. One could run this at a 30 year mortgage and the payment would be $865 plus property tax it would be $1,265.

You give them the portability, allow them to take $105,000 off the assessed value of the condo and phase it in like they would have in their old home. Their total payment is $1,457 per month. At 30 years the total payment would be $1,165 per month.

See – no tricks up my sleaves. Either way that is a savings of $100 per month or $1,200 per year.

Someone might say $100 per month is no big deal. Well $100 per month is a big deal to some people – the same people we want to extend affordable housing to.

Invest that $100 per month every month in a modest 4% CD for 5 years they would earn interest of over $700. More than likely someone (a family of 5 who needs that extra bedroom, or the older couple who wants to sell to their kid and downsize) who finds this proposal to be a big deal probably has something better to do with the extra money.

What did the County make on the transaction? 1.5% of the sale price of $400,000 on the neighbors home and 1.5% on the $350,000 price of the Condo or $11,750. That is a ratio of 10:1. If the ratio is even as low as 3:1 the County makes out by spurring on at least 1 real estate transaction per year. Charlie is that an administrative burden?

What else did the County make on that transaction? For starters about $1,500 in income taxes, and other associated fees.

I think they can afford this proposal especially if my neighbors decide to stay in Howard County instead of moving to Michigan.

That is just one example. I am sure someone could come up with the opposite numbers or even better numbers.

Hayduke's most recent comments on the subject here (no commentary from me).

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