It is time to stop the sloppy thinking and writing about the impact of the override. In the post about whether Newton has gotten over Newton North, there are comments that there are families who won’t be able to afford $343 in new taxes, the median increase. The most vulnerable will not pay the average increase. They won’t even come close.
The sloppy thinking does the most vulnerable a disservice.
Let’s review the basics. The override will increase the property tax rate by $.50 per $1,000 of home value. The override’s $343 median additional burden is based on the median house value in Newton: $686,000.
Now, let’s do the math. A family putting 20% down on a $686,000 has a mortgage of $548,000. At 5% on a 30-year note, the monthly payment is north of $3500 a month. Let’s say that the family bought the house for $400,000 and the house appreciated to $686,000. In that scenario, the monthly payment is over $2000 a month (and the family has at least $286,000 in home equity). If that family is spending 30% of pre-tax income on housing (well over guidelines), they are making $80,000.
I’m going to go out on a limb. A family that can meet $2000 to $3500 in monthly mortgage obligations can afford a $343 tax increase. By definition, such a family is not among the most vulnerable.
What will the impact be on the most vulnerable? Someone better versed in affordable housing can probably give a better answer, but we can do some rough calculations. To qualify for reduced price school lunches, a family of four must make less than $42,643. Assume that the family pays 30% of pre-tax income on housing (again, well above guidelines) and owns their own home. Thirty percent of pre-tax income translates into a mortgage of slightly more than $150,000. Assuming 20% down, that translates to a house value of less than $200,000.
On a $200,000 home, the increase from the override is $100. At the risk of seeming heartless and indifferent, I defy someone to find a family with a household income less than $42,643 that is going to move out of Newton because $100 tips them over the edge.
Obviously, there are some other scenarios. A family making less — their housing costs will be less, their override increase will be smaller. A family whose home has appreciated in value (manageable debt, but high assessment leads to higher than $100 override increase) — every $25 in override increase is $50,000 in home equity owned free and clear.
Unless someone can provide a different scenario, when we’re talking about the override impact on the most vulnerable, let’s use the more likely figure of $100 … at most.
Would it be better if the family qualifying for reduced school lunches had fewer burdens to shoulder? Absolutely. But, that’s the stuff of different posts.