DSTs & Blue State Lockdowns

As the nexus of business and finance, historically the country’s wealthiest states in terms of per capita income have been New York, New Jersey, Connecticut and Massachusetts.  However, according to Stephen Moore, finance and economics columnist for the Washington Examiner, “Because taxes are sky-high in these deep blue states, they are losing their citizens tax base at a rapid pace.  Florida is gaining 1000 people a day from the northeastern states.”

Moreover, these same states have engaged in the tightest economic lockdowns and forced business closures earlier this year in the wake of Covid-19.  In so doing, they decapitated their own business base.

To what end one might ask?  In hindsight little it seems.  New York, New Jersey and Massachusetts have had by far the highest death rates from the virus.  So, it’s possible to argue that very few lives were saved at enormous economic cost.

These policy prejudices on the part of blue state governing elites may have enormous consequences for income property investors.  Just think what kind of impact in-migration of 1000 people a day may have on Florida commercial real estate prices.  First and foremost, all these folks must have somewhere to live.  Because all of them won’t be buyers, many will be renters.

Despite the current eviction moratorium and short term issues this creates regarding rent collection, this should be good for multi-family real estate prices long term.  While searching for a place to live, many of these folks will also need someplace to store their stuff.  This potentially augers well for the self-storage sector.  With apartment footprints getting smaller every year demand could remain robust even after these emigrants put down roots.

Of course, they have to feed and clothe themselves while all this is going on.  Therefore, well sited grocery anchored shopping centers may benefit as well.

Finally, whether lifestyle or business related, their material consumption is unlikely to diminish much.  Industrial warehousing properties that facilitate the movement of goods, particularly those bought on-line, may benefit as well.

This hugely positive demographic shift to low tax red states may be amplified by the pro-business environment found there.  Unlike their northern brethren, Andrew Cuomo of New York and Phil Murphy of New Jersey for example, most red state governors have long had the open-for-business sign out.

Furthermore, due to a history of prudent fiscal management, most red states are not burdened with the huge debts and liabilities which encumber so many blue states.  Down the road, this will likely result in much less of a tax burden that residents and business owners are asked to shoulder.  To put it in the simplest possible terms, this means you get to keep more of what you make.

This compares more than favorably to the likes of Bill DeBlasio in NYC openly advocating the expropriation of private property when management of said property doesn’t meet the expectations of the governing cabal, or Phil Murphy and New Jersey’s “millionaires’ tax.”  Oops, I just heard more tires squealing on all those U-Haul vans headed south.

As an income property investor, one of the things you need to do is follow the money and it ain’t heading north.


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