I can’t help but feel that DST properties and the whole concept of Delaware Statutory Trusts is going to become much more germane to Oregon rental housing owners very soon. If you haven’t already informed yourself regarding their benefits and risks, you’d better get started.
This is because the march of doom has begun. The Oregon Rent Control Bill (Senate Bill 608) discussed earlier is now moving forward in the Senate. After landlords had the opportunity to give their views (uniformly negative) it is advancing to the full Senate for a vote. With an 18 seat Democratic majority (30 seats total) the handwriting is on the wall. Add to this Oregon’s historically quixotic (idealistic, unrealistic, impractical) political disposition, passage becomes a slam dunk.
For reasons known only to true believers and God, Oregonians have always prided themselves on being first into the breach. Think Alfred Lord Tennyson and the Charge of the Light Brigade, “Half a league, half a league, half a league onward, into the valley of death rode the six hundred.” The state’s economic battlefield is littered with the wreckage of this impetuosity; mill towns turned to ghost towns; failed urban planning; traffic congestion; unaffordable housing and the homeless blight.
And now rent control. As Jim Straub said, “it may not be an industry killer but is will certainly be another, strong disincentive to build and develop in Oregon.” Maybe someone should tell House Speaker Tina Kotek punishing landlords isn’t going to increase the amount of rental housing available in Oregon, this will simply result in less affordable housing in the long run.
What career politicians like Kotek don’t understand is capital (and the people who own it) are mobile. They simply move to that place which promises the highest return. Cross continent, New York Governor Andrew Cuomo is now learning this same lesson, much to his chagrin.
Following the 2017 law capping deductions for state and local taxes at $10,000, high earners are leaving New York in droves for tax havens such as Florida. He even goes so far as to blame New York states $2.3 billion short fall on the phenomenon. Unsurprisingly he fails to find fault in his own history of unremitting tax increases.
Try as they might, true believers like Kotek, Bill De Blasio, and Cuomo cannot punish capital or capitalists. Increasingly, these individuals will turn to financial vehicles such as the Delaware Statutory Trust to flee punitive economic environments. With DST properties, not only can landlords leave these putative socialists in the dust but they can do so without any state or federal capital gains tax liability. For them it’s a win-win, for their oppressors it’s a lose-lose.
At no cost from a tax standpoint, property owners can move their capital out of harm’s way and place it in front of positive demographic and economic trends. All the regulators will be left with is less growth, less opportunity and more impoverished constituents. Thank you DST.