All Forum Posts by: Brian J Allen

Most states are taxing the CAP Gains as income for another 5%, then you have millionaires tax in MA as well. And then there is the Obamacare tax. The actual tax amount is often not the issue, it is the principal. These are folks who have never had a $50k annual tax bill, so this is unbearable for them. Also, many have pensions and have never even touched their nest egg.

@Stetson Oates @Henry Clark @Chris Seveney @John Clark. Don't get me wrong but I agree with you about selling.  The logical thing is to sell.  But as @Stetson Oates mentions they get hung up on the taxes.  The logical thing sometimes does not enter their mind.  Lower taxes, Lower maintenance, lower utility costs, less cleaning.  These should all get factored in but often don't.  My mom has a $2mm house with a $150k basis and lives in 1 room with no heat and eats rice.  She could easily sell and pay $2k a month in a rental and live a better life, but she has some idea that the kids and grandkids might come 1 X a year and then having a 6 BR house would make them come more often.  Sadly we as Americans over consume housing, then are not able to transfer to less.  The lucky ones oddly enough in this scenario are those who take multiple steps(houses) to get to the big house, as they have a larger cost basis then those who bought the big house in the nice town at the beginning. When is the optimum time to leave the big house(no pun intended) and downsize?  Does anyone have that answer?

I agree with the concepts but the tax law makes people do strange things.  If you are going to pay $250k in taxes, many older people will rent their primary, and not sell, then rent somewhere else you can rent at $2k a month for 10 years on what you would pay in taxes.  Then die and leave the house to your heirs tax free

The states try to protect older folks but end up handcuffing them

There has been growing discussion about how capital gains tax laws are reducing the inventory of homes available for sale in high-appreciation areas. Specifically, homeowners who have lived in their properties for many years may find themselves financially disincentivized from selling due to the tax implications of their appreciated home values.

Consider the following example: A homeowner purchased a house 20 years ago for $250,000. Over time, the home has appreciated to $1.5 million. The homeowner, now older and living alone after the passing of a spouse, would like to downsize to a smaller home or condo that better suits their needs. However, upon selling, they would face a $1.25 million capital gain. Current tax law allows an individual to exclude $250,000 of that gain if they have lived in the home for at least two of the past five years, leaving them with a $1 million taxable gain. With a retirement and Social Security income of $65,000, they could owe approximately $260,000 in long-term capital gains taxes.

By contrast, if that same homeowner had moved every five years, upgrading to a larger home along the way, they would now own a property worth $1 million instead. Their capital gain would be reduced to $500,000, and after the same $250,000 exemption, they would only owe taxes on a $250,000 gain—resulting in a significantly lower tax bill of roughly $55,000.

This discrepancy effectively punishes long-term homeowners who have remained in their properties, disproportionately affecting those who may now find their homes unsuitable due to aging, changing lifestyle needs, or financial strain.

The capital gains tax exemption of $250,000 per person ($500,000 for married couples) has remained unchanged since 1997. If adjusted for inflation, that $500,000 exemption would be approximately $985,000 today. Increasing this threshold would likely encourage more longtime homeowners to sell, freeing up inventory in a housing market that is already struggling with supply shortages.

Revising this outdated exemption would not only provide financial relief to those who need to transition to more suitable housing but also help ease housing shortages by making more homes available to younger buyers. A simple policy update could have a profound effect on housing mobility and affordability, benefiting homeowners and prospective buyers alike.

The retail landscape in Worcester is undergoing significant changes, with major supermarket chains closing long-standing locations. One notable example is the closure of Price Chopper on Cambridge Street at the end of January. Built with purpose in 2003, this store has served the community for over 20 years but is now closing its doors.

Similarly, in July of 2024, Stop & Shop announced the closure of its Lincoln Street location, which has already ceased operations. This follows the earlier closure of its White City store in Shrewsbury. These closures raise an important question: why are large, purpose-built supermarkets shutting down in urban areas?

Factors Behind Supermarket Closures

Several key factors contribute to these closures:

- Aging Infrastructure: The 20-year-old store requires significant renovations to remain competitive.

- Loss of Alcohol Sales: Price Chopper previously sold alcohol but stopped in recent years, potentially impacting revenue.

- Triple Net Lease Costs: Rising property taxes, borne by the tenant, add financial strain.

- Increased Competition: Discount retailers such as Walmart, Target, Aldi, Dollar Tree, and Family Dollar provide alternatives that attract budget-conscious shoppers.

A Closer Look at Worcester’s Retail Landscape

A brief examination of supermarket properties in the area highlights financial and logistical challenges:

- 29 Sunderland Road: Built in 1960, this 46,050-square-foot property sold for $4.1 million in 2022. The lease, structured as Triple Net, expires in March 2027 with four five-year renewal options. Any store renovation could significantly increase tax liability, currently at $142,000 per year based on its $4,966,600 valuation.

- 50 Cambridge Street (Price Chopper): Spanning 67,814 square feet and built in 2003, this store is valued at $11,289,700, resulting in an annual tax bill of $323,000.

- 72 Pullman Street: One of the newest and most modern supermarket locations, valued at $10,177,000, which at a tax rate of 28.61 per thousand results in an annual tax burden of approximately $291,000.

- 221 Park Avenue: A 37,090-square-foot store valued at $5,833,500, resulting in an annual tax burden of approximately $167,000. This might be the worst store overall, yet it has the best location for housing. This means it might be the next location to close. Unfortunately for the property owners, it is zoned BL-1 which does not allow for housing by right.

- 733 Boston Turnpike (Price Chopper in Shrewsbury): A comparable 63,090-square-foot store, built in 2010, is valued at $13,427,300. However, due to Shrewsbury’s lower tax rate (12.04), its annual tax burden is only $161,000, significantly less than its Worcester counterpart.

Economic Considerations

The disparity in tax rates between Worcester and neighboring Shrewsbury illustrates a financial challenge for supermarket operators. Higher property taxes in Worcester, coupled with a lower average household income, make profitability more difficult to maintain. This economic pressure, combined with evolving consumer shopping habits and increased competition, may continue to drive changes in the local supermarket landscape.

The future of these vacant retail spaces remains uncertain. Will supermarkets reinvest in Worcester, or will these properties be repurposed for alternative uses? As leases expire and economic conditions shift, the city’s grocery market will likely continue to evolve.

The Worcester Fire Department, with support from District 5 City Councilor Etel Haxhiaj, has been advocating for the installation of sprinklers in multifamily buildings undergoing major renovations. While fire safety is undoubtedly important, a mandatory sprinkler requirement may have the opposite effect—discouraging necessary renovations and inadvertently making these buildings less safe.

No one disputes that sprinklers can help save lives in the event of a fire. However, the cost-effectiveness of such a mandate is highly questionable, and the resources required for compliance may be better spent elsewhere. The reality is that imposing expensive and time-consuming sprinkler installation requirements will drive property owners to either scale back necessary renovations or avoid permits altogether.

Currently, when owners propose substantial renovations, they are often informed that their projects will require sprinkler systems, which can cost around $45,000 for a typical three-decker. Additionally, the permitting and approval process for sprinklers can add up to three months to a project’s timeline. Faced with these burdens, many owners choose to limit their renovations to cosmetic work or, worse, proceed without permits to avoid triggering the requirement.

This raises a crucial question: which is safer—a fully gutted and renovated building with modern electrical and heating systems, rebuilt to 2025 code but without sprinklers, or a building where the original, outdated wiring and heating systems remain in place because owners chose to avoid triggering costly sprinkler requirements? The answer is clear: allowing full renovations without mandating sprinklers results in a far safer building than one that undergoes only superficial updates.

Furthermore, requiring sprinklers in more buildings will likely increase costs even further. With a limited number of qualified contractors available, additional demand will drive up prices and extend project timelines. Owners cannot recoup these costs through higher rents, meaning they are effectively being penalized for trying to improve their properties.

Instead of discouraging responsible property owners who follow the permitting process and invest in meaningful upgrades, we should be focusing our efforts on ensuring that all renovations are done legally and safely. More effort should go into enforcing existing permitting laws and cracking down on unpermitted work rather than imposing costly regulations that push property owners into avoidance tactics.

If the goal is to improve fire safety in Worcester’s aging multifamily housing stock, the best approach is to encourage full renovations that bring buildings up to modern safety standards—not to place additional financial burdens on responsible owners. Let’s prioritize practical solutions that promote compliance, affordability, and overall safety for residents.

@Karl Kauper with a SF you can require the tenant to take care of lawn and snow, but they might not be up to your standards.  There are plenty of local landscapers who you can hire to do everything.  I might suggest going directly to one of these guys.  Let me know if you need names in Sutton.

Jaclyn Packard

https://packardlawoffice.com/

@Karl Kauper Sadly MA is a very tenant friendly state.  The tenants can bind you up for a long time.  And it is difficult for you to refuse to take their rent, as there are many agencies that will pay up to $10k in back rent and rent moving forward.  Not sure if that is what you are looking for.  I just served a 30 day notice in Millbury (I live in Sutton but my rental is in Millbury) and I am hoping that the $4k I offered the tenants to actually move out on time is enough for them to find somewhere to go.  Sadly there is so little inventory that many are simply trying to last as long as possible and wait for the constable to tell them that the moving trucks are here for them.  They often don't have enough $ to take their stuff out.  Whatever you do, please make sure that you get something signed saying that are completely gone and have no claim to any possessions they left behind.  I had a client who thought they did the eviction correctly, and ended up in court as one of the occupants who had moved 3 months earlier said her stuff (including 3 rollex watches) was thrown out.  It cost him another 3 months before he could start work turning the unit.  Best of luck.  DM if you have any additional questions.