Three Painful Housing Expense Increases

Ah, the house never ends!  I seem to find myself writing quite a bit about the cost of living in a house and the controllable/sometimes not so controllable costs associated with home ownership as well.  After various discussions with people and bills being paid – I’ve decided to write about the surprising increase in housing expense over three areas of living in a house – Insurance, Property Tax & select Utilities!  Come check out the “fun”!

Three Housing Expense Increases

The three housing expense areas that have increased are very straight forward today, haha.  They have to deal with my fun privilege to talk about house insurance, property tax and the local water/sewage bills.  This year, more than a “cost of living” adjustment has occurred and I wanted to share that with the readers for a few reasons: Gauge your thoughts, see if you have suggestions and to describe my plan in hopes of finding feedback from everyone!  Here are the three housing expense increases I am dealing with:

1.) Insurance – As always – you need to be insured, no doubt.  When I first bought my house, my home insurance, which was bundled with auto, was a meager $460 on the year!  Talk about amazing.  However, my house had a new roof, new appliances, new driveway/paved, and had a “younger” feel to it.  However, from fall of 2011 through Spring of 2017, my home insurance is now a sweltering $729.00 or an increase of $269 over 5.5 years ($88 from last year).  That doesn’t seem like a lot, but I am not too far from this being doubled!  What the heck?  Did my risk get that much higher?  I haven’t had any claims.  We do receive a lot of snow – is my roof more beat up?  Talk about tough here.  I am on the verge to negotiate and to shop out my insurance.  The reason why I am with the current company, is due to my CPA discount that I receive with my membership in the AICPA, as other providers were at or below where I currently am.  Per the valuepenguin.com, the average house insurance in Ohio is around $663, but with my house at 1,400 square feet low maintenance property, should it really 10% more to cover my house?  Now, my auto insurance premium is $160 less this year, but I plan on shopping both, as a bundle, out to other parties.  In total, between house & auto, I am roughly at $1,367 all in for the year.  How does that relate to you?

2.) Property Tax – Here we go again.  From 2015-2016, the property tax only went up 2%.  However… from 2016 to 2017, my property tax is up 5.41%?!?!  Holy crap, was my first reaction to this increase.  The value from the property tax record of my house did not increase, so this was purely a higher rate being applied for taxes.  This has added an extra $222 annually to my property tax bill.  Not something I had expected, at least with such a large percentage increase, that’s for sure.  One thing has been learned – expenses don’t traditionally go down… so much why you have to fight for each dollar, as every dollar counts in this life.

3.) Water & Sewage – Our city of Cleveland has imposed quite a few massive updates to our water & sewage system.  Articles were released last year about a rate hike of 41%+ over the course of 5 years, as well as going to a monthly billing system, as opposed to quarterly that they’ve been.  So what does this mean for me?  Let’s just say – the first 5 months water/sewer bill last year was approximately $122.  The first 5 months of this year has added to $184.  That’s a whopping $62 more!  Just insanity if you ask me.  Though it’s only an extra $12 per month, it’s a large % increase, nonetheless.  I am going to purchase the toilet water tank bags, to see if I can conserve a little bit of water, and though doesn’t apply here – I will be insulating my hot water tank, as well, to offset some costs potentially through there.

The chart I’ve created below details how the $ & % impacts from the changes above.  Looks like my cost of living from having no extra value or added benefit, just increased 9.50%!!!!  Does this make sense to anyone??

In order to have no “change” in the way I save or live my life – I would have to earn, using a 30% tax rate, an extra $680 in order to pay for these additional costs!  How hilarious is this?

The plan of action

First – I will begin shopping around for a better package with home/auto, as the increase keeps creeping up and I still do believe my auto insurance is high for a 2010 Honda Accord.  This will occur in the upcoming 3 months.  I hope to at least see what else is out there, or I may end up coming back to my current provider and asking for other forms of a discount.

Secondly – I will research and see what has caused my increase in property tax.  I don’t want to jump the gun here, but want to compare my neighborhood to see if they have a similar rate as I do and to see what’s going on, i.e. if anything new was passed.

Third – I will implement conservation efforts surrounding water/sewage to reduce the impact further.  I’ll see if I can reduce other utility costs in gas/electricity to further offset the increase in costs from water/sewage.  I’ll have to remember to look back at this article to see if it was accomplished or not.  Further, I can also find a lower $ per MCF for gas, and even see if there’s a provider out there with a one time bonus as well.  I’ve seen them out there, but not too often.

Conclusion

There have been a few lessons learned over the areas that have had an increased housing expense.  To begin, the decision to live in this house is mine, therefore, I must handle the situation.  You have to fight your way to keep as much money as possible, as no one else will.  Further, there are other adjustments to off-set the impacts of these increases – saving on other utilities, reducing your driving to reduce gas cost, paying off your auto loan to open up cash flow and even to shop out your insurance plans and/or negotiate lower.  You have to do this, as it’s up to you to control the situation to the best spot that you can.

As with all things – if there are services/value that you are receiving with the increase in cost – then okay.  If it was a “promotion” that may have expired – slightly more understandable.  However – in the 3 areas above, there’s been no real additional benefit, just that prices are being pumped!!  Quite amazing, at least as of right now, to me.

How does everyone feel about their housing costs?  Able to keep up with this “inflation”?  Are you able to maintain your housing costs and/or even reduce them?  Would love to hear from the community please!  Any tips/suggestions would be appreciated, as always.

-Lanny

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24 thoughts on “Three Painful Housing Expense Increases

  1. It’s amazing that those rates can go up so high, almost 10%, and no one bats an eye since it is so normalized. But trying to get a 2% raise at work is like pulling teeth. No wonder why so many people have financial trouble, and our community keeps growing.

    As far as the gas bill goes, I know you can choose a supplier which is just a line item on the bill to lower your rate. Just have to be proactive about it as well to make sure the supplier you choose has a fixed rate (won’t go up in the winter when you are using more of it), no cancellation/ change fee for going to a new supplier, and keep an eye on their/other’s rates to make sure you are always getting the lowest rate possible. Good luck with your action plan.

    • Daze –

      Yes, you are exactly right on all accounts, makes me shake the head a little bit with the non-financial literate individuals who don’t understand what’s happening to them, ugh.

      Yep – you got it, I need to avoid any that have termination, cancellation or essentially – any time of “fee”. Fixed rate > variable all day.

      -Lanny

  2. I must admit, the more that I hear about the woes of owning a home, the more I want to avoid them. In our little apartment here, our rent went up the first year by a mere $22/mo and then the following year it went down by $33. Finally, our third year here it went down another $12/mo. Meanwhile, my friends have been getting crushed by home repairs, hail storms tearing through what they just upgraded, and other items that generally just sink their free time. I’m sorry to hear that you’re having your own struggles with home ownership but I hope for your sake that the property value of your home is increasing beyond what you’re getting axed with in taxes/insurance. Stick to the plan of action you’ve put forward but as an insurance adjuster (and for the disclosure of my company, NOT speaking on their behalf) I must feel the need to remind you that if you shop around, be careful of the policy language that can be found in a lot of the more “cut-rate” policies.

    • Reaper –

      Definitely don’t rush into buying a house, that’s for sure. It can be a huge cost, if you’re not ready for it, and there are a lot of fights/battles along the way trying to negotiate everything. Some great things though – come with that it’s your own place, it can be customized to how you want it and you’re in “more control”. But… there are ways to make it less of a hassle = less property, less land, etc.. which will help keep costs down.

      But back to the main point – don’t rush into it!

      -Lanny

  3. Dividend Reaper, owning a home comes with expenses but it also is an amazing wealth building tool and offers huge tax write offs. I personally generate over $20,000 a month from passive rental income. I was able to do this by putting extra money towards one mortgage payment until it was paid off, then I continued doing that with each house. In addition to the great passive income.
    I also get huge tax deductions using depreciation, but owning rentals last year alone I got to write off $87,000 in depreciation. This is a HUGE tax savings. With my rental properties that aren’t paid off I have renters who are paying down the mortgage each month for me.
    The problem with not owning a home is that your landlord will continually increase your rent over the long haul, where if you own a home you lock in your mortgage payment for 30 years (pending on the mortgage you choose).
    Sure homes come with some headaches and risk, but no risk no reward. At 33 by using real estate leverage and borrowing smart money I was able to retire. I’m now focusing on building up my dividend portfolio to be diversified. From my experience owning real estate is one of the fastest ways to generate wealth.
    In addition you are paying down principal every month and can write off the

    • Digest –

      Yep, from a wealth building/rental income perspective – real estate is great! You can generate income no matter what and during the bad economic times – rental markets typically increase, actually.

      If you live in a home with no rental properties, however, that’s where the pain points come in! Although you can lock your mortgage in for X # of years, your property tax bill can increase at substantial rate, such as mine, and that’s only one area.

      Real Estate as rental = great; Real estate as a house you simply live in = variable haha. All depends.

      -Lanny

  4. I’ll be looking into reducing our home/auto insurance as well. It’s sad that I’ll have to play this game every couple years but seeing how much our home insurance went up it needs to get done. I wish there was something we could go about our property tax, but in all honesty there isn’t. Ours is going up yet again and it’s already a ridiculous ~$7k per year. Got love to living in a property tax state/county. But at least with our new A/C that should help reduce the electric bill at least a little bit.

    • JC –

      Damn, exactly; the property tax is a killer; and once you are paying – say $7K like you are – a 5% increase “seems nominal” but $350 is quite a bit of money… like come on!!!!

      Battle those expenses down with your insurance – let me know how it pans out in the end – would be a nice article to read!

      -Lanny

  5. Lanny,
    My wife and I have started the slow and utterly soul crushing experience of home shopping. Clearly it is a process designed by the insane to drive the sane totally insane.
    – Gremlin

    • Gremlin –

      Yes, haha, that is a GREAT way to put it; TAKE YOUR T I M E and do not rush! If you can keep your expenses low – you have so much freedom in an apartment! You can always purchase a house and live in it – however, going from living in a house to not – is a bit “different” haha and harder to do for some reason!

      I love the comments so far, keep them coming. As noted above in an earlier comment – pros and cons – depending on the usage and way to look at it.

      -Lanny

  6. Check out Zander Insurance. They compare rates from lots of different companies to find the lowest in regards to your insurance criteria.
    We live in southern Cali so things are on the high side here. Our insurance is with USAA. Our homeowners just renewed this month and increased by $169. We pay $1555.54 for the year. That doesn’t include the earthquake insurance premium(about another $200) or the flood insurance ($450), and we are on the top of a mountain so a flood is extremely unlikely. We have high deductibles on everything. Property taxes run $5299.08 for the year.
    Our sewer rates went up last year and are about to go up again in July. Our sewer rates are included as part of property taxes, currently $720.84 but that is going up about $100. Water rates go up 1-2x per year every year! We redid our landscaping years ago to low water use native plants but that doesn’t mean no water use. Current water bill is $377. Low for the year was $170 and high $630.
    The electric rates keep going up too. We do have solar electric so we save some there but what we save goes to the water bill. We no longer are allowed to have a zero bill even when we overproduce. We now have to pay a minimum monthly charge.
    The only thing that hasn’t increased by huge amounts is the trash pickup. It can go years without an increase and then their increases are extremely small, like 50 cents to $1.50.
    We have cut back on spending a lot over the years but so many things have increased and increased by huge amounts that it is a lot of one step forward and three to five backwards. Any time I save money by cutting something out or cutting back something else comes along with an increase that is even more than my savings.We have been a one income family for over 14 years. We trimmed the fat years ago from our budget when we went from two incomes to one and our income was cut in less than half. We’ve realized we will have to move in order to get out of this rat race. So thankful for big brothers pounding the table about contributing to company 401k and investing in stocks. Change is heading our way once again.

  7. Great post. It’s an excellent reminder that home ownership goes way beyond a mortgage. The commercials on TV really paint such an ‘easy’ picture when it comes to home ownership. Increased fees, maintenance, taxes, inflation, interest and more must all be factored in when buying a home. I don’t know what a good figure to represent this would be but could it be fair to add 15% or more to ones ‘regular’ monthly expenses to cover all that you mentioned and more? I’m not against home ownership, real estate, rentals, etc. but a post like this really helps me appreciate living in an apartment with rent control. The fee increases you mentioned would not make me a happy camper, that’s for sure.

    • Hut –

      Exactly. This isn’t a “Buy a home with a 30 year mortgage that’s fixed – so no increases! and you’re done!” It’s not even close. Property tax, water/sewer/electricity/gas – all are variable and typically.. point UP. Further, property taxes HARDLY ever go down – usually only in a recessionary climate – as my taxes on the property I have before I bought it was less by over $1K, which was during the economic collapse in the late 2000’s.

      Need to fight and work hard for every dollar, but some of them – you can’t last in the ring! Specifically property taxes.

      -Lanny

  8. Wow that really is a massive increase in cost of living in only just one year. I know in my area the local Council are looking to increase rates by up to 6%! That is just daylight robbery to me! Seems like an awful large increase for very little gain over the long run for all residents.
    Are you interested in participating in a competition I have running on my site very shortly? It’s basically a stock picking game against other bloggers. Take a look and see if you are interested here, http://www.buyholdlong.com/2017/05/10/who-wants-to-play-a-game/

    • BHL –

      Damn… they are actually/publicly talking about a 6% increase? That’s a massive increase, hands down. What are you getting in return? What’s your community receiving?

      And games with stocks – always in for it, will check it out – thanks for the invite.

      -Lanny

      • The community receiving of it is not good at all. Our return is possible better roads and free waste disposal. So some benefits.

        Be sure to invite Bert as well. I have 6 spots left for the game so get in while you can. Cheers.

        • I will invite Bert, I should be talking to him later today, no doubt.

          I would be more than happy to accept to have to pay separate for garbage pick up (as another city that I know of is $52/3 months) as opposed to having to shell out the high $ property taxes, kills me!

          -Lanny

  9. I forgot. As far as your property taxes go, if you think the taxes are too high for your area, you might see if you can file an appeal. We filed one once because all the houses in our area were selling for way less than the accessed value we were being taxed on. We had to provide supporting documentation but they did lower them for about a year and gave us a small refund ($400) for the previous year. After a year property values started increasing again so they once again jumped up to more than what we had been paying. That one year was better at least.
    For water/sewer, can you contest it before the rate increase? Here they send a notice out about a month before the planned increase and tell you how to contest it. I used to always send a letter of protest. Unfortunately it has never done any good were I live. I think 16% rate increases are ridiculous but here they still go through. One year I even put notices on the side of the mailboxes lockers in our neighborhood telling people where to send a protest letter and what was required in the letter. I quoted actual past rates of where we started from and where we were already at and the percentage of increase.It still didn’t get people motivated to act. I think only one or two other people took the time to protest. Most people don’t want the increase but yet they don’t take the time to protest by letter or in person.
    We have an illegal fire tax here of $150 per year. I have protested it every year for over 5 years when I pay it and send letters in triplicate. If you don’t pay it the fire department will not come to your house if you have a fire. They also do not allow you to claim this as a tax on your tax returns. We already pay for fire protection on our property taxes. There are several law suits going on over this one.
    Good luck to you.

  10. Lanny,
    All I can say is, I feel your pain. My home is now about 1 year old. One thing I didn’t count on was an increase in taxes. Basically, my mortgage is now $50 higher because of the increase in property taxes. Not the end of the world, but also totally unexpected. There were other unexpected costs associated with home ownership too. I still think that owning a home will payoff in the longer run, but we’ll have to wait and see. Good luck.

    • DP –

      $50/month is a nice whopping $600/year! It’s quite a bit of cash; and yes – seeing if it pays off in the long run is a very true to the statement – a long period to find that out. Ah… the pain runs among the community it seems!

      -Lanny

  11. Oh my goodness Dividend Diplomat,

    I’m kind of not looking forward to owning a house right now. lol That 9% is a drastic cost of living expenditure.

    This last month, I resigned my lease and my monthly apartment rent went up 3% ($50) so I feel your pain there, but since I paid off my car, I raised my deductible and saved $10/mo on my car insurance. Still, though my car insurance for a 2014 Subaru Crosstreck is annual $948 ($82/mo) and that’s with every discount possible through Esurance.

    One thing to consider, I don’t know your energy utility company, but my parents (Xcel) came out and did a free energy audit and implemented several energy features including outlet insulation to help reduce heat loss and other energy expenditures. Something to consider and I hope you get that cost down!!!

    • Wallet –

      Thanks for the comment and sorry to hear about the 3% increase; stinks!! And yes – I have every discount in the book, and my auto insurance is a little over $53/month or $638 per year; which to me is still high for a used 2010 Honda Accord haha. I am assuming in 2018 – I would expect this to be around $500/year. If it’s not – back to the battle grounds.

      I will be shopping my auto/home in April of 2018, no later and may be earlier. I’m excited for it, that’s for sure.

      -Lanny

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