4 ms·

> Prop 13 has nothing to do with real estate price inflation. Its hard to imagine the current real estate inflation in the case where home owners had to pay ta

> Prop 13 has nothing to do with real estate price inflation. Its hard to imagine the current real estate inflation in the case where home owners had to pay taxes against the fair market value. In other words, home owners would at least see some value in new construction. As it stands now, there is only downside.

gozur88 11y ago
>Its hard to imagine the current real estate inflation in the case where home owners had to pay taxes against the fair market value. Prop 13 exists in California because that's exactly what was happening. Prior to its passage you paid on the assessed value of you house, and it didn't stop prices from double digit percentage increases every year. People who'd owned their homes for decades were being forced to sell because the assessed value of the house had gone up so much they could no longer afford to pay the taxes.
- shostack 11y ago
  While that sucks, that sort of self-correcting market pressure is in fact required for a healthy real estate market. Yes, people would have been pushed out as prices increased. But as areas gentrify, there is no guarantee that the farmers and tradespeople who lived there get to stay forever. That's how other markets work. It sucks to those pushed out, but eventually taxes increase to the point where demand for the area diminishes. Further, since you'd have increased liquidity without Prop 13, people could actually afford to move to other areas so there would be more inventory. As it stands, that isn't happening because people can't afford to move, so the market is locked up. If we didn't have Prop 13, my gut says that the broader Peninsula would not be impacted to nearly the degree it is now (although perhaps SF would because it is so much smaller). People being forced to sell because their areas taxes increase substantially is an unfortunate, but very necessary thing.
  - gozur88 11y ago
    >Further, since you'd have increased liquidity without Prop 13, people could actually afford to move to other areas so there would be more inventory. People over 55 can transfer the tax basis of their primary residence. In all cases if they move somewhere in the same county, and depending on local ordinances inter-county. So retired people living in the Peninsula can afford to move to other areas.
    - shostack 11y ago
      What you're leaving out of the equation though is that often times people that old who have lived here forever either have their home fully or mostly paid off. Sure it likely appreciated quite a bit, but depending on their savings, they may not be able to afford a new home in the area at market rates regardless of the tax situation, especially if they are retired and on fixed income. So instead they stay in their home and don't sell. Or they pass it on to the next generation who doesn't sell.
      - gozur88 11y ago
        Eh, why would they not be able to afford a new home after selling the old one? Usually when people retire they're looking for a smaller home that's easier to take care of.
  - imh 11y ago
    You say that's how other markets work, but I can't think of any other market where an increase in the price of something you already own can make owning it unaffordable. If I buy stocks, or gold, or a car, and it gets more valuable, I'm not taxed until I sell, right? Does the same argument hold for those?
    - shostack 11y ago
      I'm referring to other real estate markets in the country. Also, in this case, if the price of your home appreciates, it is likely the price of other homes appreciated, so your gain may not actually amount to anything (particularly after realtor fees). Likewise, you are taxed every year on real estate.

gozur88 11y ago

>Its hard to imagine the current real estate inflation in the case where home owners had to pay taxes against the fair market value. Prop 13 exists in California because that's exactly what was happening. Prior to its passage you paid on the assessed value of you house, and it didn't stop prices from double digit percentage increases every year. People who'd owned their homes for decades were being forced to sell because the assessed value of the house had gone up so much they could no longer afford to pay the taxes.

shostack 11y ago
While that sucks, that sort of self-correcting market pressure is in fact required for a healthy real estate market. Yes, people would have been pushed out as prices increased. But as areas gentrify, there is no guarantee that the farmers and tradespeople who lived there get to stay forever. That's how other markets work. It sucks to those pushed out, but eventually taxes increase to the point where demand for the area diminishes. Further, since you'd have increased liquidity without Prop 13, people could actually afford to move to other areas so there would be more inventory. As it stands, that isn't happening because people can't afford to move, so the market is locked up. If we didn't have Prop 13, my gut says that the broader Peninsula would not be impacted to nearly the degree it is now (although perhaps SF would because it is so much smaller). People being forced to sell because their areas taxes increase substantially is an unfortunate, but very necessary thing.
- gozur88 11y ago
  >Further, since you'd have increased liquidity without Prop 13, people could actually afford to move to other areas so there would be more inventory. People over 55 can transfer the tax basis of their primary residence. In all cases if they move somewhere in the same county, and depending on local ordinances inter-county. So retired people living in the Peninsula can afford to move to other areas.
  - shostack 11y ago
    What you're leaving out of the equation though is that often times people that old who have lived here forever either have their home fully or mostly paid off. Sure it likely appreciated quite a bit, but depending on their savings, they may not be able to afford a new home in the area at market rates regardless of the tax situation, especially if they are retired and on fixed income. So instead they stay in their home and don't sell. Or they pass it on to the next generation who doesn't sell.
    - gozur88 11y ago
      Eh, why would they not be able to afford a new home after selling the old one? Usually when people retire they're looking for a smaller home that's easier to take care of.
- imh 11y ago
  You say that's how other markets work, but I can't think of any other market where an increase in the price of something you already own can make owning it unaffordable. If I buy stocks, or gold, or a car, and it gets more valuable, I'm not taxed until I sell, right? Does the same argument hold for those?
  - shostack 11y ago
    I'm referring to other real estate markets in the country. Also, in this case, if the price of your home appreciates, it is likely the price of other homes appreciated, so your gain may not actually amount to anything (particularly after realtor fees). Likewise, you are taxed every year on real estate.