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I agree with most of your comment. I never understood the idea behind prop 13. A naive interpretation seems to be that it lowers taxes on the one item where dea

by vostok 11y ago

I agree with most of your comment. I never understood the idea behind prop 13. A naive interpretation seems to be that it lowers taxes on the one item where dead weight loss is very low. This is in addition to the argument that it's a plain handout to the rentier class. >That, combined with rock bottom interest rates (driving down mortgage requirements) Do changes in interest rates affect underwriting requirements? I have to admit that I don't know anything about mortgages, but they always looked like volatility products to me. I do agree that the fall in interest rates has caused property prices to increase. This seems to be related to the fall in return on capital so it's unclear to me how rates might be "jacked up" and why that might be desirable.

crdoconnor 11y ago
>A naive interpretation seems to be that it lowers taxes on the one item where dead weight loss is very low. The deadweight loss of a land tax is zero until it's raised above the unimproved rental yield of the land. Lowering it is purely a mechanism for moving money into the pockets of land owners. A land tax is more efficient than a property tax, but a higher property tax approximates a land tax sufficiently that the deadweight loss is minimal. >Do changes in interest rates affect underwriting requirements? Yes, since with lower interest rates you can afford a more expensive property since your monthly repayments will be lower. That in turn pushes up the value of housing as people take out bigger and bigger mortgages to try and keep up with rising prices.
gozur88 11y ago
You can't understand prop 13 without understanding the environment in which it was passed. The price of houses was shooting up 20-30% a year, and people who had owned their houses for decades were being forced to sell because they couldn't pay the taxes. The idea that somehow a higher property tax will keep prices under control is not borne out by experience.
- vkou 11y ago
  Why on earth were property taxes rising along with the price of housing? Instead of collecting a flat percentage of the home value, the cities/state could have just divided the taxes they were going to collect across all properties, proportionate to their value. Just because there's a property value boom doesn't mean that the regional budgets should expand by 20% year over year...
  - gozur88 11y ago
    Where I lived pre-prop 13 taxes were based purely on the assessed value of the house. If the assessed value doubled in five years, so did the taxes. And there was no cap on tax rates. I don't know if it was a state-level thing or if tax districts all did their own calculations back then.
- eli_gottlieb 11y ago
  > You can't understand prop 13 without understanding the environment in which it was passed. The price of houses was shooting up 20-30% a year, and people who had owned their houses for decades were being forced to sell because they couldn't pay the taxes. Is that very different from the present day, in which there is very little property tax?
  - gozur88 11y ago
    That's my point. It wasn't different, so people who say getting rid of prop 13 will somehow cause house prices to fall are probably wrong.

by vostok 11y ago

crdoconnor 11y ago

>A naive interpretation seems to be that it lowers taxes on the one item where dead weight loss is very low. The deadweight loss of a land tax is zero until it's raised above the unimproved rental yield of the land. Lowering it is purely a mechanism for moving money into the pockets of land owners. A land tax is more efficient than a property tax, but a higher property tax approximates a land tax sufficiently that the deadweight loss is minimal. >Do changes in interest rates affect underwriting requirements? Yes, since with lower interest rates you can afford a more expensive property since your monthly repayments will be lower. That in turn pushes up the value of housing as people take out bigger and bigger mortgages to try and keep up with rising prices.

gozur88 11y ago

You can't understand prop 13 without understanding the environment in which it was passed. The price of houses was shooting up 20-30% a year, and people who had owned their houses for decades were being forced to sell because they couldn't pay the taxes. The idea that somehow a higher property tax will keep prices under control is not borne out by experience.

vkou 11y ago
Why on earth were property taxes rising along with the price of housing? Instead of collecting a flat percentage of the home value, the cities/state could have just divided the taxes they were going to collect across all properties, proportionate to their value. Just because there's a property value boom doesn't mean that the regional budgets should expand by 20% year over year...
- gozur88 11y ago
  Where I lived pre-prop 13 taxes were based purely on the assessed value of the house. If the assessed value doubled in five years, so did the taxes. And there was no cap on tax rates. I don't know if it was a state-level thing or if tax districts all did their own calculations back then.
eli_gottlieb 11y ago
> You can't understand prop 13 without understanding the environment in which it was passed. The price of houses was shooting up 20-30% a year, and people who had owned their houses for decades were being forced to sell because they couldn't pay the taxes. Is that very different from the present day, in which there is very little property tax?
- gozur88 11y ago
  That's my point. It wasn't different, so people who say getting rid of prop 13 will somehow cause house prices to fall are probably wrong.