6 ms·

In your example, the building you describe is a condominium? If so, then what does it matter what your tax bill is and if they are absentee owners; if the owner

by Agustus 11y ago

In your example, the building you describe is a condominium? If so, then what does it matter what your tax bill is and if they are absentee owners; if the owner maintains the property, pays their bills and taxes, then you should be happy to have them. Tax reassessments during the boom of 2001 to 2007 were on track to price a lot of people out of their houses based on their current economic status. Proposition 13 and other bills passed across the country allowed individuals to avoid being "taxed out" of their house. If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house? The main item with this problem, as is with all affordability issues is that supply is not meeting demand. Look in Detroit and Flint where there is not enough demand and the supply is worth next to nothing. Author's points of increased units would lead to a drop in prices until it becomes affordable to all. San Francisco will never allow it because the people who live there want to keep it San Francisco and NIMBY rules.

mahyarm 11y ago
It creates a built in incentive for NIMBYs to not block development, lest they feel the pain of increased 'rent' too. If the bay area built as many units at the rate of texas or seattle for example, none of this would of been a big deal. Imagine old people viciously fighting for increased development lest their property tax bill goes up, unlike the opposite today at most city council meetings. The elderly drive most housing policy in many ways because they have the free time, general boredom and incentive to participate in the political process this way. Property tax is also almost never approaching %3. The range can be %0.5 to %2.5. A high property tax rate actually helps modulate the value of houses in a market since the price of housing is based on the monthly payment. This is what contributes to texas being a cheap housing state, since the high property tax prevents housing values from going up too quickly. Unoccupied properties also cause the supply to go down without a person or family inside it contributing to the local economy. Idle assets should be put to productive use, it's half the point of a property tax already.
- seanmcdirmid 11y ago
  This. If anyone wants to see what a real estate market looks like without property tax, come to China. Even a good property in a first tier city is 40% vacant. It acts to inflate property bubbles as housing becomes just another asset.
DavidSJ 11y ago
> In your example, the building you describe is a condominium? If so, then what does it matter what your tax bill is and if they are absentee owners; if the owner maintains the property, pays their bills and taxes, then you should be happy to have them. The owner may not care, but the city as a whole should: it makes poor use of the scarce housing supply if sales are discouraged due to tax artifacts.
Renevith 11y ago
> If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house? I shed exactly zero tears for someone whose $250k property quadruples in value to $1m in five years. Sell the house and dance with joy at your (untaxed!) $750k capital gain. The only argument for freezing tax assessments is to soak the new residents in favor of the current residents. It's a result of the absolute worst kind of democracy: voting to make other people pay more taxes.
- khuey 11y ago
  Technically you would pay capital gains taxes on around 250k of the gain, and 500k if you're not married. You can deduct improvements/maintenance from the gain, but capital gains from owner-occupied real estate are taxed in the US if they're large enough.
  - Renevith 11y ago
    Ah, I did not realize that. Thanks for the info! Still, $250/500k untaxed is nothing to sneeze at. And long-term capital gains are taxed at a lower rate than income for someone who's making $100k.
- Grishnakh 11y ago
  >I shed exactly zero tears for someone whose $250k property quadruples in value to $1m in five years. Sell the house and dance with joy at your (untaxed!) $750k capital gain. Ok, now where are they supposed to live? All the other properties cost just as much, so now they're forced to not only move out of the city, but now they have to quit their job too! How is this productive? You're penalizing someone for living in a housing bubble and not taking advantage of it. Even worse, you're penalizing current residents for having their house values driven up by a bunch of out-of-state (or out-of-country) investors and speculators.
  - floatrock 11y ago
magnetix 11y ago
>If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house? A simple solution (for the elderly at least) would be to roll up all the debt until death, payable by the estate.
- ceejayoz 11y ago
  > A simple solution (for the elderly at least) would be to roll up all the debt until death, payable by the estate. Simple until the next housing crisis.
- thrownaway2424 11y ago
  That's exactly what people did before Prop 13. The idea that granny was getting tossed out on her ear by the tax collector wasn't ever literally true.
oppositelock 11y ago
It's not the market fluctuation that's forcing people to leave the house, it's the tax and the state's enforcement of it. If taxes are pricing people out, lower the rate!
aianus 11y ago
> why would you want the market fluctuations to be able to force an individual to leave their house? To make room for newcomers with higher-paying jobs who, in some sense, 'deserve' to live there more than you do. Unpopular opinion, but that's how we ration every other limited resource; it goes to the highest bidder, not the first mover.
- thaumasiotes 11y ago
  > that's how we ration every other limited resource; it goes to the highest bidder, not the first mover This is the opposite of the truth. The core of property rights is that just because someone will offer you a "good" price for your trinket, doesn't mean you have to sell it to them. (That would be a chaotic world!) Limited resources are held by their owners, who had them first. You can argue that housing is fundamentally different from every other kind of property, which justifies forcing people to give theirs up if somebody else wants it more -- but there is no room to argue that that's how we handle other limited resources.
cowsandmilk 11y ago
> Tax reassessments during the boom of 2001 to 2007 were on track to price a lot of people out of their houses based on their current economic status. Proposition 13 and other bills passed across the country allowed individuals to avoid being "taxed out" of their house. Proposition 13 was passed in 1978. The housing boom of 2001-2007 had jack shit to do with its passage. (Yes there, is a Prop 13 in 2010 that also has to do with property taxes, but only about seismic retrofitting of existing buildings).
cowsandmilk 11y ago
Firstly, California property taxes are limited by Prop 13 to being 1% of assessed value, so your $30k tax bill can only happen if your property went to $3 million. A $1 million house cannot have a tax higher than $10,000. There are well-established solutions to your issue about people being forced out of housing with rising demand. Massachusetts allows tax deferrals up to 50% of a property value. (If you want to get technical, Massachusetts allows towns/cities to allow tax deferrals; if your city does not want to offer it, they do not have to) So, your $250,000 -> $1 million dollar house allows up to $500,000 in tax deferrals, so you've got a lot of years you can live in that house without paying taxes. When you sell the house, you pay the taxes and also pocket a pretty sum on the appreciation in the value of the house.
- mdb333 11y ago
  It's a bit more than 1% in SF, getting close to 1.2% http://sftreasurer.org/online-property-tax-payment-faq#taxamount http://sftreasurer.org/online-property-tax-payment-faq#taxam...
  - mdb333 11y ago
    Also possibly relevant for comparison, DC rate is 0.85... so there is already a 40% premium for enjoying the Cali weather :-] http://otr.cfo.dc.gov/page/real-property-tax-rates http://otr.cfo.dc.gov/page/real-property-tax-rates
mdb333 11y ago
well, Prop 13 was passed way before 2001-2007, its an artifact of the late 70s. Still that's true that people can become priced out by tax increases (this was/is a problem in DC). And you're right... as owners now we don't care and only benefit from the absentee neighbors. That's a major part of the problem. Now that we're invested, we are naturally opposed to anything that would untether our tax rates. If our neighbors (who mostly bought in the 80s/90s) were paying tax on the current valuations they would be encouraged to either sell or rent thus creating more inventory and helping bring prices toward equilibrium.
mywittyname 11y ago
> If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house? Because it ties housing prices to economic viability. If a person's housing value increases 10x, they should move if they can't afford to maintain it so that another more economically productive person can live in it. It sounds evil on the surface, but the reality is that it will keep housing prices in line with the economic growth of the area. As it stands now, fixing the assessment value only encourages people to hold onto the house even longer because taxes eventually become a minuscule amount compared to the appreciation of the house. If taxes are a fixed $10,000/yr on a house that is growing 10% in value every year, then it makes sense to hold onto the house indefinitely. However, if the property taxes increase proportionally each year, there comes a point in time where the calculus no longer works out and it makes sense to sell the property and cash out. Since this happens to everyone simultaneously, the growth in housing prices will also decrease (thus, reducing the growth in property tax).

by Agustus 11y ago

mahyarm 11y ago

It creates a built in incentive for NIMBYs to not block development, lest they feel the pain of increased 'rent' too. If the bay area built as many units at the rate of texas or seattle for example, none of this would of been a big deal. Imagine old people viciously fighting for increased development lest their property tax bill goes up, unlike the opposite today at most city council meetings. The elderly drive most housing policy in many ways because they have the free time, general boredom and incentive to participate in the political process this way. Property tax is also almost never approaching %3. The range can be %0.5 to %2.5. A high property tax rate actually helps modulate the value of houses in a market since the price of housing is based on the monthly payment. This is what contributes to texas being a cheap housing state, since the high property tax prevents housing values from going up too quickly. Unoccupied properties also cause the supply to go down without a person or family inside it contributing to the local economy. Idle assets should be put to productive use, it's half the point of a property tax already.

seanmcdirmid 11y ago
This. If anyone wants to see what a real estate market looks like without property tax, come to China. Even a good property in a first tier city is 40% vacant. It acts to inflate property bubbles as housing becomes just another asset.

DavidSJ 11y ago

> In your example, the building you describe is a condominium? If so, then what does it matter what your tax bill is and if they are absentee owners; if the owner maintains the property, pays their bills and taxes, then you should be happy to have them. The owner may not care, but the city as a whole should: it makes poor use of the scarce housing supply if sales are discouraged due to tax artifacts.

Renevith 11y ago

> If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house? I shed exactly zero tears for someone whose $250k property quadruples in value to $1m in five years. Sell the house and dance with joy at your (untaxed!) $750k capital gain. The only argument for freezing tax assessments is to soak the new residents in favor of the current residents. It's a result of the absolute worst kind of democracy: voting to make other people pay more taxes.

khuey 11y ago
Technically you would pay capital gains taxes on around 250k of the gain, and 500k if you're not married. You can deduct improvements/maintenance from the gain, but capital gains from owner-occupied real estate are taxed in the US if they're large enough.
- Renevith 11y ago
  Ah, I did not realize that. Thanks for the info! Still, $250/500k untaxed is nothing to sneeze at. And long-term capital gains are taxed at a lower rate than income for someone who's making $100k.
Grishnakh 11y ago
>I shed exactly zero tears for someone whose $250k property quadruples in value to $1m in five years. Sell the house and dance with joy at your (untaxed!) $750k capital gain. Ok, now where are they supposed to live? All the other properties cost just as much, so now they're forced to not only move out of the city, but now they have to quit their job too! How is this productive? You're penalizing someone for living in a housing bubble and not taking advantage of it. Even worse, you're penalizing current residents for having their house values driven up by a bunch of out-of-state (or out-of-country) investors and speculators.
- floatrock 11y ago

magnetix 11y ago

>If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house? A simple solution (for the elderly at least) would be to roll up all the debt until death, payable by the estate.

ceejayoz 11y ago
> A simple solution (for the elderly at least) would be to roll up all the debt until death, payable by the estate. Simple until the next housing crisis.
thrownaway2424 11y ago
That's exactly what people did before Prop 13. The idea that granny was getting tossed out on her ear by the tax collector wasn't ever literally true.

oppositelock 11y ago

It's not the market fluctuation that's forcing people to leave the house, it's the tax and the state's enforcement of it. If taxes are pricing people out, lower the rate!

aianus 11y ago

> why would you want the market fluctuations to be able to force an individual to leave their house? To make room for newcomers with higher-paying jobs who, in some sense, 'deserve' to live there more than you do. Unpopular opinion, but that's how we ration every other limited resource; it goes to the highest bidder, not the first mover.

thaumasiotes 11y ago
> that's how we ration every other limited resource; it goes to the highest bidder, not the first mover This is the opposite of the truth. The core of property rights is that just because someone will offer you a "good" price for your trinket, doesn't mean you have to sell it to them. (That would be a chaotic world!) Limited resources are held by their owners, who had them first. You can argue that housing is fundamentally different from every other kind of property, which justifies forcing people to give theirs up if somebody else wants it more -- but there is no room to argue that that's how we handle other limited resources.

cowsandmilk 11y ago

> Tax reassessments during the boom of 2001 to 2007 were on track to price a lot of people out of their houses based on their current economic status. Proposition 13 and other bills passed across the country allowed individuals to avoid being "taxed out" of their house. Proposition 13 was passed in 1978. The housing boom of 2001-2007 had jack shit to do with its passage. (Yes there, is a Prop 13 in 2010 that also has to do with property taxes, but only about seismic retrofitting of existing buildings).

cowsandmilk 11y ago

Firstly, California property taxes are limited by Prop 13 to being 1% of assessed value, so your $30k tax bill can only happen if your property went to $3 million. A $1 million house cannot have a tax higher than $10,000. There are well-established solutions to your issue about people being forced out of housing with rising demand. Massachusetts allows tax deferrals up to 50% of a property value. (If you want to get technical, Massachusetts allows towns/cities to allow tax deferrals; if your city does not want to offer it, they do not have to) So, your $250,000 -> $1 million dollar house allows up to $500,000 in tax deferrals, so you've got a lot of years you can live in that house without paying taxes. When you sell the house, you pay the taxes and also pocket a pretty sum on the appreciation in the value of the house.

mdb333 11y ago
It's a bit more than 1% in SF, getting close to 1.2% http://sftreasurer.org/online-property-tax-payment-faq#taxamount http://sftreasurer.org/online-property-tax-payment-faq#taxam...
- mdb333 11y ago
  Also possibly relevant for comparison, DC rate is 0.85... so there is already a 40% premium for enjoying the Cali weather :-] http://otr.cfo.dc.gov/page/real-property-tax-rates http://otr.cfo.dc.gov/page/real-property-tax-rates

mdb333 11y ago

well, Prop 13 was passed way before 2001-2007, its an artifact of the late 70s. Still that's true that people can become priced out by tax increases (this was/is a problem in DC). And you're right... as owners now we don't care and only benefit from the absentee neighbors. That's a major part of the problem. Now that we're invested, we are naturally opposed to anything that would untether our tax rates. If our neighbors (who mostly bought in the 80s/90s) were paying tax on the current valuations they would be encouraged to either sell or rent thus creating more inventory and helping bring prices toward equilibrium.

mywittyname 11y ago

> If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house? Because it ties housing prices to economic viability. If a person's housing value increases 10x, they should move if they can't afford to maintain it so that another more economically productive person can live in it. It sounds evil on the surface, but the reality is that it will keep housing prices in line with the economic growth of the area. As it stands now, fixing the assessment value only encourages people to hold onto the house even longer because taxes eventually become a minuscule amount compared to the appreciation of the house. If taxes are a fixed $10,000/yr on a house that is growing 10% in value every year, then it makes sense to hold onto the house indefinitely. However, if the property taxes increase proportionally each year, there comes a point in time where the calculus no longer works out and it makes sense to sell the property and cash out. Since this happens to everyone simultaneously, the growth in housing prices will also decrease (thus, reducing the growth in property tax).