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“Cities will tell you that from a property tax perspective, housing is a loser,” says David Cogdill, president of the [California Building Industry Association]
by ScottBurson 10y ago
“Cities will tell you that from a property tax perspective, housing is a loser,” says David Cogdill, president of the [California Building Industry Association].
I was trying to make this point a few weeks ago here on HN, in a discussion on Prop. 13, and got pushback. I take this quote as evidence that it's common knowledge among people in the housing industry. Prop. 13 disincentivizes cities from adding housing.
Prop. 13 needs to be fixed. The way it should have been done is this: in a year in which property values increase by more than 2%, instead of limiting the tax to 2% more than the previous year's, we limit the payment due to 2% more than last year's payment due. The locality receives a lien on the difference, but that lien does not become due until the property is sold.
So in an area in which property values have been rapidly rising, a homeowner who sells their property will have to share their windfall to some extent with the locality. But those on fixed incomes are still protected: their annual tax payments don't increase any faster than they would today.
Common objections:
"People will take out home equity loans that will have to be repaid at sale, leaving them with a cash loss."
A property tax lien is a public record. Banks will take the liens into consideration when deciding how large a loan to offer. This is standard practice already.
"The liens will accumulate to the point that they will be greater than the owner's gain on the property, giving them a strong disincentive to sell."
No, this wouldn't happen, because the lien is only on 1% of the excess gain (the amount the value increased over 2%). If, for one example, the value jumped in the first year and then went flat, the payment would continue to grow at 2% annually until it caught up to the value. The only scenario that generates a lien larger than the owner's gain is if the market has been up but then drops sharply just before the owner wants to sell -- in short, if there was a bubble. Well, bubbles produce lots of dislocation; I don't think they make for a good argument against this proposal.
"Prop. 13 will never be modified."
Well, it certainly won't if no better alternative is put forth!
- twblalock 10y agoOf course a disincentive to sell will be created by your proposal! Any lien that comes close to offsetting or canceling out the owner's gain will do that. The lien doesn't have to exceed the gain to create a disincentive. Why would anyone sell for little to no gain? Any time the potential gain is decreased, a disincentive to sell is created. Furthermore, not only does this create a disincentive to sell, it also creates a disincentive to buy. Buying property becomes a lot less attractive when the same disincentive that applies to the current seller will apply to buyer in the future, when the buyer decides to sell the home.
- ScottBurson 10y agoActually the people who would feel the disincentive most strongly are speculators. Those are the people we want to discourage. The whole point is to slow the growth of prices, by giving cities an incentive to increase supply. Higher prices are the biggest disincentive to purchasers.
- vonmoltke 10y agoI have brought this up in multiple Prop 13 discussions, including I think the one you are referring to where you pitched your proposal. My opinion is that the proper fix for Prop 13 is to modify it to match Florida's much saner[1] practice of only providing the appreciation cap to owner-occupied primary residences. That speculators, investors, and landlords get to benefit from taxable value caps is bullshit, IMNSHO. [1] Who would have expected Florida to be the same one on anything?
- ScottBurson 10y agoI think you did bring it up there, and I completely agree. I don't know how much it would help, though, in the specific area of giving cities more of an incentive to approve residential construction projects. I guess it would help some.
- hilop 10y agoThat's an arbitrary advantage given to homeowners over renters (who pay the landlord's taxes)
- prostoalex 10y ago> Prop. 13 disincentivizes cities from adding housing. disincentivizes cities from adding low-density housing Once you start piling them up into high-rises, the revenue stream doesn't look that bad. But for multi-family high rises different cities have a number of additional requirements. Minimum parking spaces, minimum number of feet from the sidewalk, minimum footage of "green zones" consisting of lawns or trees - all great things hypothetically speaking, but costs add up pretty fast, so any high-rise building is now a "luxury condo tower" when in theory increasing density should lead to decrease of cost per square foot, not increase.
- r00fus 10y ago> Once you start piling them up into high-rises, the revenue stream doesn't look that bad. Combine with earthquake regulations essentially limiting buildings to a small number of stories and ScottBurson's comment is pretty spot-on.
- prostoalex 10y agoHow restrictive are those regulations? The tallest structure in the Western United States is being built in Los Angeles, of all places http://graphics.latimes.com/wilshire-grand-the-big-pour/ http://graphics.latimes.com/wilshire-grand-the-big-pour/
- linkregister 10y agoIs it a residential structure?
- prostoalex 10y agoMixed-use, with retail and office space closer to the bottom, hotel rooms and residences towards the top.
- ScottBurson 10y agoThere are height limitations in most of Silicon Valley (except maybe downtown San Jose?) -- I think the limit here in Sunnyvale, for example, is eight stories -- but earthquakes are not the reason for them. People just want to preserve the suburban character of the area. How that can be done when a lot more people want to live here is not clear to me.
- deleted 10y ago[deleted]