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It's leveling it between existing owners and purchasers. As it stands, it's essentially subsidizing commuting. If you bought a house at $100k that's now worth

It's leveling it between existing owners and purchasers. As it stands, it's essentially subsidizing commuting. If you bought a house at $100k that's now worth $1M, and your job moves an hour away, you'd be giving up the property tax lock-in by moving to cut down your commute. Rent stabilization/control measures have a very similar problem.

Y7ZCQtNo39 9y ago
You could always rent the home so someone else could occupy it. Presumably you would've paid off the $100k home by now, and then you could get a second mortgage on a new property, or rent and break even (given the income from renting the first property).
- CydeWeys 9y ago
  Why should people owning investment properties be given huge tax breaks that wouldn't apply to someone buying the same home in the present day in order to live in it? Basing property taxes on the current value of the property makes sense, and is how it is done essentially everywhere else in the world. Basing property taxes on what the property cost the last time it was sold, even if that was decades ago and is some tiny fraction of the current value, is very unusual, and has all sorts of negative repercussions.
  - Y7ZCQtNo39 9y ago
    I'm not disagreeing. I was attempting to show how you might make the housing market less rigid. Even if the numbers of units for sale is low, you could at least get people to rent them. A larger rental supply would help meet the demand in California and keep prices for renters and buyers lower. I completely agree, though, that Prop 13 isn't helping the situation. But politically, we might as well accept that it won't go away. Your best bet is to save up enough to afford a down payment, and hope that property appreciates and you too can also reap Prop. 13's benefits down the road when you're older. And if you're house is worth 10x as much then, you won't lose it for being on a fixed income, like most retired people are. ...I'd still prefer not having Prop. 13. The more fruitful discussion is how to best navigate a world where it continues to exist. Voters will never approve its repeal; if politicians try to do something about it, they will get thrown out the next election cycle.
  - sjg007 9y ago
    There is an active debate with people lobbying Congress to remove the second mortgage deduction. Current value makes sense but California introduced Prop-13 and rent control around the same time to basically allow senior citizens to stay in their homes/rentals. Problems with prop-13 include the fact that commercial buildings are not excluded. California also has Prop-58 and another one where the parent or grandparent can transfer the house to a child/grandchild without an FMV appraisal as well. I believe it works like this.. Say a $50k house is paid off by the parent, then the gift tax on that can be paid by a home equity loan on it's current $1m valuation. I'm not sure if the gift tax though is calculated on the $50k or the $1m. Or if it is calculated at all. It may depend on if the parent/grandparent is still alive. You may be able to specify the value as the last real property value or the FMV (to cut future capital gains). Either way you just pay the taxes on it. But I think you can exclude a certain amount up to $500k if married. But you could rent it out as well and use it as collateral on another mortgage. It could also be that these houses will continue to be passed down the generations.
    - khuey 9y ago
      It's not the capital gains taxes that prop 58/etc allow you to escape, it's a reassessment of the valuation for property tax purposes. So in your example, the inheritors get a house with a $500/yr property tax bill (1% of 50k) instead of a $10000/yr property tax bill. (1% of 1M) Meanwhile all their neighbors who had to buy their homes recently are paying that $10k/yr. The estate tax doesn't kick in until 5 or so million so the capital gains thing is mostly irrelevant.
      - sjg007 9y ago
        Yes I know that it's property tax. Sorry if that wasn't clear. I thought I had it covered by FMV appraisal.
- deleted 9y ago
  [deleted]
PretzelFisch 9y ago
Why would you buy a new property and lose 6% to realtors? Or take out a new possibly more expensive loan. I am not sure property tax is a big motivator. Do you have studies that show it's negative effect?
- cjlars 9y ago
  Why would it not be a big motivator? don't know about LA, but in SF tax is just shy of 1.2%, if you have a mortgage at 3.5%, and you've held your property for a long time, you can easily see your property tax triple and your cost of living go up ~10-20% in aggregate just by being assessed at the current market level in a new home (with the same value) on the other side of town... And that's every year, not just once on the sale. It seems pretty clear to me that 10% or 20% makes a big difference. Plenty of people will move across town to pay $2,400 a month instead of $3,000, why would home-owners be fundamentally different.
- mturmon 9y ago
  Your comment indicates you may not know about how Prop. 13 works. Property valuations can get small year-to-year bumps, but a sale triggers a re-assessment, with vastly increased property taxes after that. My neighbor across the street bought in 1975 for $28K, and their valuation for tax assessment last year was $162K. Their next-door neighbor bought last year for $1.5M and their assessed value is $920K. Their houses are quite similar, but one pays $7500 more a year in property taxes. That difference can motivate people to endure a long commute, to hang on to a low assessment.
  - rosege 9y ago
    As someone living in a country without annual property taxes Im not really qualified to comment, but, it almost sounds like the solution is to allow people to transfer their low assessments on to new properties - this is obviously a huge advantage to older people but it would allow real estate to be used more efficiently.
    - exclusiv 9y ago
m-j-fox 9y ago
Freeways also subsidize commuting. Would people sit in traffic every day if they had a choice? But if you suggest dynamiting a few stretches of interstate you get the same reaction from the public as you get when you suggest taking away prop 13.
- closeparen 9y ago
  Would people sit on public transportation every day if they had a choice? Cleary not - BART ridership is falling during leisure time (when people have a choice) even as it rises during peak hours.

Y7ZCQtNo39 9y ago

You could always rent the home so someone else could occupy it. Presumably you would've paid off the $100k home by now, and then you could get a second mortgage on a new property, or rent and break even (given the income from renting the first property).

CydeWeys 9y ago
Why should people owning investment properties be given huge tax breaks that wouldn't apply to someone buying the same home in the present day in order to live in it? Basing property taxes on the current value of the property makes sense, and is how it is done essentially everywhere else in the world. Basing property taxes on what the property cost the last time it was sold, even if that was decades ago and is some tiny fraction of the current value, is very unusual, and has all sorts of negative repercussions.
- Y7ZCQtNo39 9y ago
  I'm not disagreeing. I was attempting to show how you might make the housing market less rigid. Even if the numbers of units for sale is low, you could at least get people to rent them. A larger rental supply would help meet the demand in California and keep prices for renters and buyers lower. I completely agree, though, that Prop 13 isn't helping the situation. But politically, we might as well accept that it won't go away. Your best bet is to save up enough to afford a down payment, and hope that property appreciates and you too can also reap Prop. 13's benefits down the road when you're older. And if you're house is worth 10x as much then, you won't lose it for being on a fixed income, like most retired people are. ...I'd still prefer not having Prop. 13. The more fruitful discussion is how to best navigate a world where it continues to exist. Voters will never approve its repeal; if politicians try to do something about it, they will get thrown out the next election cycle.
- sjg007 9y ago
  There is an active debate with people lobbying Congress to remove the second mortgage deduction. Current value makes sense but California introduced Prop-13 and rent control around the same time to basically allow senior citizens to stay in their homes/rentals. Problems with prop-13 include the fact that commercial buildings are not excluded. California also has Prop-58 and another one where the parent or grandparent can transfer the house to a child/grandchild without an FMV appraisal as well. I believe it works like this.. Say a $50k house is paid off by the parent, then the gift tax on that can be paid by a home equity loan on it's current $1m valuation. I'm not sure if the gift tax though is calculated on the $50k or the $1m. Or if it is calculated at all. It may depend on if the parent/grandparent is still alive. You may be able to specify the value as the last real property value or the FMV (to cut future capital gains). Either way you just pay the taxes on it. But I think you can exclude a certain amount up to $500k if married. But you could rent it out as well and use it as collateral on another mortgage. It could also be that these houses will continue to be passed down the generations.
  - khuey 9y ago
    It's not the capital gains taxes that prop 58/etc allow you to escape, it's a reassessment of the valuation for property tax purposes. So in your example, the inheritors get a house with a $500/yr property tax bill (1% of 50k) instead of a $10000/yr property tax bill. (1% of 1M) Meanwhile all their neighbors who had to buy their homes recently are paying that $10k/yr. The estate tax doesn't kick in until 5 or so million so the capital gains thing is mostly irrelevant.
    - sjg007 9y ago
      Yes I know that it's property tax. Sorry if that wasn't clear. I thought I had it covered by FMV appraisal.
deleted 9y ago
[deleted]

PretzelFisch 9y ago

Why would you buy a new property and lose 6% to realtors? Or take out a new possibly more expensive loan. I am not sure property tax is a big motivator. Do you have studies that show it's negative effect?

cjlars 9y ago
Why would it not be a big motivator? don't know about LA, but in SF tax is just shy of 1.2%, if you have a mortgage at 3.5%, and you've held your property for a long time, you can easily see your property tax triple and your cost of living go up ~10-20% in aggregate just by being assessed at the current market level in a new home (with the same value) on the other side of town... And that's every year, not just once on the sale. It seems pretty clear to me that 10% or 20% makes a big difference. Plenty of people will move across town to pay $2,400 a month instead of $3,000, why would home-owners be fundamentally different.
mturmon 9y ago
Your comment indicates you may not know about how Prop. 13 works. Property valuations can get small year-to-year bumps, but a sale triggers a re-assessment, with vastly increased property taxes after that. My neighbor across the street bought in 1975 for $28K, and their valuation for tax assessment last year was $162K. Their next-door neighbor bought last year for $1.5M and their assessed value is $920K. Their houses are quite similar, but one pays $7500 more a year in property taxes. That difference can motivate people to endure a long commute, to hang on to a low assessment.
- rosege 9y ago
  As someone living in a country without annual property taxes Im not really qualified to comment, but, it almost sounds like the solution is to allow people to transfer their low assessments on to new properties - this is obviously a huge advantage to older people but it would allow real estate to be used more efficiently.
  - exclusiv 9y ago

m-j-fox 9y ago

Freeways also subsidize commuting. Would people sit in traffic every day if they had a choice? But if you suggest dynamiting a few stretches of interstate you get the same reaction from the public as you get when you suggest taking away prop 13.

closeparen 9y ago
Would people sit on public transportation every day if they had a choice? Cleary not - BART ridership is falling during leisure time (when people have a choice) even as it rises during peak hours.