11 ms·

> Move the story to California. A three bedroom home in the San Francisco Bay Area, covered by Proposition 13, purchased by ordinary working people with good fi

by Kalium 8y ago

> Move the story to California. A three bedroom home in the San Francisco Bay Area, covered by Proposition 13, purchased by ordinary working people with good financial habits, around the 1970 time frame, and a working late-thirties, early forties person with some savings and good financial habits, cannot afford to take the home under almost any circumstances due to property taxes (cost of ownership) and competition for financing (loans not available in practice due to terms). California actually has ways to inherit not only the home of your parents and grandparents, but also their tax rate.

javajosh 8y ago
Really? How?
- Kalium 8y ago
  Prop 13 was amended twice - Propositions 58 and 193. Those allowed Prop 13 tax assessments to be inherited with property to children and grandchildren. There's some broader legal commentary, which I'm not properly equipped to evaluate, here: https://krasalaw.com/lawyer/2010/08/24/Estate-Planning/Maintaining-Your-Prop.-13-Tax-Base_bl1153.htm https://krasalaw.com/lawyer/2010/08/24/Estate-Planning/Maint...
TulliusCicero 8y ago
Which is bad. It's possible it may end up benefiting me since my parents own a home in the bay area, but I still think it's bad. The entire prop 13 + zoning + property value situation is terrible, it's a total pyramid scheme: older generations get wealthy through wealth transfers from the younger generation from inflating property values. But it can only work once or twice before the property values are so comically high that even high income DINK couples can't afford to buy in.
- aey 8y ago
  Why is that bad? A family lived in the city for generations, and now due to the tech boom and a property bubble they should be forced to move? It makes a hell of a lot more sense for FAANG to open offices somewhere else.
  - objclxt 8y ago
    It’s bad because the tax rate you pay on your property should not be tied to how long you’ve owned it. Right now two different families living in identical properties in CA can be paying vastly different property taxes depending on when they bought (or inherited) their house. This is manifestly unfair.
    - AdrianB1 8y ago
      Paying an increasing tax is not fair too. You don't get more services from higher tax, the city is just extorting more money because it can and because enough people think this is fair.
      - ridgeguy 8y ago
        Inflation is a real thing. I doubt we'd have any workers paid through property taxes if we were paying like it's 1955.
      - Dylan16807 8y ago
        The services cost more to deliver as cost of living rises. Cities don't usually have a profit motive, can you name cities in booming areas that you think are 'extorting' money and wasting it?
        AdrianB1 8y ago
        No, no profit$$$, just throwing money on stuff that is either a way to siphon it or not the purpose for a city. Like you organize people in a city and instead of providing services like clean roads you do politics, social care, welfare etc (most cities in Europe spend more on benefits and welfare than on proper services to tax payers).
    - shados 8y ago
      One could argue that tying it to the value of the property (or owning property AT ALL!!!) is not great either. Why do renters not pay taxes? Sure, they're "property taxes" so from that angle it makes sense, but really they're taxes to run the city. Renters can vote and decide policies just like owners do, but they only indirectly pay for what they get (the landlord pays it from their rent). My house being more expensive than next door's doesn't mean Im a bigger burden on the city. The only reason it kinds of sortoff make sense is as a proxy to income. So why not just have everyone pay taxes based on residency (those who get to vote and receives city services), like we do for federal/state taxes? And if someone owns property and don't live there (investment), then their burden should be from it being an investment and be kind of unrelated. Only (albeit significant) hiccup is maintenance of the property and the responsibility of the owner via the city.
- tofflos 8y ago
  DINK - Double Income, No Kids
- puranjay 8y ago
  Where are affordable homes anymore in any big city in the world now? A good apartment in Delhi, India, is 4-6 times the annual income of a high income DINK couple with salaries in excess of $40-50k each (a big amount in India) I can't think of a single major economic center that has affordable housing now.
  - sandworm101 8y ago
    >>I can't think of a single major economic center that has affordable housing now. That's what makes them major economic centers: real estate prices. The building, renovation, redevelopment, renting and investing of real estate ... that a massive part of the the modern economy. Think Vancouver makes its money on tourism or lumber? Fishing? It is all down to industry that is perpetually-increasing land values.
    - vkou 8y ago
      What makes them major economic centers is that a lot of useful work is done in them. High real estate prices is just rent-collection by landlords. Vancouver is an outlier that makes its money as a destination for laundered international money. The other economic centers actually produce, and export useful goods.
      - toomuchtodo 8y ago
        So support remote work and the disintermediation of geography from delivering value. Unless you’re twiddling atoms, no need to be somewhere specific in space time. And if you must twiddle atoms, pay a premium for demanding a specific piece of space time that is in high demand. High rent collection is a symptom of high demand for an asset. If the land wasn’t valuable, the rent wouldn’t be high! But the argument that “place X is an economic engine but should still be cheap” is wildly unrealistic.
        shados 8y ago
        > Unless you’re twiddling atoms Or married to someone twiddling atoms, or needing to support someone twiddling atoms, or married to someone who needs to support someone twiddling atoms... Or have such level of arrogance and greeds (:gasp:) as to want to be near a family member who needs to twiddle atoms... Or if you're straight up greedy and don't want to live in the middle of nowhere.
EliRivers 8y ago
It's like they want a new aristocracy. Which I suppose is the truth; people with the wealth and power would be happy with that.
- Kalium 8y ago
  I genuinely don't think that was the idea. Prop 13 was passed in an era when property values were increasingly rapidly and California was a fairly conservative place. The idea was also promoted by Howard Jarvis in an effort to choke state revenues and keep the state government small (oops). Of course, it quickly became the new normal. Now getting rid of it is the third rail of California politics.
  - burfog 8y ago
    You touch upon a fundamental problem with the tax calculation. There is no reason for the city budget to increase by x% just because the supposed home values (could be a bubble) happen to increase by x%. It's not as if the other costs of running a government increased by x%. (in the long term there is a smaller increase due to salaries, but the city budget isn't normally spent buying up land) So a real estate bubble hits, home owners are hurt, and the government gets used to what they think is the new normal. The government takes on wasteful obligations, hiring lots of people and failing to push back on pension demands. Once the bubble pops, the city budget is in deep trouble. Something must be cut. It isn't easy to lay off employees and cut back the pensions, so the city increases the tax rate. Repeat that again with a new bubble, again and again, and the rates only go up. It's a ratchet effect, with rates going up but never down. Voters chose a simplistic way to put a stop to this problem. Something was needed, but the chosen solution is pretty bad. The fact that people can't trade houses without seeing rate increases means that people commute too far, clogging up the roads. Newcomers also get hit, with cities imposing huge impact fees and generally discouraging housing because the housing doesn't pay for itself due to Prop 13. What was really needed was a restriction on the total city budget. Instead of setting a tax rate and then calculating the budget, we could set the budget and then calculate the tax rate. Applying the restriction to the total city budget serves the necessary purpose of putting a stop to out-of-control spending.

by Kalium 8y ago

javajosh 8y ago

Really? How?

Kalium 8y ago
Prop 13 was amended twice - Propositions 58 and 193. Those allowed Prop 13 tax assessments to be inherited with property to children and grandchildren. There's some broader legal commentary, which I'm not properly equipped to evaluate, here: https://krasalaw.com/lawyer/2010/08/24/Estate-Planning/Maintaining-Your-Prop.-13-Tax-Base_bl1153.htm https://krasalaw.com/lawyer/2010/08/24/Estate-Planning/Maint...

TulliusCicero 8y ago

Which is bad. It's possible it may end up benefiting me since my parents own a home in the bay area, but I still think it's bad. The entire prop 13 + zoning + property value situation is terrible, it's a total pyramid scheme: older generations get wealthy through wealth transfers from the younger generation from inflating property values. But it can only work once or twice before the property values are so comically high that even high income DINK couples can't afford to buy in.

aey 8y ago
Why is that bad? A family lived in the city for generations, and now due to the tech boom and a property bubble they should be forced to move? It makes a hell of a lot more sense for FAANG to open offices somewhere else.
- objclxt 8y ago
  It’s bad because the tax rate you pay on your property should not be tied to how long you’ve owned it. Right now two different families living in identical properties in CA can be paying vastly different property taxes depending on when they bought (or inherited) their house. This is manifestly unfair.
  - AdrianB1 8y ago
    Paying an increasing tax is not fair too. You don't get more services from higher tax, the city is just extorting more money because it can and because enough people think this is fair.
    - ridgeguy 8y ago
      Inflation is a real thing. I doubt we'd have any workers paid through property taxes if we were paying like it's 1955.
    - Dylan16807 8y ago
      The services cost more to deliver as cost of living rises. Cities don't usually have a profit motive, can you name cities in booming areas that you think are 'extorting' money and wasting it?
      - AdrianB1 8y ago
        No, no profit$$$, just throwing money on stuff that is either a way to siphon it or not the purpose for a city. Like you organize people in a city and instead of providing services like clean roads you do politics, social care, welfare etc (most cities in Europe spend more on benefits and welfare than on proper services to tax payers).
  - shados 8y ago
    One could argue that tying it to the value of the property (or owning property AT ALL!!!) is not great either. Why do renters not pay taxes? Sure, they're "property taxes" so from that angle it makes sense, but really they're taxes to run the city. Renters can vote and decide policies just like owners do, but they only indirectly pay for what they get (the landlord pays it from their rent). My house being more expensive than next door's doesn't mean Im a bigger burden on the city. The only reason it kinds of sortoff make sense is as a proxy to income. So why not just have everyone pay taxes based on residency (those who get to vote and receives city services), like we do for federal/state taxes? And if someone owns property and don't live there (investment), then their burden should be from it being an investment and be kind of unrelated. Only (albeit significant) hiccup is maintenance of the property and the responsibility of the owner via the city.
tofflos 8y ago
DINK - Double Income, No Kids
puranjay 8y ago
Where are affordable homes anymore in any big city in the world now? A good apartment in Delhi, India, is 4-6 times the annual income of a high income DINK couple with salaries in excess of $40-50k each (a big amount in India) I can't think of a single major economic center that has affordable housing now.
- sandworm101 8y ago
  >>I can't think of a single major economic center that has affordable housing now. That's what makes them major economic centers: real estate prices. The building, renovation, redevelopment, renting and investing of real estate ... that a massive part of the the modern economy. Think Vancouver makes its money on tourism or lumber? Fishing? It is all down to industry that is perpetually-increasing land values.
  - vkou 8y ago
    What makes them major economic centers is that a lot of useful work is done in them. High real estate prices is just rent-collection by landlords. Vancouver is an outlier that makes its money as a destination for laundered international money. The other economic centers actually produce, and export useful goods.
    - toomuchtodo 8y ago
      So support remote work and the disintermediation of geography from delivering value. Unless you’re twiddling atoms, no need to be somewhere specific in space time. And if you must twiddle atoms, pay a premium for demanding a specific piece of space time that is in high demand. High rent collection is a symptom of high demand for an asset. If the land wasn’t valuable, the rent wouldn’t be high! But the argument that “place X is an economic engine but should still be cheap” is wildly unrealistic.
      - shados 8y ago
        > Unless you’re twiddling atoms Or married to someone twiddling atoms, or needing to support someone twiddling atoms, or married to someone who needs to support someone twiddling atoms... Or have such level of arrogance and greeds (:gasp:) as to want to be near a family member who needs to twiddle atoms... Or if you're straight up greedy and don't want to live in the middle of nowhere.

EliRivers 8y ago

It's like they want a new aristocracy. Which I suppose is the truth; people with the wealth and power would be happy with that.

Kalium 8y ago
I genuinely don't think that was the idea. Prop 13 was passed in an era when property values were increasingly rapidly and California was a fairly conservative place. The idea was also promoted by Howard Jarvis in an effort to choke state revenues and keep the state government small (oops). Of course, it quickly became the new normal. Now getting rid of it is the third rail of California politics.
- burfog 8y ago
  You touch upon a fundamental problem with the tax calculation. There is no reason for the city budget to increase by x% just because the supposed home values (could be a bubble) happen to increase by x%. It's not as if the other costs of running a government increased by x%. (in the long term there is a smaller increase due to salaries, but the city budget isn't normally spent buying up land) So a real estate bubble hits, home owners are hurt, and the government gets used to what they think is the new normal. The government takes on wasteful obligations, hiring lots of people and failing to push back on pension demands. Once the bubble pops, the city budget is in deep trouble. Something must be cut. It isn't easy to lay off employees and cut back the pensions, so the city increases the tax rate. Repeat that again with a new bubble, again and again, and the rates only go up. It's a ratchet effect, with rates going up but never down. Voters chose a simplistic way to put a stop to this problem. Something was needed, but the chosen solution is pretty bad. The fact that people can't trade houses without seeing rate increases means that people commute too far, clogging up the roads. Newcomers also get hit, with cities imposing huge impact fees and generally discouraging housing because the housing doesn't pay for itself due to Prop 13. What was really needed was a restriction on the total city budget. Instead of setting a tax rate and then calculating the budget, we could set the budget and then calculate the tax rate. Applying the restriction to the total city budget serves the necessary purpose of putting a stop to out-of-control spending.