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Housing and taxes in CA are close to oppressive. The housing situation will not change unless CA voters agree to a change in property taxes and they won't. I w

Housing and taxes in CA are close to oppressive. The housing situation will not change unless CA voters agree to a change in property taxes and they won't. I would also bet that the move will come at the expense of Texas tax payers and to the benefit of Schwabb.

skybrian 7y ago
While California taxes are high, this doesn't seem to be the main reason that building more housing is difficult? For that you can blame zoning restrictions and political opposition.
- zer00eyz 7y ago
  That is a piece of it. But the housing market lacks liquidity due to prop 13. When your tax basis doesn't reflect the value of your property and doesn't keep up with inflation it makes NO sense for you to move in response to market conditions. Not building housing increases the value of what I already own, and the tax policy means I don't face the economic pressure to change any of it. The two are deeply linked and going to be nearly impossible to change.
TulliusCicero 7y ago
Part of the problem with housing prices in California is that property taxes are too low. Prop 13 means existing homeowners are shielded from higher property taxes, so growing property values are only good for them, no matter how high. Thus, there's no incentive to increase housing supply, which could lower prices.
- justinzollars 7y ago
  The problem with housing in California is that we do not build it because regulations prohibit new housing. Look at a zoning map in San Francisco. Housing is illegal.
  - ethbro 7y ago
    I believe the full reasoning is that (1) if property owners paid property taxes on the full market value of their property, then (2) they would lobby for (or at least cease opposition against) upzoning for density, and (3) more dense housing would be legalized and built.
    - rizwank 7y ago
      Can you help me understand how #1 becomes #2?
      - TulliusCicero 7y ago
        In most parts of the country, there's both an upside and downside to increasing property values to landowners. Upside: they're worth more, they could sell and move somewhere else cheaper, pocketing the money, or they could rent out their place for more. Downside: they have to pay higher ongoing property taxes. Most landowners still like increasing property values, but it's not all good for them. With prop 13, the downside is wiped out. Increasing values are only good; they could increase 10x overnight and this would only make landowners filthy rich, there's no negative effect for them. Ergo, they have every incentive to keep housing supply constrained, to keep voting for politicians and policies that limit housing density.
        ethbro 7y ago
        And to bear specifically on the sub-point that blights the Bay Area -- by removing increasing property taxes, you are removing market pressure for highest and best use. Another way to think about property taxes is that they're annual nudges to encourage best use of the property. Without that pressure, as TulliusCicero notes, why would I ever sell before retirement? And furthermore, why would I even try to make money off the property (say, by renting)? That's probably not in the city's (as in, all the people living there) best interest to have a substantial portion of homeowners so disengaged from the actual market. PS: Which isn't to say there aren't gentrification and affordable housing debates to be had. Simply that Prop 13 doesn't really help with that -- it just removed risk from those who are already homeowners.
- gilbetron 7y ago
  Whoa! Didn't even know about Prop 13 - that basically means no house can currently have a higher taxable value than basically double what it was worth in 1978. Insane!
  - 0xffff2 7y ago
    Huh? I think you're mis-reading something. Your assertion is true only for houses that haven't changed hands since 1978. In most cases, the buyer of a house is assessed taxes on the market value of the house at the time of sale, and further increases are limited from there.
    - mifreewil 7y ago
      This is true but it’s insane that California allows children to inherit the lower tax basis: https://www.latimes.com/politics/la-pol-ca-california-property-taxes-elites-201808-htmlstory.html https://www.latimes.com/politics/la-pol-ca-california-proper...
      - 0xffff2 7y ago
        Yes, "in most cases" was my hedge around the various ways in which property can be transferred while keeping its tax status. The majority of prop 13 is insane IMO. If I had to pick a single thing to change, I'd much rather stop applying it to commercial property than remove the inheritance provision.
        mifreewil 7y ago
        Yeah, commercial property makes no sense either, especially if you consider the original intent of the law, but it bothers me less than residences as at least those properties, in theory, are doing something productive for society.
        nitrogen 7y ago
        Long-term residents are also doing something productive for society -- they are providing stable communities around which longer-term plans can be made, in which cultural memory of e.g. local climatological risks can be preserved, etc. Housing is definitely way too expensive in the bay area, but calling existing residents "unproductive" is pretty astonishingly, callously, selfishly offensive.
- koolba 7y ago
  That’s not just part of the problem. That’s the single largest factor of the problem. Unfortunately it won’t be changed until the State is at the brink of financial collapse. At that point I can see a “millionaires reassessment” suddenly being very popular.
- scarface74 7y ago
  So if we want to tax illiquid assets and wealth instead of income, why stop at houses? Why not tax equity held in companies? Why don’t we tax employees based on the amount and value of equity they have in a company? Every time there is a new round of funding that increases the value of equity, impose a higher tax.
  - TulliusCicero 7y ago
    It's not really houses that are important to tax, it's land, because there's a fixed amount of it, especially valuable land, so it's useful to encourage economically efficient use of that land. No property or land tax means people can just sit on land forever if they feel like it with no real downside, besides missing out on potential revenue. This is bad for society, because people need land for things, and unlike cars or computers or gold we can't just ship it in from elsewhere if some provider is being obstinate.
    - scarface74 7y ago
      No you can’t just “ship land” elsewhere. But, there is nothing stopping people and companies from moving where land is cheaper. The land is only valuable because people want to live in California instead of places where it cheaper. Its not just the supplier who is being “obstinate” the consumer is also refusing to look other places.
      - petronio 7y ago
        You have to remember that companies compete with others for human labor. If your company moves to a city nobody wants to move to, you'll lose labor resources to another company (in the case of SF companies, highly skilled labor that's not easily replaceable and has high training costs). While I also think companies should spread out more, the very fact that so many companies are paying the significantly inflated property and labor prices in the SF area shows the tremendous economic value in having access to that labor market.
        7y ago
- remote_phone 7y ago
  The idea that California property taxes are too low is completely wrong, they are too high. In Vancouver, my family’s house was paying around $6000/yr in property taxes and the house was worth 1.4M only because the housing market in Vancouver has been crazy for decades. My friend in Toronto pays $3800 on her $700k single family home. My house in the Bay Area I bought for $1M and my taxes were $12,000 and in the last few years it has gone up to $15,000. The idea that Prop 13 is somehow damaging CA is false. Imagine if you were a retiree in the Bay Area and your property taxes were indexed you the house price? It would drive out too many senior citizens and low income families because house prices have double in the last 7 years. Also before you say that Prop 13 has a negative effect if you look at the actual house purchases, in my area at least half of the houses have turned over in the last 10 years meaning that the taxes being paid were reset drastically. Prop 13 protects homeowners by keeping consistency but doesn’t stop them from selling.
  - Aloha 7y ago
    The issue is, someone who owns a house they bought for 260,000, 30 years ago, isn't paying tax on the current valuation of 1.4m, they're paying a much much lower rate because of Prop 13.
  - fountainofage 7y ago
    So that's your anecdote - and now mine: the building I live in is worth well over $5 million, and the property tax is currently $3500 a year. Edit: just to add - I don't know where people get the idea that we need to evict people from their homes over property taxes. Just put a lien on the property for the tax bill. This isn't rocket science.
    - proverbialbunny 7y ago
      That's a great idea, especially if they don't evict people, but just take a chunk of the house that is the state's now if they don't pay taxes. If house prices go up, the state profits when the house changes hands, or the state owns all of the house and then needs to evict people.
galangalalgol 7y ago
Property taxes in fort worth are ~2.85%. What is bay area?
- burlesona 7y ago
  Closer to 1%.
  - ramses0 7y ago
    Asterisk: Texas has no state income tax, but has a higher property tax rate.
- downrightmike 7y ago
  Zero until the house is sold.
- jogjayr 7y ago
  The Bay Area's problem isn't absolute tax rates. It's that taxes aren't calculated on current property value, but on original sale price. This keeps effective tax rates low if you bought earlier. It also discourages redevelopment, rezoning, or anything else that would bring more supply into the market.
thatfrenchguy 7y ago
Aren’t taxes highly regressive in Texas with sky high property taxes which exempt rich people ?
- crikli 7y ago
  The property taxes are sky high, yes, but they most definitely do not exempt the rich. There is no state income tax. I wouldn’t call the state’s general tax structure progressive or regressive.
  - kyralis 7y ago
    Property taxes are inherently more regressive than income taxes, since since property (either directly or through rents) nearly always consumes a larger portion of the income/wealth of lower-means individuals.
    - whokal 7y ago
      It's not obvious to me that you can't also have a progressive / marginal tax system for property taxes based on home valuations (e.g. home values >$1MM taxed higher than those worth $200K). So, I don't think property taxes are inherently regressive. That said, I don't think it's enough to just look at one tax. We have to consider taxes and regulations as a whole to understand whether a place is overall regressive or not. This leaves room for different implementations of tax policy which if done correctly will benefit the people.
    - deleted 7y ago
      [deleted]
- mifreewil 7y ago
  I would say overall California’s high income and sales taxes and low property taxes are far, far more regressive, see this at the extreme: https://www.latimes.com/politics/la-pol-ca-california-property-taxes-elites-201808-htmlstory.html https://www.latimes.com/politics/la-pol-ca-california-proper...
scarface74 7y ago
Sure there is another way for it to change. Companies start moving out of California, the employees follow and the demand lessens.
fortran77 7y ago
Giant companies get to personally negotiate their own favorable property tax rates. If people goose-step to the polls in 2020 to confiscate additional property from commercial property owners in the form of increased property taxes [1], the mega-corporations won't pay a cent of it. The mom an pop business that give SF its character, however, will be driven out of business. [1] https://www.sfchronicle.com/politics/article/Change-in-California-s-Prop-13-makes-2020-13314983.php https://www.sfchronicle.com/politics/article/Change-in-Calif...

skybrian 7y ago

While California taxes are high, this doesn't seem to be the main reason that building more housing is difficult? For that you can blame zoning restrictions and political opposition.

zer00eyz 7y ago
That is a piece of it. But the housing market lacks liquidity due to prop 13. When your tax basis doesn't reflect the value of your property and doesn't keep up with inflation it makes NO sense for you to move in response to market conditions. Not building housing increases the value of what I already own, and the tax policy means I don't face the economic pressure to change any of it. The two are deeply linked and going to be nearly impossible to change.

TulliusCicero 7y ago

Part of the problem with housing prices in California is that property taxes are too low. Prop 13 means existing homeowners are shielded from higher property taxes, so growing property values are only good for them, no matter how high. Thus, there's no incentive to increase housing supply, which could lower prices.

justinzollars 7y ago
The problem with housing in California is that we do not build it because regulations prohibit new housing. Look at a zoning map in San Francisco. Housing is illegal.
- ethbro 7y ago
  I believe the full reasoning is that (1) if property owners paid property taxes on the full market value of their property, then (2) they would lobby for (or at least cease opposition against) upzoning for density, and (3) more dense housing would be legalized and built.
  - rizwank 7y ago
    Can you help me understand how #1 becomes #2?
    - TulliusCicero 7y ago
      In most parts of the country, there's both an upside and downside to increasing property values to landowners. Upside: they're worth more, they could sell and move somewhere else cheaper, pocketing the money, or they could rent out their place for more. Downside: they have to pay higher ongoing property taxes. Most landowners still like increasing property values, but it's not all good for them. With prop 13, the downside is wiped out. Increasing values are only good; they could increase 10x overnight and this would only make landowners filthy rich, there's no negative effect for them. Ergo, they have every incentive to keep housing supply constrained, to keep voting for politicians and policies that limit housing density.
      - ethbro 7y ago
        And to bear specifically on the sub-point that blights the Bay Area -- by removing increasing property taxes, you are removing market pressure for highest and best use. Another way to think about property taxes is that they're annual nudges to encourage best use of the property. Without that pressure, as TulliusCicero notes, why would I ever sell before retirement? And furthermore, why would I even try to make money off the property (say, by renting)? That's probably not in the city's (as in, all the people living there) best interest to have a substantial portion of homeowners so disengaged from the actual market. PS: Which isn't to say there aren't gentrification and affordable housing debates to be had. Simply that Prop 13 doesn't really help with that -- it just removed risk from those who are already homeowners.
gilbetron 7y ago
Whoa! Didn't even know about Prop 13 - that basically means no house can currently have a higher taxable value than basically double what it was worth in 1978. Insane!
- 0xffff2 7y ago
  Huh? I think you're mis-reading something. Your assertion is true only for houses that haven't changed hands since 1978. In most cases, the buyer of a house is assessed taxes on the market value of the house at the time of sale, and further increases are limited from there.
  - mifreewil 7y ago
    This is true but it’s insane that California allows children to inherit the lower tax basis: https://www.latimes.com/politics/la-pol-ca-california-property-taxes-elites-201808-htmlstory.html https://www.latimes.com/politics/la-pol-ca-california-proper...
    - 0xffff2 7y ago
      Yes, "in most cases" was my hedge around the various ways in which property can be transferred while keeping its tax status. The majority of prop 13 is insane IMO. If I had to pick a single thing to change, I'd much rather stop applying it to commercial property than remove the inheritance provision.
      - mifreewil 7y ago
        Yeah, commercial property makes no sense either, especially if you consider the original intent of the law, but it bothers me less than residences as at least those properties, in theory, are doing something productive for society.
        nitrogen 7y ago
        Long-term residents are also doing something productive for society -- they are providing stable communities around which longer-term plans can be made, in which cultural memory of e.g. local climatological risks can be preserved, etc. Housing is definitely way too expensive in the bay area, but calling existing residents "unproductive" is pretty astonishingly, callously, selfishly offensive.
koolba 7y ago
That’s not just part of the problem. That’s the single largest factor of the problem. Unfortunately it won’t be changed until the State is at the brink of financial collapse. At that point I can see a “millionaires reassessment” suddenly being very popular.
scarface74 7y ago
So if we want to tax illiquid assets and wealth instead of income, why stop at houses? Why not tax equity held in companies? Why don’t we tax employees based on the amount and value of equity they have in a company? Every time there is a new round of funding that increases the value of equity, impose a higher tax.
- TulliusCicero 7y ago
  It's not really houses that are important to tax, it's land, because there's a fixed amount of it, especially valuable land, so it's useful to encourage economically efficient use of that land. No property or land tax means people can just sit on land forever if they feel like it with no real downside, besides missing out on potential revenue. This is bad for society, because people need land for things, and unlike cars or computers or gold we can't just ship it in from elsewhere if some provider is being obstinate.
  - scarface74 7y ago
    No you can’t just “ship land” elsewhere. But, there is nothing stopping people and companies from moving where land is cheaper. The land is only valuable because people want to live in California instead of places where it cheaper. Its not just the supplier who is being “obstinate” the consumer is also refusing to look other places.
    - petronio 7y ago
      You have to remember that companies compete with others for human labor. If your company moves to a city nobody wants to move to, you'll lose labor resources to another company (in the case of SF companies, highly skilled labor that's not easily replaceable and has high training costs). While I also think companies should spread out more, the very fact that so many companies are paying the significantly inflated property and labor prices in the SF area shows the tremendous economic value in having access to that labor market.
      - 7y ago
remote_phone 7y ago
The idea that California property taxes are too low is completely wrong, they are too high. In Vancouver, my family’s house was paying around $6000/yr in property taxes and the house was worth 1.4M only because the housing market in Vancouver has been crazy for decades. My friend in Toronto pays $3800 on her $700k single family home. My house in the Bay Area I bought for $1M and my taxes were $12,000 and in the last few years it has gone up to $15,000. The idea that Prop 13 is somehow damaging CA is false. Imagine if you were a retiree in the Bay Area and your property taxes were indexed you the house price? It would drive out too many senior citizens and low income families because house prices have double in the last 7 years. Also before you say that Prop 13 has a negative effect if you look at the actual house purchases, in my area at least half of the houses have turned over in the last 10 years meaning that the taxes being paid were reset drastically. Prop 13 protects homeowners by keeping consistency but doesn’t stop them from selling.
- Aloha 7y ago
  The issue is, someone who owns a house they bought for 260,000, 30 years ago, isn't paying tax on the current valuation of 1.4m, they're paying a much much lower rate because of Prop 13.
- fountainofage 7y ago
  So that's your anecdote - and now mine: the building I live in is worth well over $5 million, and the property tax is currently $3500 a year. Edit: just to add - I don't know where people get the idea that we need to evict people from their homes over property taxes. Just put a lien on the property for the tax bill. This isn't rocket science.
  - proverbialbunny 7y ago
    That's a great idea, especially if they don't evict people, but just take a chunk of the house that is the state's now if they don't pay taxes. If house prices go up, the state profits when the house changes hands, or the state owns all of the house and then needs to evict people.

galangalalgol 7y ago

Property taxes in fort worth are ~2.85%. What is bay area?

burlesona 7y ago
Closer to 1%.
- ramses0 7y ago
  Asterisk: Texas has no state income tax, but has a higher property tax rate.
downrightmike 7y ago
Zero until the house is sold.
jogjayr 7y ago
The Bay Area's problem isn't absolute tax rates. It's that taxes aren't calculated on current property value, but on original sale price. This keeps effective tax rates low if you bought earlier. It also discourages redevelopment, rezoning, or anything else that would bring more supply into the market.

thatfrenchguy 7y ago

Aren’t taxes highly regressive in Texas with sky high property taxes which exempt rich people ?

crikli 7y ago
The property taxes are sky high, yes, but they most definitely do not exempt the rich. There is no state income tax. I wouldn’t call the state’s general tax structure progressive or regressive.
- kyralis 7y ago
  Property taxes are inherently more regressive than income taxes, since since property (either directly or through rents) nearly always consumes a larger portion of the income/wealth of lower-means individuals.
  - whokal 7y ago
    It's not obvious to me that you can't also have a progressive / marginal tax system for property taxes based on home valuations (e.g. home values >$1MM taxed higher than those worth $200K). So, I don't think property taxes are inherently regressive. That said, I don't think it's enough to just look at one tax. We have to consider taxes and regulations as a whole to understand whether a place is overall regressive or not. This leaves room for different implementations of tax policy which if done correctly will benefit the people.
  - deleted 7y ago
    [deleted]
mifreewil 7y ago
I would say overall California’s high income and sales taxes and low property taxes are far, far more regressive, see this at the extreme: https://www.latimes.com/politics/la-pol-ca-california-property-taxes-elites-201808-htmlstory.html https://www.latimes.com/politics/la-pol-ca-california-proper...

scarface74 7y ago

Sure there is another way for it to change. Companies start moving out of California, the employees follow and the demand lessens.

fortran77 7y ago

Giant companies get to personally negotiate their own favorable property tax rates. If people goose-step to the polls in 2020 to confiscate additional property from commercial property owners in the form of increased property taxes [1], the mega-corporations won't pay a cent of it. The mom an pop business that give SF its character, however, will be driven out of business. [1] https://www.sfchronicle.com/politics/article/Change-in-California-s-Prop-13-makes-2020-13314983.php https://www.sfchronicle.com/politics/article/Change-in-Calif...