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Prop 13 also contributes to the limited supply because existing property owners don’t pay their fair share toward transportation and infrastructure. The propert

by Decade 7y ago

Prop 13 also contributes to the limited supply because existing property owners don’t pay their fair share toward transportation and infrastructure. The property taxes rise slower than inflation, while the cost of living (important for paying for infrastructure maintenance, let alone new infrastructure) increases faster than inflation. Therefore, California cities charge outrageous impact fees on construction. The time of construction is the only time the property can contribute its full share toward transportation and infrastructure. These impact fees are passed to the consumer in the cost of new housing. Thus, new housing does not get built until the shortage has inflated the cost of all housing enough to cover the fees. The vast majority of that increase becomes homeowner windfall profits. In this respect, low interest rates are actually good because they raise the cost of existing housing high enough to make new housing worth the extortionate impact fees. Even better would be the repeal of Prop 13.

omgwtfbyobbq 7y ago
It does, but I doubt it contributes as much as low interest rates. The difference in current mortgage rates and the long run average rate is something like 40% of a homes current value IIRC. Assessed value increasing at 2% per year instead of 3% per year does make a difference, but a 1% difference in the rate of increase of taxes that are 1% of the assessed value is a 1 hundredth of a percent difference per year.
hellisothers 7y ago
“The vast majority of that increase becomes homeowner windfall profits.” I see this sentiment a lot in these threads, that somehow the fat cat homeowners are laughing all the way to the bank. For most of these homeowners this property is their home, just because it goes up in value quickly over 5-10 years doesn’t net them any “windfall”, and it could all vanish as quick as it came. As somebody mentioned in response to a similar article, individual homeowners aren’t in it for the increased property value. They’re in it for lower taxes and a safety net against change. Just like (individual) “NIMBY”s aren’t in it for property values, they’re in it because they don’t want change.
- closeparen 7y ago
  If the appreciation isn’t important, then the solution is clear: charge the difference in property taxes when the house is sold.

by Decade 7y ago

omgwtfbyobbq 7y ago

It does, but I doubt it contributes as much as low interest rates. The difference in current mortgage rates and the long run average rate is something like 40% of a homes current value IIRC. Assessed value increasing at 2% per year instead of 3% per year does make a difference, but a 1% difference in the rate of increase of taxes that are 1% of the assessed value is a 1 hundredth of a percent difference per year.

hellisothers 7y ago

“The vast majority of that increase becomes homeowner windfall profits.” I see this sentiment a lot in these threads, that somehow the fat cat homeowners are laughing all the way to the bank. For most of these homeowners this property is their home, just because it goes up in value quickly over 5-10 years doesn’t net them any “windfall”, and it could all vanish as quick as it came. As somebody mentioned in response to a similar article, individual homeowners aren’t in it for the increased property value. They’re in it for lower taxes and a safety net against change. Just like (individual) “NIMBY”s aren’t in it for property values, they’re in it because they don’t want change.

closeparen 7y ago
If the appreciation isn’t important, then the solution is clear: charge the difference in property taxes when the house is sold.