5 ms·

What do low property taxes have to do with high rent and lack of housing? Higher property taxes would result in higher rent and property prices...

DontGiveTwoFlux 6y ago
High taxes incentivizes more productive use of real estate, such as multi family housing.
- alexmingoia 6y ago
  Only to the extent that it makes single family homes unaffordable. Lower taxes incentivize building any type of housing, and cheaper rent for multi-family buildings.
- bcheung 6y ago
  High taxes are good because people will have less room to live? This doesn't sound like a good justification.
  - klipt 6y ago
    Most economists agree that a land value tax is economically the best kind of tax. Imagine property tax is 0. Why would anyone ever sell? All the land would effectively be owned by hereditary feudal lords. Texas has higher property taxes than California but more affordable housing. Makes you think.
    - bcheung 6y ago
      Funny enough, I actually agree with this, at least from an economics perspective. I'd much rather get rid of the income tax and have higher property taxes. That seems much more efficient to me.
      - charrondev 6y ago
        Move to New Hampshire then. There’s no escaping federal income taxes, but the is no state income tax or sales tax. Just a slightly higher property tax, and a lower state budget.
      - lotsofpulp 6y ago
        If your goal is to have wealthier/higher income people pay proportionally more taxes than poorer/lower income people, i.e. reduce the wealth/income gap in society, then you want both income and property (specifically land value) tax.
    - killtimeatwork 6y ago
      > Imagine property tax is 0. Why would anyone ever sell? All the land would effectively be owned by hereditary feudal lords. You'd sell for the usual reason, i.e. you'd prefer having money rather than that particular piece of land? That money would be then spent on either consumption or an investment with higher yield than land-holding. In my home country Poland the land tax is negligible and yet the market for land exists, it's not held forever by "feudal lords".
      - TheOtherHobbes 6y ago
        Your home country Poland is primarily agricultural - at least compared to the BA - and has much lower demand for housing. I suspect if you pick apart of the BA housing market you'll see some very large landlords with huge property portfolios. While they're not literally "feudal lords" they might as well be in terms of their self-serving influence on housing policy. Perhaps not coincidentally, some of them are FAANGs. https://www.mercurynews.com/2019/11/03/meet-silicon-valleys-top-property-owners/ https://www.mercurynews.com/2019/11/03/meet-silicon-valleys-...
        killtimeatwork 6y ago
        But the logic still holds - it there's huge demand for housing, then presumably the land prices are off the charts and the land owners can still be enticed to sell for huge amounts of money and invest into something with higher returns. The market shouldn't be dead.
  - deleted 6y ago
    [deleted]
  - bawolff 6y ago
    If your goal is to have land be more efficiently used, and thus decrease housing prices by increasing supply, then yes it is. Whether or not you think efficient land use is a good thing is up to you. The question of what taxes accomplish is separate from the question of if a policy objective is "good".
  - refurb 6y ago
    Why is that bad? If you own a single family home where an apartment tower could house 200 families (and there is demand for those units) why shouldn’t you pay a tax that reflects that?
beamatronic 6y ago
They are referring to long time California residents taking advantage of Prop 13. Presumably, long time residents vote against "change", which would include construction of new homes. Now imagine a lifetime of such voting. This would lead to a long-term undersupply of housing. Leading to higher housing prices. edit: added more
pb7 6y ago
NIMBYs oppose new construction because it keeps their property values high. They don't care about property values ballooning because they pay property taxes on the assessed values from when they bought, which is often decades ago, due to Prop 13. Prop 13 in general keeps things stagnant. For another example, there is no incentive to renovate/tear down/rebuild bigger because now you will pay significantly higher property taxes. Single family homes don't get turned into denser properties. The list of consequences goes on beyond my interest in it.
- zamfi 6y ago
  > NIMBYs oppose new construction because it keeps their property values high No, they just don’t want their neighborhoods to change (read: poor people, more traffic). I don’t think most of them are frankly thinking about their property values because it’s just not super relevant, thanks to prop 13. > For another example, there is no incentive to renovate/tear down/rebuild bigger because now you will pay significantly higher property taxes. Single family homes don't get turned into denser properties. There is a ton of incentive to build more units: for one, you could sell them for a ton more in aggregate! But there is also a huge disincentive that is not prop 13: zoning laws that prevent basically any increase in density in some absurd fraction of California, especially absurd in central areas and inner ring suburbs. Prop 13 is definitely an issue, but it’s not the dominant one for the effects you describe.
  - klipt 6y ago
    Well Prop 13 contributes to zoning. Cities get almost no money from residents, so they zone for denser commercial but sparser residential. The ratio of jobs to housing goes wack and you have a shortage of housing for the people who move here for jobs.
    - zamfi 6y ago
      This is a common refrain, but cities would absolutely collect substantial property taxes from new residents because new residents are much more likely to be paying substantially higher property taxes (having bought now-expensive properties). Commercial properties bring in tons of sales taxes, but not quite as much in property taxes. (See Figure 6 in [0].) The history of exclusionary zoning is a history of replacing restrictive racial covenants (binding agreements on property titles that prevent sales to certain groups) and redlining (which rendered unavailable mortgage loans to anyone for properties in neighborhoods that were not majority-white), both of which were invalidated by the Fair Housing Act in 1968, triggering the wave of exclusionary zoning intended to keep out the same people. The history is clear that this type of zoning is explicitly designed to keep properties expensive, to keep them out of the hands of "undesirables". Prop 13 then insulates longtime residents from that same increase in cost. They go hand in hand, but I'm not sure it's fair to say that Prop 13 contributes to zoning. [0]: https://lao.ca.gov/reports/2012/tax/property-tax-primer-112912.aspx https://lao.ca.gov/reports/2012/tax/property-tax-primer-1129...
DylanDmitri 6y ago
If my understanding is right, if you purchase a house and you (or your kids) have been living in it continuously you pay taxes on the original purchase price, rather than current value. These tax savings pass to homeowner families who stay in one location for multiple decades, especially as land values rise. Homeowners are very opposed to being displaced, since moving means their taxes would reset to a higher level. Renters are excluded from these savings.
- dannyincolor 6y ago
  That is correct. Source: just bought my first home in CA. Taxes were surprisingly reasonable
  - zamfi 6y ago
    Not correct: your taxes will go up annually by 2% or CPI, whichever is lower. Granted, this means they will grow substantially slower than historical property appreciation, but it’s not 0. Also your property taxes start out at 1% of assessed value, which is very low compared with many other high-wealth states.
    - jjav 6y ago
      The above is factually correct.
    - deleted 6y ago
      [deleted]
- smsm42 6y ago
  > you pay taxes on the original purchase price Not exactly. It is more complex than that. The tax base is supposed to be the market value but if the market value raises, the tax base is allowed to follow only up to a certain margin. With CA and especially Bay Area prices skyrocketing for a while, the effect has been than the tax base lags very far from the actual market value, and for people who bought in the 80s the tax base may be a fraction of their current market value.
- 6y ago

DontGiveTwoFlux 6y ago

High taxes incentivizes more productive use of real estate, such as multi family housing.

alexmingoia 6y ago
Only to the extent that it makes single family homes unaffordable. Lower taxes incentivize building any type of housing, and cheaper rent for multi-family buildings.
bcheung 6y ago
High taxes are good because people will have less room to live? This doesn't sound like a good justification.
- klipt 6y ago
  Most economists agree that a land value tax is economically the best kind of tax. Imagine property tax is 0. Why would anyone ever sell? All the land would effectively be owned by hereditary feudal lords. Texas has higher property taxes than California but more affordable housing. Makes you think.
  - bcheung 6y ago
    Funny enough, I actually agree with this, at least from an economics perspective. I'd much rather get rid of the income tax and have higher property taxes. That seems much more efficient to me.
    - charrondev 6y ago
      Move to New Hampshire then. There’s no escaping federal income taxes, but the is no state income tax or sales tax. Just a slightly higher property tax, and a lower state budget.
    - lotsofpulp 6y ago
      If your goal is to have wealthier/higher income people pay proportionally more taxes than poorer/lower income people, i.e. reduce the wealth/income gap in society, then you want both income and property (specifically land value) tax.
  - killtimeatwork 6y ago
    > Imagine property tax is 0. Why would anyone ever sell? All the land would effectively be owned by hereditary feudal lords. You'd sell for the usual reason, i.e. you'd prefer having money rather than that particular piece of land? That money would be then spent on either consumption or an investment with higher yield than land-holding. In my home country Poland the land tax is negligible and yet the market for land exists, it's not held forever by "feudal lords".
    - TheOtherHobbes 6y ago
      Your home country Poland is primarily agricultural - at least compared to the BA - and has much lower demand for housing. I suspect if you pick apart of the BA housing market you'll see some very large landlords with huge property portfolios. While they're not literally "feudal lords" they might as well be in terms of their self-serving influence on housing policy. Perhaps not coincidentally, some of them are FAANGs. https://www.mercurynews.com/2019/11/03/meet-silicon-valleys-top-property-owners/ https://www.mercurynews.com/2019/11/03/meet-silicon-valleys-...
      - killtimeatwork 6y ago
        But the logic still holds - it there's huge demand for housing, then presumably the land prices are off the charts and the land owners can still be enticed to sell for huge amounts of money and invest into something with higher returns. The market shouldn't be dead.
- deleted 6y ago
  [deleted]
- bawolff 6y ago
  If your goal is to have land be more efficiently used, and thus decrease housing prices by increasing supply, then yes it is. Whether or not you think efficient land use is a good thing is up to you. The question of what taxes accomplish is separate from the question of if a policy objective is "good".
- refurb 6y ago
  Why is that bad? If you own a single family home where an apartment tower could house 200 families (and there is demand for those units) why shouldn’t you pay a tax that reflects that?

beamatronic 6y ago

They are referring to long time California residents taking advantage of Prop 13. Presumably, long time residents vote against "change", which would include construction of new homes. Now imagine a lifetime of such voting. This would lead to a long-term undersupply of housing. Leading to higher housing prices. edit: added more

pb7 6y ago

NIMBYs oppose new construction because it keeps their property values high. They don't care about property values ballooning because they pay property taxes on the assessed values from when they bought, which is often decades ago, due to Prop 13. Prop 13 in general keeps things stagnant. For another example, there is no incentive to renovate/tear down/rebuild bigger because now you will pay significantly higher property taxes. Single family homes don't get turned into denser properties. The list of consequences goes on beyond my interest in it.

zamfi 6y ago
> NIMBYs oppose new construction because it keeps their property values high No, they just don’t want their neighborhoods to change (read: poor people, more traffic). I don’t think most of them are frankly thinking about their property values because it’s just not super relevant, thanks to prop 13. > For another example, there is no incentive to renovate/tear down/rebuild bigger because now you will pay significantly higher property taxes. Single family homes don't get turned into denser properties. There is a ton of incentive to build more units: for one, you could sell them for a ton more in aggregate! But there is also a huge disincentive that is not prop 13: zoning laws that prevent basically any increase in density in some absurd fraction of California, especially absurd in central areas and inner ring suburbs. Prop 13 is definitely an issue, but it’s not the dominant one for the effects you describe.
- klipt 6y ago
  Well Prop 13 contributes to zoning. Cities get almost no money from residents, so they zone for denser commercial but sparser residential. The ratio of jobs to housing goes wack and you have a shortage of housing for the people who move here for jobs.
  - zamfi 6y ago
    This is a common refrain, but cities would absolutely collect substantial property taxes from new residents because new residents are much more likely to be paying substantially higher property taxes (having bought now-expensive properties). Commercial properties bring in tons of sales taxes, but not quite as much in property taxes. (See Figure 6 in [0].) The history of exclusionary zoning is a history of replacing restrictive racial covenants (binding agreements on property titles that prevent sales to certain groups) and redlining (which rendered unavailable mortgage loans to anyone for properties in neighborhoods that were not majority-white), both of which were invalidated by the Fair Housing Act in 1968, triggering the wave of exclusionary zoning intended to keep out the same people. The history is clear that this type of zoning is explicitly designed to keep properties expensive, to keep them out of the hands of "undesirables". Prop 13 then insulates longtime residents from that same increase in cost. They go hand in hand, but I'm not sure it's fair to say that Prop 13 contributes to zoning. [0]: https://lao.ca.gov/reports/2012/tax/property-tax-primer-112912.aspx https://lao.ca.gov/reports/2012/tax/property-tax-primer-1129...

DylanDmitri 6y ago

If my understanding is right, if you purchase a house and you (or your kids) have been living in it continuously you pay taxes on the original purchase price, rather than current value. These tax savings pass to homeowner families who stay in one location for multiple decades, especially as land values rise. Homeowners are very opposed to being displaced, since moving means their taxes would reset to a higher level. Renters are excluded from these savings.

dannyincolor 6y ago
That is correct. Source: just bought my first home in CA. Taxes were surprisingly reasonable
- zamfi 6y ago
  Not correct: your taxes will go up annually by 2% or CPI, whichever is lower. Granted, this means they will grow substantially slower than historical property appreciation, but it’s not 0. Also your property taxes start out at 1% of assessed value, which is very low compared with many other high-wealth states.
  - jjav 6y ago
    The above is factually correct.
  - deleted 6y ago
    [deleted]
smsm42 6y ago
> you pay taxes on the original purchase price Not exactly. It is more complex than that. The tax base is supposed to be the market value but if the market value raises, the tax base is allowed to follow only up to a certain margin. With CA and especially Bay Area prices skyrocketing for a while, the effect has been than the tax base lags very far from the actual market value, and for people who bought in the 80s the tax base may be a fraction of their current market value.
6y ago