6 ms·

I’ve ranted about this before but CA Prop 13 not only makes housing a good investment, but one that you’re extremely incentivized to hold onto forever and never

I’ve ranted about this before but CA Prop 13 not only makes housing a good investment, but one that you’re extremely incentivized to hold onto forever and never move. Two people can be living in houses next to each other valued around 1.5m, and one of them will be paying 1/10th the tax. If anyone wants to buy a house, they have to first be able to afford the property, so the barriers to entry are so much higher for those who didn’t have the foresight to purchase a home 40 years ago. It’s not even residential that’s the most disturbing though. One of the biggest beneficiaries of this tax break is Disney: https://www.ocregister.com/2010/06/03/disneyland-businesses-enjoy-prop-13-loopholes-study-says/ https://www.ocregister.com/2010/06/03/disneyland-businesses-...

foogazi 5y ago
Prop 13 biggest beneficiaries are corporations. > so the barriers to entry are so much higher for those who didn’t have the foresight to purchase a home 40 years ago. 40 years ago it was still expensive to buy otherwise everyone would have bought, including the investment funds
- deleted 5y ago
  [deleted]
- jeffbee 5y ago
  40 years ago a home in the Bay Area cost about 3x median income. Now it is more than 10x. Buyers in 1981 benefitted enormously from high interest rates. I know they whine about it now, but objectively it was a massive windfall for buyers.
  - foogazi 5y ago
    > 40 years ago a home in the Bay Area cost about 3x median income. Now it is more than 10x. Interest rated have fallen 10x > Buyers in 1981 benefitted enormously from high interest rates. They didn’t benefit from paying more for a money loan. They benefited from being able to refinance on always lower rates, and the corresponding rise in asset price
  - jonny_eh 5y ago
    > it was a massive windfall for buyers It was a wealth grab. They're the ones that voted for prop 13, and they're the ones benefitting. Meanwhile it's the Millennials and all subsequent generations that are stuck paying for their social security.
plank_time 5y ago
You’re saying that old people should be driven out of their houses because younger, richer people deserve to live in their houses. I’m sure your feelings will change as you get older.
- gowld 5y ago
  Paying taxes on unearned gains is not "driven out of your house". You can keep the house and pay taxes on the gains. > I’m sure your feelings will change as you get older. Yes, this is the problem. Extreme self-interest and entitlement to massive windfalls.
  - plank_time 5y ago
    How are old people with no income supposed to afford capital gains taxes? And if house prices go down do they get a refund?
    - mattmcknight 5y ago
      Mark to market property taxes do go lower when assessments go lower.
      - dnautics 5y ago
        You don't get a refund for the intervening years of mania. Oh we're sorry we almost kicked you out of your house because everyone else was paying out the nose for houses because they speculated Amazon would build it's hq there that year so sorry about that. Here's your 50k in taxes back with interest.
        arrosenberg 5y ago
        In that scenario it sounds like the person "forced out" would have received a huge windfall of cash, and could ostensibly buy their same house back for much less than they sold it for at the height of the mania.
throw737858 5y ago
California used cheap migrant work force for decades, but that stream is drying up. This pyramid scheme is one of reasons.
Lammy 5y ago
> CA Prop 13 not only makes housing a good investment, but one that you’re extremely incentivized to hold onto forever and never move AKA "segregation with extra steps"
dragonwriter 5y ago
> I’ve ranted about this before but CA Prop 13 not only makes housing a good investment, but one that you’re extremely incentivized to hold onto forever and never move. Not “never move”, just never sell. When you are ready and able to upgrade to a new home, you convert the existing one to a rental property with rents to cover costs with a suitable risk premium (but don’t worry about additional profit), and then benefit from the appreciation and protection from full-value reassessment on both properties, rinse and repeat as needed.
- offsky 5y ago
  This assumes that you don't need the equity in the first house to get the mortgage on the second house.
  - tick_tock_tick 5y ago
    No, the price has gone up so much you remortgage and get cash out to buy the next place.
TheSpiceIsLife 5y ago
Or, anyone who didn't have the foresight to be born 60+ years ago and buy land in their early twenties.
erentz 5y ago
Prop 13 is so ridiculously unfair and distortionary. I wonder is there a way to legally challenge Prop 13 on the basis that it confers a kind of durational residency benefit (see Shapiro v. Thompson)?
- rcpt 5y ago
  Yes. https://harvardcrcl.org/wp-content/uploads/sites/10/2018/11/Sarkar-Rosenthal.pdf https://harvardcrcl.org/wp-content/uploads/sites/10/2018/11/... Norlidger v. Hahn (worth a read https://www.law.cornell.edu/supct/html/90-1912.ZD.html https://www.law.cornell.edu/supct/html/90-1912.ZD.html) didn't make it but also didn't address the Fair Housing Act. Prop 13, especially the extensions that preserve tax rates through bloodlines, disparately impacts minorities even though that wasn't the explicit intent of the law. Turns out that intent doesn't matter on issues of race so there's legal precedent to overturn the law.
  - jonny_eh 5y ago
    It's also a huge grant to older generations, which violates the Equal Protection Clause of the 14th amendment, IMO. But I'm not a Supreme, so I dunno.
    - rcpt 5y ago
      I agree with Justice Stevens that it's a violation of equal protection, and the state supreme court of Delaware recently did to when they struck down their version of Prop 13, but as you'll see in my Cornell link above the rest of the court upheld the law.

foogazi 5y ago

Prop 13 biggest beneficiaries are corporations. > so the barriers to entry are so much higher for those who didn’t have the foresight to purchase a home 40 years ago. 40 years ago it was still expensive to buy otherwise everyone would have bought, including the investment funds

deleted 5y ago
[deleted]
jeffbee 5y ago
40 years ago a home in the Bay Area cost about 3x median income. Now it is more than 10x. Buyers in 1981 benefitted enormously from high interest rates. I know they whine about it now, but objectively it was a massive windfall for buyers.
- foogazi 5y ago
  > 40 years ago a home in the Bay Area cost about 3x median income. Now it is more than 10x. Interest rated have fallen 10x > Buyers in 1981 benefitted enormously from high interest rates. They didn’t benefit from paying more for a money loan. They benefited from being able to refinance on always lower rates, and the corresponding rise in asset price
- jonny_eh 5y ago
  > it was a massive windfall for buyers It was a wealth grab. They're the ones that voted for prop 13, and they're the ones benefitting. Meanwhile it's the Millennials and all subsequent generations that are stuck paying for their social security.

plank_time 5y ago

You’re saying that old people should be driven out of their houses because younger, richer people deserve to live in their houses. I’m sure your feelings will change as you get older.

gowld 5y ago
Paying taxes on unearned gains is not "driven out of your house". You can keep the house and pay taxes on the gains. > I’m sure your feelings will change as you get older. Yes, this is the problem. Extreme self-interest and entitlement to massive windfalls.
- plank_time 5y ago
  How are old people with no income supposed to afford capital gains taxes? And if house prices go down do they get a refund?
  - mattmcknight 5y ago
    Mark to market property taxes do go lower when assessments go lower.
    - dnautics 5y ago
      You don't get a refund for the intervening years of mania. Oh we're sorry we almost kicked you out of your house because everyone else was paying out the nose for houses because they speculated Amazon would build it's hq there that year so sorry about that. Here's your 50k in taxes back with interest.
      - arrosenberg 5y ago
        In that scenario it sounds like the person "forced out" would have received a huge windfall of cash, and could ostensibly buy their same house back for much less than they sold it for at the height of the mania.

throw737858 5y ago

California used cheap migrant work force for decades, but that stream is drying up. This pyramid scheme is one of reasons.

Lammy 5y ago

> CA Prop 13 not only makes housing a good investment, but one that you’re extremely incentivized to hold onto forever and never move AKA "segregation with extra steps"

dragonwriter 5y ago

> I’ve ranted about this before but CA Prop 13 not only makes housing a good investment, but one that you’re extremely incentivized to hold onto forever and never move. Not “never move”, just never sell. When you are ready and able to upgrade to a new home, you convert the existing one to a rental property with rents to cover costs with a suitable risk premium (but don’t worry about additional profit), and then benefit from the appreciation and protection from full-value reassessment on both properties, rinse and repeat as needed.

offsky 5y ago
This assumes that you don't need the equity in the first house to get the mortgage on the second house.
- tick_tock_tick 5y ago
  No, the price has gone up so much you remortgage and get cash out to buy the next place.

TheSpiceIsLife 5y ago

Or, anyone who didn't have the foresight to be born 60+ years ago and buy land in their early twenties.

erentz 5y ago

Prop 13 is so ridiculously unfair and distortionary. I wonder is there a way to legally challenge Prop 13 on the basis that it confers a kind of durational residency benefit (see Shapiro v. Thompson)?

rcpt 5y ago
Yes. https://harvardcrcl.org/wp-content/uploads/sites/10/2018/11/Sarkar-Rosenthal.pdf https://harvardcrcl.org/wp-content/uploads/sites/10/2018/11/... Norlidger v. Hahn (worth a read https://www.law.cornell.edu/supct/html/90-1912.ZD.html https://www.law.cornell.edu/supct/html/90-1912.ZD.html) didn't make it but also didn't address the Fair Housing Act. Prop 13, especially the extensions that preserve tax rates through bloodlines, disparately impacts minorities even though that wasn't the explicit intent of the law. Turns out that intent doesn't matter on issues of race so there's legal precedent to overturn the law.
- jonny_eh 5y ago
  It's also a huge grant to older generations, which violates the Equal Protection Clause of the 14th amendment, IMO. But I'm not a Supreme, so I dunno.
  - rcpt 5y ago
    I agree with Justice Stevens that it's a violation of equal protection, and the state supreme court of Delaware recently did to when they struck down their version of Prop 13, but as you'll see in my Cornell link above the rest of the court upheld the law.