3 ms·

i'm mostly learning about this just recently, but i still downvoted you because i don't think that's true. property tax, for all intents and purposes, seems to

by apsurd 3y ago

i'm mostly learning about this just recently, but i still downvoted you because i don't think that's true. property tax, for all intents and purposes, seems to just get passed down to the renters both commercial and residential. i used to knee jerk think that raising property taxes to the market rate was a great equalizer. in california that bill got killed, but actually i'm more informed now and i don't think it's that easy. rich people find a way, always.

Thorrez 3y ago
If you look at a property in the Bay Area, it seems mortgages are significantly more expensive than rent. So people can't be buying for the purpose of making money off renting it out, or for the purpose of saving money by not paying rent. People must be buying for the purpose of making money from the price going up in the future. Property tax prevents it from going up in the future too much, thus it will prevent prices from getting so high.
- apsurd 3y ago
  appreciate the nuance. what about all cash offers though? i understand high interest rates change these equations, but influx of egregious capital from China for example, all-cash offers is a problem no? they break the equation if they need places to store capital. they aren't affected by interest rates and so sit on property and weather any storms.
  - Thorrez 3y ago
    If the tax rate is high, then property won't be a good investment. They'll be paying high tax on a small value property. The high tax will discourage people from buying property as an investment.
- seanp2k2 3y ago
  >in the Bay Area, it seems mortgages are significantly more expensive than rent. It wasn’t that way when mortgages were 2-4% —- getting a mortgage is harder and requires a large down payment. It’s more of a commitment. Rent will always be more. >So people can't be buying for the purpose of making money off renting it out, or for the purpose of saving money by not paying rent. They can and they did. > People must be buying for the purpose of making money from the price going up in the future. It does that too, and for many boomers who bought in the 60s-80s, it went up about 10x for them. > Property tax prevents it from going up in the future too much, thus it will prevent prices from getting so high. Look up “California Prop 13”. People who buy basically get a freeze on tax rates at the price they paid for the house. If you bought in 1978, you’d pay the property tax based on the 1975 assessed value, and it can only go up 2% per year up to 1% of that assessed value MAX. That means if you bought a house back then for $100k, the max tax is $1k. Now your neighbor moved out and cashes in on their lottery ticket-like winnings, selling their home right next door for the $2m properties on that street are now worth. Guess how much the new owner pays in taxes? $20k. Even though the house paying $1k could sell tomorrow for the same $2m, they paid a ridiculously low property tax for decades, and the new owners of the exact same property will pay $20k each time property tax season rolls along. This garbage law is a big part of why owning in the Bay Area is so hard for folks trying to get their first home. Meanwhile, tons of owners rent their paid-off cheap tax home for ridiculous market rates. $5-7k/mo for a clapped out 60s POS is very typical. The folks who really played their cards right and have multiple properties for which there paying 1/10th or so of what their property tax SHOULD be then renting those all out while they live like kings are the real winners in this scenario, as are all the businesses that enjoy the same anti-competitive benefits. Ever wonder how all those crappy taquerias in San Jose stay open after all these decades while newer much better restaurants struggle and go under in a year? It’s this. Ever wonder how much tax Disney pays on all their property? It’s criminally low. Yet this issue is such a political third rail because all the boomer voters love love love their sweet sweet 90%+ tax discount, they’ll do anything to keep it. Another fun fact is this benefit can be passed down within the family, and with some clever lawyers, be passed between companies as well (IIRC the trick is to sell a property in 3 parts so no part exceeds 50% of tbe whole). Yay, loopholes. This is also a big part of why we have some schools that are surrounded by $2m+ houses and yet the school is way under-funded: those old neighborhoods don’t pay jack for property tax.
  - Thorrez 3y ago
    >Rent will always be more. It's not now. >Look up “California Prop 13” Yeah, I know about it. I'm not arguing in favor of it. >all the boomer voters love love love their sweet sweet 90%+ tax discount Wouldn't it still be possible to remove prop 13 for corporations?
HDThoreaun 3y ago
Landlords are price takers because supply is fixed in the short to medium term. Demand is what sets prices in the rental market as landlords look to find the tenant that will pay the most for their unit. Because of this property taxes are not passed to tenants, unless you think about second order effects that change the supply of housing available for rent.
- dragonwriter 3y ago
  > Landlords are price takers because supply is fixed in the short to medium term. Quantity supplied is not fixed in even the short term, landlords choose whether to let vacant units or remove them from the market, e.g., for upgrades that might improve their relative position in the market when re-let but prevent letting them immediately, based on market conditions including adequacy of price. There's a limit to how high quantity supplied can be in the short term, but underneath that cap it has the usual slope direction of a supply curve.
  - HDThoreaun 3y ago
    Sure but at least in my area vacancy rate is sub 4%. The structural minimum is 3% so there really aren't any landlords just leaving units vacant. Surely some will choose to sell when taxes increase but rental supply is pretty stable after property taxes are up a solid 50% so that seems to be minor.

by apsurd 3y ago

Thorrez 3y ago

If you look at a property in the Bay Area, it seems mortgages are significantly more expensive than rent. So people can't be buying for the purpose of making money off renting it out, or for the purpose of saving money by not paying rent. People must be buying for the purpose of making money from the price going up in the future. Property tax prevents it from going up in the future too much, thus it will prevent prices from getting so high.

apsurd 3y ago
appreciate the nuance. what about all cash offers though? i understand high interest rates change these equations, but influx of egregious capital from China for example, all-cash offers is a problem no? they break the equation if they need places to store capital. they aren't affected by interest rates and so sit on property and weather any storms.
- Thorrez 3y ago
  If the tax rate is high, then property won't be a good investment. They'll be paying high tax on a small value property. The high tax will discourage people from buying property as an investment.
seanp2k2 3y ago
>in the Bay Area, it seems mortgages are significantly more expensive than rent. It wasn’t that way when mortgages were 2-4% —- getting a mortgage is harder and requires a large down payment. It’s more of a commitment. Rent will always be more. >So people can't be buying for the purpose of making money off renting it out, or for the purpose of saving money by not paying rent. They can and they did. > People must be buying for the purpose of making money from the price going up in the future. It does that too, and for many boomers who bought in the 60s-80s, it went up about 10x for them. > Property tax prevents it from going up in the future too much, thus it will prevent prices from getting so high. Look up “California Prop 13”. People who buy basically get a freeze on tax rates at the price they paid for the house. If you bought in 1978, you’d pay the property tax based on the 1975 assessed value, and it can only go up 2% per year up to 1% of that assessed value MAX. That means if you bought a house back then for $100k, the max tax is $1k. Now your neighbor moved out and cashes in on their lottery ticket-like winnings, selling their home right next door for the $2m properties on that street are now worth. Guess how much the new owner pays in taxes? $20k. Even though the house paying $1k could sell tomorrow for the same $2m, they paid a ridiculously low property tax for decades, and the new owners of the exact same property will pay $20k each time property tax season rolls along. This garbage law is a big part of why owning in the Bay Area is so hard for folks trying to get their first home. Meanwhile, tons of owners rent their paid-off cheap tax home for ridiculous market rates. $5-7k/mo for a clapped out 60s POS is very typical. The folks who really played their cards right and have multiple properties for which there paying 1/10th or so of what their property tax SHOULD be then renting those all out while they live like kings are the real winners in this scenario, as are all the businesses that enjoy the same anti-competitive benefits. Ever wonder how all those crappy taquerias in San Jose stay open after all these decades while newer much better restaurants struggle and go under in a year? It’s this. Ever wonder how much tax Disney pays on all their property? It’s criminally low. Yet this issue is such a political third rail because all the boomer voters love love love their sweet sweet 90%+ tax discount, they’ll do anything to keep it. Another fun fact is this benefit can be passed down within the family, and with some clever lawyers, be passed between companies as well (IIRC the trick is to sell a property in 3 parts so no part exceeds 50% of tbe whole). Yay, loopholes. This is also a big part of why we have some schools that are surrounded by $2m+ houses and yet the school is way under-funded: those old neighborhoods don’t pay jack for property tax.
- Thorrez 3y ago
  >Rent will always be more. It's not now. >Look up “California Prop 13” Yeah, I know about it. I'm not arguing in favor of it. >all the boomer voters love love love their sweet sweet 90%+ tax discount Wouldn't it still be possible to remove prop 13 for corporations?

HDThoreaun 3y ago

Landlords are price takers because supply is fixed in the short to medium term. Demand is what sets prices in the rental market as landlords look to find the tenant that will pay the most for their unit. Because of this property taxes are not passed to tenants, unless you think about second order effects that change the supply of housing available for rent.

dragonwriter 3y ago
> Landlords are price takers because supply is fixed in the short to medium term. Quantity supplied is not fixed in even the short term, landlords choose whether to let vacant units or remove them from the market, e.g., for upgrades that might improve their relative position in the market when re-let but prevent letting them immediately, based on market conditions including adequacy of price. There's a limit to how high quantity supplied can be in the short term, but underneath that cap it has the usual slope direction of a supply curve.
- HDThoreaun 3y ago
  Sure but at least in my area vacancy rate is sub 4%. The structural minimum is 3% so there really aren't any landlords just leaving units vacant. Surely some will choose to sell when taxes increase but rental supply is pretty stable after property taxes are up a solid 50% so that seems to be minor.