5 ms·

So if your neighborhood gets popular you get kicked out? Sounds like a healthy policy. Have you ever thought more than 2 minutes about it?

TulliusCicero 3y ago
You could provide exceptions for a primary residence where the increased taxes would be sufficiently burdensome on the owner's income. Doesn't have to be all or nothing. Just don't do what Prop 13 did in California where they applied the property tax limit even to commercial property for some reason.
- Kalium 3y ago
  Michigan, for better or worse, does both. There's a major property tax break for your primary residence. There's a Prop 13 style cap on property tax increases. It's the lesser of 5% or inflation. I'm not a fan of it, but it's not nearly as bad as Prop 13's low cap.
- cameldrv 3y ago
  You could also do what they do in Texas which is to allow anyone over 65 to defer any increased property tax amount (with interest) until sale or the death of the owner. The California approach is to let the owner get massive appreciation, which they receive at sale, but never pay tax on any of it.
  - Kalium 3y ago
    California also has the deferment policy.
  - tzs 3y ago
    Does that ever lead to old people getting stuck? E.g., you've been getting deferrals for 25 years and now finally want to sell and move to be nearer family, but paying back the 25 deferred years and interest will not leave you with enough after the sale to afford a new place. And so you just have to stay until you die.
- Narkov 3y ago
  ^ this. In Queensland, Australia, your family home (principal place of residence) is exempt and any other property gets no land tax up to a certain personal land holding value ($600k?). Once you go over the threshold, it's a percentage of value.
6D794163636F756 3y ago
Unfortunately that tends to already happen. Gentrification pushes populations out as rent and property taxes increase. I'm honestly not sure how this is different and it seems like this may, as you pointed out, make gentrification worse.
s17n 3y ago
That is already how property tax works, except in California. I think most people agree that the California system is a disaster.
- yongjik 3y ago
  The main reason the California system is a disaster is that long-time owners are grandfathered and pay very little tax, meaning there's no incentive for these people to support more housing. In other words, if California actually did kick out homeowners for their neighborhood getting too popular, it would have been much less of a disaster.
  - phkahler 3y ago
    Kicking out long term residents sounds kinda sick doesn't it? Think about it. You're just gonna have homeless old people.
    - jackcosgrove 3y ago
      They wouldn't be homeless if they already owned property. Even before Proposition 13 the median house price-median income ratio was higher in California than elsewhere, around 4 while the rest of the country was at 3. So they could do what many people do in old age, they sell their house for a large sum and move somewhere cheaper. It was true that before Proposition 13 many older homeowners who could not keep up with rising taxes were forced to sell. But taxes were rising because house prices were rising, so they were able to sell at a nice gain.
    - jandrewrogers 3y ago
      Why would old people be homeless? The cause of them being forced out is that they own an immensely valuable asset but live on relatively little income. That asset would then presumably be sold for cash. Any house expensive enough to create this situation would also give them enough hard cash to live out the rest of their lives in relative comfort. This is essentially a relatively benign form of eminent domain, which has the same consequences without the implication of a good financial outcome.
t-writescode 3y ago
Sounds like a way to convert single family homes into multiplexes as population rises so everyone can be closer to amenities. I’m very for that, especially if the former owner could find a guaranteed way to get one of the units on their land so they can stay.
- genman 3y ago
  if
  - t-writescode 3y ago
    It’s better than what we have now, even without that caveat
- causality0 3y ago
  "Don't worry, the law guarantees that after taxes on the land and home you spent decades paying for are so high you can't afford them you can get one of the pieces after we take it away and chop it up" is one of the most dystopian things I've ever heard.
  - harimau777 3y ago
    When you say "...home you spent decades paying for..." it comes across like you are implying that the money you spent is somehow disappearing or being stolen. However, if the land value taxes have dramatically increased, then that means that the value of your property has dramatically increased, so you can sell for a dramatic profit. It would still suck to have to sell, but it's not nearly as dark as you seem to be suggesting.
    - causality0 3y ago
      Why should you have to do anything? My binder of pokémon cards is worth thousands of times what I paid for it but nobody has the right to levy an unending amount of taxes on it until I can't afford to not sell it.
- 3y ago
favflam 3y ago
The hold-out resident can just sell the land to a developer who will build something denser than a single family home. Then as a condition of the sale, the resident will own a unit in the new building. I see it all the time. There is some office building with a weird looking residential unit on the top floor. The resident gets residual rent income together with the developer. New residents take advantage of increased supply of housing and commercial space. It is a win-win-win.
jlhawn 3y ago
I have thought about this for years. If your land value increases dramatically over a short period of time, _theoretically_ you should be able to use this as an opportunity to take advantage of that increase by constructing more housing or office/retail space. In reality, individuals and businesses like to make long term plans. This expectation makes it incredibly unreasonable for a recently constructed home, office, or retail space which has an expected useful lifetime of decades. They shouldn't be expected to replace it all only after a few years. This is why I think a reasonable compromise is to have a type of limited "rent control" for land value tax where it is only allowed to increase by no more than 1 percent more than the rate of inflation. This limit comes into affect when a building is constructed and lasts for the duration of the expected lifetime of the building, perhaps 55 to 65 years. That's at least 2 full depreciation cycles (if you're familiar with that). It resets to market value if the property is sold but the limit is not extended any further into the future.
- jlhawn 3y ago
  For anyone who think "oh this is just California's Proposition 13 but with a time limit"... not exactly. The tax rate in California is 1% of assessed value where assessed value can't grow more than 2% or the rate of inflation (whichever is lower). In this alternative system the base tax rate would be significantly higher. Ideally, high enough to capture the majority of the land's rental value at first. It also sets inflation as a floor while prop 13 has it or 2% as a ceiling.
BirdieNZ 3y ago
This is the case for renters everywhere.
ijustlovemath 3y ago
You could easily incentivize the behavior you want: - a delay or cap on taxes for first time/single home owners; to make it not so punishing if you're just buying it to live there - a number of properties below which the tax isn't applied or is reduced; to allow people to build equity in their house and maybe a vacation home or two, but stops someone from owning 5+ homes and locking up all the supply - a tax that applies more heavily to corporate owners of residential homes; to keep the Blackrock's of the world from snapping up significant amounts of residential homes for padding their portfolios. Could even apply to LLCs of a certain size. We just need to get creative!

TulliusCicero 3y ago

You could provide exceptions for a primary residence where the increased taxes would be sufficiently burdensome on the owner's income. Doesn't have to be all or nothing. Just don't do what Prop 13 did in California where they applied the property tax limit even to commercial property for some reason.

Kalium 3y ago
Michigan, for better or worse, does both. There's a major property tax break for your primary residence. There's a Prop 13 style cap on property tax increases. It's the lesser of 5% or inflation. I'm not a fan of it, but it's not nearly as bad as Prop 13's low cap.
cameldrv 3y ago
You could also do what they do in Texas which is to allow anyone over 65 to defer any increased property tax amount (with interest) until sale or the death of the owner. The California approach is to let the owner get massive appreciation, which they receive at sale, but never pay tax on any of it.
- Kalium 3y ago
  California also has the deferment policy.
- tzs 3y ago
  Does that ever lead to old people getting stuck? E.g., you've been getting deferrals for 25 years and now finally want to sell and move to be nearer family, but paying back the 25 deferred years and interest will not leave you with enough after the sale to afford a new place. And so you just have to stay until you die.
Narkov 3y ago
^ this. In Queensland, Australia, your family home (principal place of residence) is exempt and any other property gets no land tax up to a certain personal land holding value ($600k?). Once you go over the threshold, it's a percentage of value.

6D794163636F756 3y ago

Unfortunately that tends to already happen. Gentrification pushes populations out as rent and property taxes increase. I'm honestly not sure how this is different and it seems like this may, as you pointed out, make gentrification worse.

s17n 3y ago

That is already how property tax works, except in California. I think most people agree that the California system is a disaster.

yongjik 3y ago
The main reason the California system is a disaster is that long-time owners are grandfathered and pay very little tax, meaning there's no incentive for these people to support more housing. In other words, if California actually did kick out homeowners for their neighborhood getting too popular, it would have been much less of a disaster.
- phkahler 3y ago
  Kicking out long term residents sounds kinda sick doesn't it? Think about it. You're just gonna have homeless old people.
  - jackcosgrove 3y ago
    They wouldn't be homeless if they already owned property. Even before Proposition 13 the median house price-median income ratio was higher in California than elsewhere, around 4 while the rest of the country was at 3. So they could do what many people do in old age, they sell their house for a large sum and move somewhere cheaper. It was true that before Proposition 13 many older homeowners who could not keep up with rising taxes were forced to sell. But taxes were rising because house prices were rising, so they were able to sell at a nice gain.
  - jandrewrogers 3y ago
    Why would old people be homeless? The cause of them being forced out is that they own an immensely valuable asset but live on relatively little income. That asset would then presumably be sold for cash. Any house expensive enough to create this situation would also give them enough hard cash to live out the rest of their lives in relative comfort. This is essentially a relatively benign form of eminent domain, which has the same consequences without the implication of a good financial outcome.

t-writescode 3y ago

Sounds like a way to convert single family homes into multiplexes as population rises so everyone can be closer to amenities. I’m very for that, especially if the former owner could find a guaranteed way to get one of the units on their land so they can stay.

genman 3y ago
if
- t-writescode 3y ago
  It’s better than what we have now, even without that caveat
causality0 3y ago
"Don't worry, the law guarantees that after taxes on the land and home you spent decades paying for are so high you can't afford them you can get one of the pieces after we take it away and chop it up" is one of the most dystopian things I've ever heard.
- harimau777 3y ago
  When you say "...home you spent decades paying for..." it comes across like you are implying that the money you spent is somehow disappearing or being stolen. However, if the land value taxes have dramatically increased, then that means that the value of your property has dramatically increased, so you can sell for a dramatic profit. It would still suck to have to sell, but it's not nearly as dark as you seem to be suggesting.
  - causality0 3y ago
    Why should you have to do anything? My binder of pokémon cards is worth thousands of times what I paid for it but nobody has the right to levy an unending amount of taxes on it until I can't afford to not sell it.
3y ago

favflam 3y ago

The hold-out resident can just sell the land to a developer who will build something denser than a single family home. Then as a condition of the sale, the resident will own a unit in the new building. I see it all the time. There is some office building with a weird looking residential unit on the top floor. The resident gets residual rent income together with the developer. New residents take advantage of increased supply of housing and commercial space. It is a win-win-win.

jlhawn 3y ago

I have thought about this for years. If your land value increases dramatically over a short period of time, _theoretically_ you should be able to use this as an opportunity to take advantage of that increase by constructing more housing or office/retail space. In reality, individuals and businesses like to make long term plans. This expectation makes it incredibly unreasonable for a recently constructed home, office, or retail space which has an expected useful lifetime of decades. They shouldn't be expected to replace it all only after a few years. This is why I think a reasonable compromise is to have a type of limited "rent control" for land value tax where it is only allowed to increase by no more than 1 percent more than the rate of inflation. This limit comes into affect when a building is constructed and lasts for the duration of the expected lifetime of the building, perhaps 55 to 65 years. That's at least 2 full depreciation cycles (if you're familiar with that). It resets to market value if the property is sold but the limit is not extended any further into the future.

jlhawn 3y ago
For anyone who think "oh this is just California's Proposition 13 but with a time limit"... not exactly. The tax rate in California is 1% of assessed value where assessed value can't grow more than 2% or the rate of inflation (whichever is lower). In this alternative system the base tax rate would be significantly higher. Ideally, high enough to capture the majority of the land's rental value at first. It also sets inflation as a floor while prop 13 has it or 2% as a ceiling.

BirdieNZ 3y ago

This is the case for renters everywhere.

ijustlovemath 3y ago

You could easily incentivize the behavior you want: - a delay or cap on taxes for first time/single home owners; to make it not so punishing if you're just buying it to live there - a number of properties below which the tax isn't applied or is reduced; to allow people to build equity in their house and maybe a vacation home or two, but stops someone from owning 5+ homes and locking up all the supply - a tax that applies more heavily to corporate owners of residential homes; to keep the Blackrock's of the world from snapping up significant amounts of residential homes for padding their portfolios. Could even apply to LLCs of a certain size. We just need to get creative!