16 ms·

This piece is very perceptive in portraying Prop 13 property-tax caps and rent-control as sibling policies, each feeding destructive "I've got mine" politics. T

• blueskin_ 13y ago
  This is why the whole concept of renting seems bad to me. If you don't have rent control, you are condemned to a future of uncertainty, as you can never retire in case prices go up. You also pay money but never see any permanent return, as it doesn't matter how long you've been paying, you can never stop.
  • alandarev 13y ago
    True, renting does not give you rights, and I see no reason why it should. But do not risk believing that buying a house for youself is a true investment. I have been renting for last five years, and I see nothing bad in renting. Though my opinion might be irrelevent to the subject, as I do not live in SF and there is no "frozen property taxes" law in UK.
    • cscheid 13y ago
      In the US, the http://en.wikipedia.org/wiki/Home_mortgage_interest_deduction http://en.wikipedia.org/wiki/Home_mortgage_interest_deductio... on your first home makes a huge difference when making rent-vs-own plans. It wasn't obvious to me when I first started making rent-vs-own plans (I'm not a US citizen). In 30-year mortgages you are realistically paying more than half your monthly payment as interest, and doing that with pre-tax money means you're conservatively looking at 15% total reduction in monthly payments compared to renting.
      • refurb 13y ago
        As stated above, it really depends on a number of factors whether renting is cheaper or more expensive than buying. You are right that the US has two things to advantage owning: (1) mortgage interest tax deduction and (2) 30-year mortgage terms. If you're lucky enough to lock in a mortgage rate of ~3%, when you add in the mortgage interest tax deduction, you're practically paying nothing for the money you are borrowing. However, all it takes is a 10%+ drop in the market when you are selling to wipe out any advantage to owning and often you'll come out behind of someone who rents.
      • dionidium 13y ago
        We're pretty far off topic now, but this benefit has been overstated. In most of the U.S. -- the areas not discussed in this article -- cheap housing is the norm. If you have, say, a $150k mortgage at 5% for 30 years, then your yearly interest is going to be less than $5k. That's less than the standard deduction.
        • selectodude 13y ago
          Essentially it's a tax write-off for the wealthy.
          • Domenic_S 13y ago
            Not at all. The deduction (all itemized deductions in fact) phases out starting at $300k household income, which is pretty trivial for a 2-techie couple in an urban tech hub.
            • gojomo 13y ago
              A "2 techie couple in an urban tech hub" is "the wealthy".
              • Domenic_S 13y ago
                I disagree - but even if I concede, you're proving my point.
    • sosborn 13y ago
      >I see nothing bad in renting. The rub usually comes when you are older and your earning ability deteriorates. Those who own their house get a significant drop in monthly housing costs while those who are still renting to not. Some people plan well for this, others don't.
  • scottkduncan 13y ago
    Not that this is the best place to hash out a buy vs. rent argument (the answer of course is, it depends), but there are loads of uncertainties associated with buying. How high will my property taxes go? Will the market where I am go up or down? What will my future maintenance costs be? Will I have to pick up and move to another city unexpectedly? Variability in all of those affects what kind of return you get on buying, if at all. Then there are the transaction and opportunity costs associated with buying...locking up a down payment, closing costs, broker costs. I'm sure I'll buy in the future when I'm at a different point lifewise, but for now renting works just fine.
    • Domenic_S 13y ago
      Those costs are all baked in to the price of rent. It's not like you get out of paying property tax by renting. Housing prices go up = your rent goes up.
    • iopq 13y ago
      This is why I hate property taxes. It means that I can't just buy a house and live in it. I have to make sure my house doesn't get too expensive for ME to live in. I can't just look forward to retiring in my house. It's taxes until I die.
      • dragonwriter 13y ago
        Even in the absence of property taxes, utility and maintenance costs (and changing market rates for required labor and materials that drive those) would pose the same risk. Property taxes are hardly the only required expenses that might go up when owning a house (and, in CA, have strict constitutional limits on increases, unlike most other necessary expenses.)
        • 001sky 13y ago
          Isn't the issue with property taxes that weath taxes are not legal under the constitution. The government is not allowed to just tax (ie, take) your assets. Income and Real estate are just imperfect proxies "wealth".
  • raverbashing 13y ago
    What? If you rent and retire you can go wherever rent is cheaper. Problem solved
  • chaostheory 13y ago
    Renting gives you flexibility. If the rent increases beyond your means, just move. When you find better job prospects (or need them), just move. When you buy a house, you can't just move even if you need to do it. It is a lot more difficult. That's where I see the 2-3 hour daily commutes, which I feel is insane. > You also pay money but never see any permanent return, as it doesn't matter how long you've been paying, you can never stop Yes but at the same time, your capital isn't trapped in the place that you're living in. You also have to pay for yearly maintenance in both time and money (I personally hate this part the most). When you don't own a home, you can more easily do things like investing or using it to start something up.
    • lacksconfidence 13y ago
      > Yes but at the same time, your capital isn't trapped in the place that you're living in. It probably varies by person, but I don't see that the same. If i was paying $2400/mo in rent, then i bought a house for $2400/mo mortgage, the capital in the house is not part of the capital i would have if i had been renting. That would just be gone.
      • chaostheory 13y ago
        > If i was paying $2400/mo in rent, then i bought a house for $2400/mo mortgage, If rent was $2400/m, I can assure you that a house in the same area would be a lot more than $2400/m unless you put %50 or more as a down payment which is at least a few hundred thousand if not a million dollars. That's a lot of capital. If you choose a house in a cheaper area with a mortgage of $2400/m, then I can guarantee that there will be cheaper apartments in the area as well. > the capital in the house is not part of the capital i would have if i had been renting. That would just be gone. I'm not sure I understand what you're saying? Are we in agreement or are you disagreeing?
        • lacksconfidence 13y ago
          Currently i rent a 1br place for $2400, looking to buy something. I am strictly guessing that most people in my situation arn't going to be getting a mortgage that is thousands more than their current rent, but rather end up in something a little less nice that has a similar mortgage to the previous rent. i will have to find a cheaper area to be able to buy a house(or condo more likely). > I'm not sure I understand what you're saying? Are we in agreement or are you disagreeing? Rent: pay $2400/mo for 30 years. Spent: $864k. Capital: $0 Buy: pay $2400/mo for 30 years. Spent: $864k. Capital: Whatever the house is worth. Hopefully around the 3-400k the loan was for, but half would still be better than the rent scenario Together that doesn't sum it up, sure in that cheaper neighborhood maybe a rental would be $600 a month cheaper, $216k over those 30 years and more with compound interest. But rent doesn't stay the same like a mortgage does (baring intervention). An apartment that went for $1800 a decade ago (locally) goes for well over $2400 now.
  • smsm42 13y ago
    You are condemned to a future of uncertainty anyways. That's the nature of living - you don't know what your income would be in the future, your health, your expenses. You can make some preparations - but you'd never be certain. If you want the services the city provides, you have to pay for them. They are paid from property taxes. As those raise, so does the rent - after all, you live in the city, so you consume those services, so why don't you have to pay for them? That's your return - getting city services. If you don't like taxes being linked to property value - enact fixed taxes, but then you'd have to rein in city budget costs, including salaries, pensions, benefits, entitlements, etc. Somebody has to pay for all that. If not people living in the city, then who? If you want to stop paying for it, then you need to either stop consuming them, or find some other way to pay - what that would be?
• utnick 13y ago
  > Why does the person who moved in yesterday, perhaps far needier than the longer-term resident/owner (and just as deserving of basic civic services) have to pay so much more? Property taxes without caps are just as unfair but in the opposite direction. Why should someone who lives within their means and bought an affordable house be punished just because a bunch of other people swoop in and drive up prices around them. A buyer of a house needs to be able to forecast future tax payments to make an informed decision. If you don't have a yearly increase cap on property tax rates, the buyers future costs are totally unpredictable and up the whims of the markets and bubbles.
  • JonFish85 13y ago
    Let's also not forget that a resident in an area does have a say in property taxes. That's the whole idea around local government. Show up to town hall, be vocal about your opinions and listen to others' opinions. This is how it should work. If you want lower property taxes, make your case! Convince your friends & neighbors.
    • bradleyjg 13y ago
      Also the money isn't being taken for the sake of encouraging productive use of land, it is paying for government services. Perhaps people who have locked in lower tax assessments should have their garbage picked up less frequently, have limited use of parks, and have lower priory status for police and fire services. Or do prop 13 supporters prefer a heads I win, tails you lose system?
  • JoeAltmaier 13y ago
    If your car payment got untenable, we won't see folks lobbying for car-payment support or caps. You'd just have to sell the car. Houses get some sort of special treatment, I guess because people emotionally bond with them. But in a free market we'd not scotch-tape all these special rules around them.
    • MRSallee 13y ago
      What car-owning scenario is comparable to government driving someone out of their home via unaffordable tax assessment?
• erehweb 13y ago
  From http://www.caltax.org/member/digest/may98/may98-4.htm http://www.caltax.org/member/digest/may98/may98-4.htm Almost immediately after passage, the California Supreme Court sustained Proposition 13's constitutionality in the Amador case (Amador Valley Joint Union High School District v. State Board of Equalization. September 22, 1978). After a series of legal challenges in the 1980s, the issue of acquisition-value assessments reached the U.S. Supreme Court in Nordlinger v. Hahn. In a stunning 8-1 decision, the court in 1992 upheld California's acquisition-value system. The court ruled that an acquisition-value system does not violate the Equal Protection Clause of the U.S. Constitution because it rationally furthers a legitimate state interest. The court said, "The state legitimately can conclude that a new owner, at the point of purchasing his property, does not have the same reliance interest warranting protection against higher taxes as does an existing owner who is already saddled with his purchase and does not have the option of deciding not to buy his home if taxes become prohibitively high." The court also opined that a state has a rational interest in neighborhood preservation, continuity and stability, and that Proposition 13's system of "locking in" lower tax assessments contributed to such preservation.
  • DannyBee 13y ago
    For the curious, because it doesn't affect a fundamental constitutional right, the equal protection challenge will get evaluated by the rational basis test. As long as it is rationally related to a legitimate government interest, it will be upheld.
    • gojomo 13y ago
      Isn't equal protection, without regard to a superficial category like length-of-residency (which is itself highly entangled with age & race), a constitutional right?
      • DannyBee 13y ago
        What it actually means is subject to much debate. Wikipedia surprisingly has reasonable coverage of this. http://en.wikipedia.org/wiki/Equal_Protection_Clause http://en.wikipedia.org/wiki/Equal_Protection_Clause See tiered scrutiny.
• bluishgreen 13y ago
  You could say the same thing about immigration, and infact you should. That comparison I feel, brings out the explosive politics that is behind these kinds of policies.
• malandrew 13y ago
  Related to your equal-protection observation: An interesting thought experiment is imagining a policy that allows the eviction of those with rent-control in favor of those who can demonstrate more financial need. I'm trying to imagine how to form this so I can propose it to San Franciscans with rent control when they express ire about techies and the Ellis Act. I'm extremely curious how they will react/respond when they are asked to explicitly acknowledge their position of privilege relative to someone less well off. Unrelated: Ultimately what we need is the startup equivalent of cities, where people abandon the status quo in established cities and seek out new civic models. Given the right location, I would consider being a founding citizen in a "startup city".