7 ms·

> Letting incumbents under-utilize valuable real estate is a bad policy. If the value of the property increases, there is incentive for owners to sell. If a de

> Letting incumbents under-utilize valuable real estate is a bad policy. If the value of the property increases, there is incentive for owners to sell. If a developer wants to "utilize valuable real estate," is it not better that they make an offer and that people have choice in what happens to their property, rather forcing out "incumbents" with no choice due to escalating tax costs? Buying a house with potentially wild inflation of tax costs is about as attractive as buying a house with a variable APR.

muzz 13y ago
> If the value of the property increases, there is incentive for owners to sell. Prop 13 counter-acts the incentive given by market appreciation of the value. The value may go up according to the market, but the owner's taxes are capped. This is an incentive to stay, as an owner would face higher taxes and thus higher costs if they simply moved to an identically-priced home.
- vonmoltke 13y ago
  Florida recently solved that problem by making homestead caps transferrable after a certain period of time.
  - thrownaway2424 13y ago
    This has been possible for decades in California under a later proposition. People over age 55 (iirc) can transfer their assessment to a property of same or less value within or between participating counties. Not all counties participate but several populous counties do (including Alameda).
    - muzz 13y ago
      Only 9 counties participate in inter-county transfers http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#1 http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#1 And as you point out, if you are under 55 then none of this applies.
- jasonlotito 13y ago
  > The value may go up according to the market, but the owner's taxes are capped. So, the value according the market is not accurate. The value is actually higher. The problem isn't the laws. The problem is the market simply doesn't want to pay an appropriate amount for the person's property.
  - dragonwriter 13y ago
    > So, the value according the market is not accurate. I'm not sure how a market value can be inaccurate, that implies that there is some objectively correct non-market value that you could meeasure the market value against, which is an odd idea. What Prop 13's limit on assessment increases does is (in terms of the forces that drive market prices) is decrease supply (because it increases the value of homes to people who already own them, by decreasing the cost -- in property taxes -- paid compared to the utility derived from holding the property), which, considered on its own, increases market clearing price. It may also increase demand (since it also decreases long-term expected costs for new buyers), but probably more weakly than it increases supply (since the decreased cost is already being realized by sellers -- and more strongly the longer they have held the whome -- wherease it will take several years for the decreased cost to be realized by a new buyer, since purchase events trigger assessment at full value.) > The problem isn't the laws. The problem is the market simply doesn't want to pay an appropriate amount for the person's property. The law adds non-transferrable value (or, less simply, provides a non-transferrable abatement of cost) as long as the owner holds the property. This creates an externally-imposed difference in the value to the owner and the value to other market participants.
bradleyjg 13y ago
> Buying a house with potentially wild inflation of tax costs is about as attractive as buying a house with a variable APR. The one and only reason the US has 30 year fixed rate mortgages, with no prepayment penalty, available levered 5-10x, all at less than 100 bps over the risk free rate is because of massive government implicit and explicit subsidies. Absent distortions it doesn't make sense for most people to buy a house -- it's inherently non-diversified, low liquidity, high transaction costs. But American society has for some bizarre reason decided that home ownership is the sine qua non of human civilization and so every level of government intervenes to distort the market in favor of homeownership. Instead of recognizing this extraordinary intervention, and perhaps being grateful, homeowners tend to either: 1) refuse to recognize that such massive subsidies exist, or 2) see as entirely natural -- and bitch and moan if even the slightest modification is proposed. It's yet another example of the American phenomenon of socialism for me but not for thee (and none dare call it welfare).
- encoderer 13y ago
  On the contrary, Fed and Census data indicates that the net worth of the average homeowner is 30x greater than renters. Part of this is certainly some selection bias. More wealthy people buy homes. But it's more than that. The truth is, buying a home is the only form of investing on margin for most. Also, it's compulsory investment and savings -- both with the principal payment and in the form of property improvements. Finally, of course, are the myriad tax benefits. While it's true that we incentivize home ownership, possibly too much, I think it's unfair that you paint it as an otherwise neutral activity that we strangely endorse with public policy. Land has real value, you can live on (and off) it. It was long seen as the one enduring source of wealth (See John Adams, George Washington, etc). It's much deeper than our postwar tax policies.
  - deleted 13y ago
    [deleted]
  - ahomescu1 13y ago
    > The truth is, buying a home is the only form of investing on margin for most. Also, it's compulsory investment and savings -- both with the principal payment and in the form of property improvements. I find it weird that people look at houses as "investments". For an asset to be an investment for me, it has to be productive. Buying stock in a company or starting your own is productive; buying farm land is productive (you can use it to produce food). A house in itself doesn't produce anything, it's just an asset. If you're relying on buying it cheap and selling it at a high price, that's speculation, not investment (that house still hasn't produced anything, it just happens to be more valued by other people).

muzz 13y ago

> If the value of the property increases, there is incentive for owners to sell. Prop 13 counter-acts the incentive given by market appreciation of the value. The value may go up according to the market, but the owner's taxes are capped. This is an incentive to stay, as an owner would face higher taxes and thus higher costs if they simply moved to an identically-priced home.

vonmoltke 13y ago
Florida recently solved that problem by making homestead caps transferrable after a certain period of time.
- thrownaway2424 13y ago
  This has been possible for decades in California under a later proposition. People over age 55 (iirc) can transfer their assessment to a property of same or less value within or between participating counties. Not all counties participate but several populous counties do (including Alameda).
  - muzz 13y ago
    Only 9 counties participate in inter-county transfers http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#1 http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#1 And as you point out, if you are under 55 then none of this applies.
jasonlotito 13y ago
> The value may go up according to the market, but the owner's taxes are capped. So, the value according the market is not accurate. The value is actually higher. The problem isn't the laws. The problem is the market simply doesn't want to pay an appropriate amount for the person's property.
- dragonwriter 13y ago
  > So, the value according the market is not accurate. I'm not sure how a market value can be inaccurate, that implies that there is some objectively correct non-market value that you could meeasure the market value against, which is an odd idea. What Prop 13's limit on assessment increases does is (in terms of the forces that drive market prices) is decrease supply (because it increases the value of homes to people who already own them, by decreasing the cost -- in property taxes -- paid compared to the utility derived from holding the property), which, considered on its own, increases market clearing price. It may also increase demand (since it also decreases long-term expected costs for new buyers), but probably more weakly than it increases supply (since the decreased cost is already being realized by sellers -- and more strongly the longer they have held the whome -- wherease it will take several years for the decreased cost to be realized by a new buyer, since purchase events trigger assessment at full value.) > The problem isn't the laws. The problem is the market simply doesn't want to pay an appropriate amount for the person's property. The law adds non-transferrable value (or, less simply, provides a non-transferrable abatement of cost) as long as the owner holds the property. This creates an externally-imposed difference in the value to the owner and the value to other market participants.

bradleyjg 13y ago

> Buying a house with potentially wild inflation of tax costs is about as attractive as buying a house with a variable APR. The one and only reason the US has 30 year fixed rate mortgages, with no prepayment penalty, available levered 5-10x, all at less than 100 bps over the risk free rate is because of massive government implicit and explicit subsidies. Absent distortions it doesn't make sense for most people to buy a house -- it's inherently non-diversified, low liquidity, high transaction costs. But American society has for some bizarre reason decided that home ownership is the sine qua non of human civilization and so every level of government intervenes to distort the market in favor of homeownership. Instead of recognizing this extraordinary intervention, and perhaps being grateful, homeowners tend to either: 1) refuse to recognize that such massive subsidies exist, or 2) see as entirely natural -- and bitch and moan if even the slightest modification is proposed. It's yet another example of the American phenomenon of socialism for me but not for thee (and none dare call it welfare).

encoderer 13y ago
On the contrary, Fed and Census data indicates that the net worth of the average homeowner is 30x greater than renters. Part of this is certainly some selection bias. More wealthy people buy homes. But it's more than that. The truth is, buying a home is the only form of investing on margin for most. Also, it's compulsory investment and savings -- both with the principal payment and in the form of property improvements. Finally, of course, are the myriad tax benefits. While it's true that we incentivize home ownership, possibly too much, I think it's unfair that you paint it as an otherwise neutral activity that we strangely endorse with public policy. Land has real value, you can live on (and off) it. It was long seen as the one enduring source of wealth (See John Adams, George Washington, etc). It's much deeper than our postwar tax policies.
- deleted 13y ago
  [deleted]
- ahomescu1 13y ago
  > The truth is, buying a home is the only form of investing on margin for most. Also, it's compulsory investment and savings -- both with the principal payment and in the form of property improvements. I find it weird that people look at houses as "investments". For an asset to be an investment for me, it has to be productive. Buying stock in a company or starting your own is productive; buying farm land is productive (you can use it to produce food). A house in itself doesn't produce anything, it's just an asset. If you're relying on buying it cheap and selling it at a high price, that's speculation, not investment (that house still hasn't produced anything, it just happens to be more valued by other people).