3 ms·

Mountain View (all of Silicon Valley, really) has the bad habit of approving anything that brings in new jobs while simultaneously rejected housing commensurate

Mountain View (all of Silicon Valley, really) has the bad habit of approving anything that brings in new jobs while simultaneously rejected housing commensurate to the number of jobs added. Many of the residents of the valley want their cities to remain de facto suburbs (designed for cars). Throw in prop 13, a substantial number of well paid transplants, and you have a recipe for the extreme cost of living in the Bay.

toast0 12y ago
Honest question, how does prop 13 increase the cost of living?
- msandford 12y ago
  I would guess that by reducing property tax you've made it possible for housing prices to go ever higher. This makes housing SEEM less affordable for sure (since the prices can continue to rise higher), and might also actually make it less affordable too as people are happy to build ever more expensive housing since the property tax rates are lower. A certain niceness of a house in a certain market will tend to sell/rent for $X per month, no matter how you arrive at $X. So if property taxes are high, it tends to reduce the actual price of the house since people don't just pay a mortgage, but rather have to pay everything associated with the house; mortgage, insurance, taxes, etc. This is a similar phenomena to the low interest rate, high property price that we've witnessed over the last decade or so in the US. At 4% a 200k house costs about $1k/mo once you roll in some kind of property tax and PMI. At 8% $1k/mo buys you less than 100k of house again assuming the same property tax and PMI.
  - kansface 12y ago
    edit: moved up a level
- smokinn 12y ago
  Prop 13 limits property tax to the value of the house when you bought it unlike most places where you pay property tax on the current value. So what happens in other locations is that demand for locations starts going up, housing prices go up, taxes go up and people who can't pay those taxes get displaced. Developers buy those houses, raze them in favor of apartment complexes and eventually you get density. If people can stay in their single family 1.5 or 2 million dollar homes and pay property taxes on the 30k they bought it for 30 years ago density won't happen because those are the people that vote and they'll keep voting for municipality limits on building to "keep the character of the neighborhood".
  - dragonwriter 12y ago
    > Prop 13 limits property tax to the value of the house when you bought it No, it restricts increases in the basis value to which the tax rate is applied to a maximum of the value after purchase (or other qualifying event) + 2% per annum. > unlike most places where you pay property tax on the current value. A number of other states have Prop 13 like limits to the annual increase in tax basis value, and some others do full market valuation but split the increases over a several year period so that the tax basis value lags the increase, and other places just have fairly infrequent reassessment except at purchase (which, in effect, also causes tax basis value to, on average, trail behind increases.)
  - s73v3r 12y ago
    The alternative is people being priced out of the house they lived in all their lives. I consider that a worse outcome.
    - TulliusCicero 12y ago
      I don't. Keep in mind being 'priced out' in this case would still mean they'd get a hefty chunk of change for selling the house.
  - vonmoltke 12y ago
    dragonwriter covered most of the details, but they key one he missed in Prop 13 is that every other homestead law I am aware of has an owner occupancy requirement that Prop 13 lacks. In Florida, which has a very generous homestead law, the ad valorem tax limits apply to the owner-occupied primary residence. You move and rent the place, your valuation spikes up to market rate. Own two houses? Pick one, because the other is getting taxed at market rate. It also does not apply to commercial property whatsoever. Because of California's lenient qualifications, someone who bought that $30k house can move to North Carolina and collect massive rent checks without seeing their property taxes jump to reflect reality. The owners of apartment complexes have a vested interest in keeping their properties as they are, since a major renovation or addition would trigger a revaluation. Same for owners of office and retail space who aren't big enough to cut tax deals with the various levels of municipal government.
- kansface 12y ago
  Home owners have the perverse incentive to stop all new construction to the detriment of their community. Their net worth continually increases so long as the price of real estate increases. There is no downside! Furthermore, property taxes normally force some people out of their homes; this isn't as bad as it sounds - in SF at least, they would get a hefty windfall. On average, the property would be used more efficiently by the new owner. NIMBYism is the biggest problem in SF. Every year, 20K people or so move into the city while we only build enough housing for roughly one tenth of them. Housing has increased by ~10-15% a year for the past decade or so.

toast0 12y ago

Honest question, how does prop 13 increase the cost of living?

msandford 12y ago
I would guess that by reducing property tax you've made it possible for housing prices to go ever higher. This makes housing SEEM less affordable for sure (since the prices can continue to rise higher), and might also actually make it less affordable too as people are happy to build ever more expensive housing since the property tax rates are lower. A certain niceness of a house in a certain market will tend to sell/rent for $X per month, no matter how you arrive at $X. So if property taxes are high, it tends to reduce the actual price of the house since people don't just pay a mortgage, but rather have to pay everything associated with the house; mortgage, insurance, taxes, etc. This is a similar phenomena to the low interest rate, high property price that we've witnessed over the last decade or so in the US. At 4% a 200k house costs about $1k/mo once you roll in some kind of property tax and PMI. At 8% $1k/mo buys you less than 100k of house again assuming the same property tax and PMI.
- kansface 12y ago
  edit: moved up a level
smokinn 12y ago
Prop 13 limits property tax to the value of the house when you bought it unlike most places where you pay property tax on the current value. So what happens in other locations is that demand for locations starts going up, housing prices go up, taxes go up and people who can't pay those taxes get displaced. Developers buy those houses, raze them in favor of apartment complexes and eventually you get density. If people can stay in their single family 1.5 or 2 million dollar homes and pay property taxes on the 30k they bought it for 30 years ago density won't happen because those are the people that vote and they'll keep voting for municipality limits on building to "keep the character of the neighborhood".
- dragonwriter 12y ago
  > Prop 13 limits property tax to the value of the house when you bought it No, it restricts increases in the basis value to which the tax rate is applied to a maximum of the value after purchase (or other qualifying event) + 2% per annum. > unlike most places where you pay property tax on the current value. A number of other states have Prop 13 like limits to the annual increase in tax basis value, and some others do full market valuation but split the increases over a several year period so that the tax basis value lags the increase, and other places just have fairly infrequent reassessment except at purchase (which, in effect, also causes tax basis value to, on average, trail behind increases.)
- s73v3r 12y ago
  The alternative is people being priced out of the house they lived in all their lives. I consider that a worse outcome.
  - TulliusCicero 12y ago
    I don't. Keep in mind being 'priced out' in this case would still mean they'd get a hefty chunk of change for selling the house.
- vonmoltke 12y ago
  dragonwriter covered most of the details, but they key one he missed in Prop 13 is that every other homestead law I am aware of has an owner occupancy requirement that Prop 13 lacks. In Florida, which has a very generous homestead law, the ad valorem tax limits apply to the owner-occupied primary residence. You move and rent the place, your valuation spikes up to market rate. Own two houses? Pick one, because the other is getting taxed at market rate. It also does not apply to commercial property whatsoever. Because of California's lenient qualifications, someone who bought that $30k house can move to North Carolina and collect massive rent checks without seeing their property taxes jump to reflect reality. The owners of apartment complexes have a vested interest in keeping their properties as they are, since a major renovation or addition would trigger a revaluation. Same for owners of office and retail space who aren't big enough to cut tax deals with the various levels of municipal government.
kansface 12y ago
Home owners have the perverse incentive to stop all new construction to the detriment of their community. Their net worth continually increases so long as the price of real estate increases. There is no downside! Furthermore, property taxes normally force some people out of their homes; this isn't as bad as it sounds - in SF at least, they would get a hefty windfall. On average, the property would be used more efficiently by the new owner. NIMBYism is the biggest problem in SF. Every year, 20K people or so move into the city while we only build enough housing for roughly one tenth of them. Housing has increased by ~10-15% a year for the past decade or so.