The Great American Single-Family Home Problem

[fskimospy]

Incorrect. Prop 13 froze the value of peoples houses at the time of passage, all future home owners would see their property taxes increase/decrease depending on the assessed value.

Its why my neighbors house which is the same as mine hasn't had their assessed value change more than $10k for the last 17 years (which is the amount of data available to apps like zillow) and yet my property's assessed value has fluctuated up and down by almost $200k in those same 17 years. Its because they've owned their house since prop 13 passed.

Incorrect. Prop 13 froze it at the time of passage and reassesses value at the time of sale. In-between sales property tax value increases are limited to 2% each year on all properties regardless of their status in 1976 or whatever.

https://www.californiataxdata.com/pdf/Prop13.pdf

This is why prop 13 is so toxic and needs to be immediately repealed. It's never going away, it's going to continue to screw people in perpetuity to protect turtled homeowners.

 

[ivwshane]

Did you miss the part where there is no reassessment of the property when parents leave their property to their kids? It's called an "inter-family transfer" and it doesn't trigger a reassessment.

Also, are you aware of how Prop 13 affects commercial property? If a business, say a retail shop, is going under or the owner is retiring, all they have to do is sell the business entity which owns the property to the new owner, instead of selling the property itself. Hence, there is no change of ownership and no reassessment.

Prop 13 needs serious modification.

You'll have to show me the data that shows how many people actually take advantage of this tax break.

 

[pmv]

Building in this context is more than the dudes doing the masonry work.

Walk around any urban neighborhood. Basically that you see was built out by developers looking to make money. This isn't an inherently evil profession. Like all businesses they are looking to satisfy demand and make money doing it. What that exactly looks like is determined by the laws, technology, and consumer demand of the era. Post WWII US suburbia also is entirely a product of developers.

I just object to the idea that those with the money and political clout to profit from an activity should be credited with actually doing the work. They profited from it, they didn't actually do the labour.

And making money from land is a distinct thing, that is somewhat different from producing goods, because the land itself is a critical ingredient and nobody manufactured it. Generally, historically, it was stolen or appropriated from everyone else at some point. And I didn't say property developers are inherently evil, but I would say because of the special nature of land as a resource (it unavoidably affects everyone else collectively) they are a bit more prone than many other lines of work to be involved in corrupt practices and someone needs to keep an eye on them.

 

[Moonbeam]

Read the end of post 14 and it will make more sense why I was being farcical.

My apologies. You did well. I missed the context completely. Fucking judgmental libtards are going to be the death of me.

 

[ivwshane]

Incorrect. Prop 13 froze it at the time of passage and reassesses value at the time of sale. In-between sales property tax value increases are limited to 2% each year on all properties regardless of their status in 1976 or whatever.

https://www.californiataxdata.com/pdf/Prop13.pdf

This is why prop 13 is so toxic and needs to be immediately repealed. It's never going away, it's going to continue to screw people in perpetuity to protect turtled homeowners.

Then something ain't right with my assessments because my house's assessed value has changed between 3%-14% year over year for the last few years (this last year the value increase by 10%).


I found an explanation that explains what was going on.

 

[K1052]

I just object to the idea that those with the money and political clout to profit from an activity should be credited with actually doing the work. They profited from it, they didn't actually do the labour.

And making money from land is a distinct thing, that is somewhat different from producing goods, because the land itself is a critical ingredient and nobody manufactured it. Generally, historically, it was stolen or appropriated from everyone else at some point. And I didn't say property developers are inherently evil, but I would say because of the special nature of land as a resource (it unavoidably affects everyone else collectively) they are a bit more prone than many other lines of work to be involved in corrupt practices and someone needs to keep an eye on them.

I think a distinction should be drawn between people who speculate on land and make money off of merely trading it versus those who actually use capital to improve it and increase it's value by producing a good, namely housing. Those people expect to make money at their work just as the rest of us do. I entirely endorse making sure developers do not unduly game the system and that value is extracted by the locality to compensate for increased burdens on infrastructure.

 

[Zorba]

Incorrect. Prop 13 froze it at the time of passage and reassesses value at the time of sale. In-between sales property tax value increases are limited to 2% each year on all properties regardless of their status in 1976 or whatever.

https://www.californiataxdata.com/pdf/Prop13.pdf

This is why prop 13 is so toxic and needs to be immediately repealed. It's never going away, it's going to continue to screw people in perpetuity to protect turtled homeowners.

I love how you find the ability of a person to remain living in their house and not be forced out due to ever increasing property tax is somehow a horrible thing. You'd rather grandma and grandpa be forced to live a box on the street corner as opposed to their house of 50 years, just so some hipster can move in with five room mates. I'm guessing that you've never lived in the same home for 20+ years, so you probably don't really understand the attachment homeowner place on their house.

I know there are problems with Prop 13. But every state I've ever lived has had a cap on the amount assessed value of a primary residence can increase each year, because it is generally viewed as a good thing to allow people to stay in their houses if they want to. Of course, those caps shouldn't apply to commercial/rental property or they should at least be much higher.

 

[Jaskalas]

“We can’t just plan for growth, we have to actually build,”

Here's an idea... stop the growth and you stop the growing pains.
The people who own those homes knows what's up. They don't want to turn their city blocks into skyscrapers. Why should they?

 

[fskimospy]

I love how you find the ability of a person to remain living in their house and not be forced out due to ever increasing property tax is somehow a horrible thing. You'd rather grandma and grandpa be forced to live a box on the street corner as opposed to their house of 50 years, just so some hipster can move in with five room mates. I'm guessing that you've never lived in the same home for 20+ years, so you probably don't really understand the attachment homeowner place on their house.

That's true, the longest I lived in the same house was for 19 years.

As for my sympathy for grandma and grandpa, the idea that they are now forced to live in a box on the street corner is absolute laughable bullshit. Remember after all, the reason why their property taxes are going up so much as to send them into this imagined destitution is because their house has enormously increased in value. While my heart breaks for these people and like all good Americans I hate these evil hipsters (who have to live with 5 roommates because grandma and grandpa wouldn't let the city zone for greater density), I bet grandma and grandpa can salve their hurt feelings due to the enormity of the financial windfall that will by itself eclipse what most Americans spend a lifetime attempting to save.

I know there are problems with Prop 13. But every state I've ever lived has had a cap on the amount assessed value of a primary residence can increase each year, because it is generally viewed as a good thing to allow people to stay in their houses if they want to. Of course, those caps shouldn't apply to commercial/rental property or they should at least be much higher.

Well I can't speak for other laws but I personally see little value in taxing someone less based on how long they've lived at their particular address. What that does is shift the tax burden from older residents who are (generally) better off financially onto younger, less wealthy residents. It's the opposite of what we should be doing.

 

[K1052]

Here's an idea... stop the growth and you stop the growing pains.
The people who own those homes knows what's up. They don't want to turn their city blocks into skyscrapers. Why should they?

You don't need skyscrapers for density. Midrise structures do just fine at that basically everywhere as long as they are designed reasonably.

 

[fskimospy]

Here's an idea... stop the growth and you stop the growing pains.
The people who own those homes knows what's up. They don't want to turn their city blocks into skyscrapers. Why should they?

Instead you just trade it out for other pains where new families can't afford places to live, where homeownership declines and becomes something only the wealthy can do, and where people end up packing 4, 5, 6 or more people into a small apartment because they need to live in a place with economic opportunity but where locals have deliberately prevented sufficient housing from being built.

If that's what people want that's fine but they should acknowledge the suffering they are inflicting on others.

 

[Maxima1]

I love how you find the ability of a person to remain living in their house and not be forced out due to ever increasing property tax is somehow a horrible thing. You'd rather grandma and grandpa be forced to live a box on the street corner as opposed to their house of 50 years, just so some hipster can move in with five room mates. I'm guessing that you've never lived in the same home for 20+ years, so you probably don't really understand the attachment homeowner place on their house.

I know there are problems with Prop 13. But every state I've ever lived has had a cap on the amount assessed value of a primary residence can increase each year, because it is generally viewed as a good thing to allow people to stay in their houses if they want to. Of course, those caps shouldn't apply to commercial/rental property or they should at least be much higher.

Landowners get a huge benefit if they're not taxed significantly. Estate/land taxes are one of the better taxes. When property values go up, that is from businesses, schools, etc. being developed in the area. The landowner does nothing to earn it.

 

[IronWing]

Instead you just trade it out for other pains where new families can't afford places to live, where homeownership declines and becomes something only the wealthy can do, and where people end up packing 4, 5, 6 or more people into a small apartment because they need to live in a place with economic opportunity but where locals have deliberately prevented sufficient housing from being built.

If that's what people want that's fine but they should acknowledge the suffering they are inflicting on others.

Nope, that's just growth-is-god hogwash. The existing residents aren't inflicting anything on anybody.

 

[fskimospy]

Nope, that's just growth-is-god hogwash. The existing residents aren't inflicting anything on anybody.

I bet the people who don't get those economic opportunities because they are priced out of the region would disagree. I mean you already said what your issue is earlier in this thread. People are bringing noise, traffic, etc. and blocking your mountain views and you don't like that. That's a perfectly reasonable position to hold even if I don't find it a compelling reason to keep bad zoning policies in place. You should recognize that preserving your mountain view has costs that other people will pay though.

 

[senseamp]

Yeah, California housing is messed up by Prop 13 and NIMBYism.
I think that's what's ultimately going to kill Silicon Valley's golden goose. Locals are very resistant to new housing, they want to preserve their Leave it to Beaver suburban paradise, when if you look at what's necessary from housing stock perspective, this area should be looking a lot more like Los Angeles. This is driving prices up and young talent out. In not too distant future, it will primarily be older prop 13'd folks here, and young people coming out of colleges (the ones tech companies covet) will be concentrated in Austins, Portlands, Denvers of the world. It's already started at many companies, which are fine hiring anywhere, but Google and Facebook are continuing their boneheaded position of trying to mainly hiring and keeping employees in the Valley. But they will fold, it's only a matter of time, and when they start building massive offices outside the Valley, it's going to be a massive exodus of younger folks. And once young people move out, managerial posts will follow, then who is going to buy these SV crap shacks for $2M? So NIMBY locals are eventually going to destroy their own home equity, but in the meantime they are raking it in.

 

[Pulsar]

The article ignores any discussion of Prop 13 in CA. This law sets property taxes at 1% of the assessed value of the property at the time the law was passed in 1978. There is no reassessment until the home gets sold. People can pass their property on to their kids without triggering a reassessment. Today a typical home in the bay area will sell for ~$1.5 million. But the owner would be paying property taxes equal to 1% of say $90,000, the value of their home in 1978. $900 per year in property taxes for a property worth $1.5 million. Only in California.

Bottom line: no one wants to sell their homes here. They hold on to them as long as possible to keep the low tax rate, and many leave their homes to their kids. This shrinks supply in the housing market and keeps prices way up.

But at the same time, that law is the only one protecting older fix-income homeowners from being taxed right out of their homes. So what do they move to - income based property taxation?

 

[fskimospy]

But at the same time, that law is the only one protecting older fix-income homeowners from being taxes right out of their homes. So what do they move to - income based property taxation?

I'm still struggling to see the huge problem here. Those people are being 'taxed out of their homes' because something they bought for $50,000 is now worth $600,000 or more. Maybe the right answer is to say 'sorry you have to move, here's $600,000 as compensation.'

 

[Starbuck1975]

I'm still struggling to see the huge problem here. Those people are being 'taxed out of their homes' because something they bought for $50,000 is now worth $600,000 or more. Maybe the right answer is to say 'sorry you have to move, here's $600,000 as compensation.'

I think it is more reasonable to question why home prices are so divorced from underlying economic fundamentals. Perhaps we should instead question why local governments are using inflated home prices to create a facade of budgetary stabity. Perhaps we should question a housing marked where 20% down payments are the exception, replaced instead by foreign money and Wall Street ponzi schemes.

 

[senseamp]

I think we are going to see some progress limiting Prop 13 under the new federal tax bill. Reason being, it makes state income taxes non-deductible, but allows deduction of property taxes, up to $10K.
So the incentive for states to maximize what they get back from the federal government is to tax property at least up to the $10K before taxing income.

 

[Pulsar]

I think it is more reasonable to question why home prices are so divorced from underlying economic fundamentals. Perhaps we should instead question why local governments are using inflated home prices to create a facade of budgetary stabity. Perhaps we should question a housing marked where 20% down payments are the exception, replaced instead by foreign money and Wall Street ponzi schemes.

We can easily answer that one. Even in times of depression, while income and property values disappear, the money it costs to do business and pay politicians' salaries doesn't. So having a variable income but an ever-rising output causes them to search for easy fixes (for them). They could never actually say NO to projects because of finanacial issues. That would cost votes.

 

[senseamp]

I think it is more reasonable to question why home prices are so divorced from underlying economic fundamentals. Perhaps we should instead question why local governments are using inflated home prices to create a facade of budgetary stabity. Perhaps we should question a housing marked where 20% down payments are the exception, replaced instead by foreign money and Wall Street ponzi schemes.

Prices are divorced from underlying economic fundamentals because prop 13 has created an incentive for current owners to not sell, limiting supply.

 

[fskimospy]

I think it is more reasonable to question why home prices are so divorced from underlying economic fundamentals. Perhaps we should instead question why local governments are using inflated home prices to create a facade of budgetary stabity. Perhaps we should question a housing marked where 20% down payments are the exception, replaced instead by foreign money and Wall Street ponzi schemes.

I sincerely doubt local governments are deliberately zoning stupidly to increase property tax receipts. To me the most likely answer is the obvious one. You have highly desirable, high income areas that have not built housing at anywhere near the required rate for several decades now due to a combination of dumb zoning and rent policies.

In my opinion the low down payments are a symptom, not a cause. In NYC for example I bet a 20% down payment or more is very common due to co-op board approval and financing requirements and yet real estate is still extremely expensive here.

 

[Starbuck1975]

Prices are divorced from underlying economic fundamentals because prop 13 has created an incentive for current owners to not sell, limiting supply.

I am all for eliminating Prop 13. I moved out to SoCal just as the housing bubble started to take shape. You should watch The Big Short if you haven't already.

 

[ElFenix]

But at the same time, that law is the only one protecting older fix-income homeowners from being taxed right out of their homes. So what do they move to - income based property taxation?

there's ways around that. you can have exemptions for olds that reduce the rate on their property, you can have the taxes accrue against the property with no enforcement so long as the olds is living there, etc.

 

[MagnusTheBrewer]

there's ways around that. you can have exemptions for olds that reduce the rate on their property, you can have the taxes accrue against the property with no enforcement so long as the olds is living there, etc.

That sounds a lot like an inheritance tax once the original owners leave or pass away.