The Great American Single-Family Home Problem

[Greenman]

You think it is a ridiculous argument that people should pay property taxes on the actual value of their property?

That is the argument in a nutshell. ‘I’ve lived here for awhile therefore my property taxes should be lower than yours for the same property.’

Yes, it is ridiculous. Increased property value is unrealized wealth. The idea that someone has to sell their home because they can't pay the increased taxes is criminal. Prop 13 is the single greatest piece of legislation to ever come out of Sacramento.
They can tax the inflated value of my house when they start taxing your 401k every year.

 

[fskimospy]

Yes, it is ridiculous. Increased property value is unrealized wealth. The idea that someone has to sell their home because they can't pay the increased taxes is criminal. Prop 13 is the single greatest piece of legislation to ever come out of Sacramento.
They can tax the inflated value of my house when they start taxing your 401k every year.

Uhmm, you realize home sales are tax advantaged when you sell them too, right You are basically arguing against property taxes in principle, which I am fine with. If we are going to have them though then the idea that you’re paying way less than your neighbor because you happened to move to the neighborhood sooner is dumb and you know it.

Also prop 13 didn’t come out of Sacramento, haha. It’s one of the best examples of why the proposition system is stupid. Millions of people voting on ballot initiatives they don’t understand.

 

[zinfamous]

And one of the keys in retirement is also having sufficient savings. $600,000 I’m additional capital goes a long way towards that.



Darn, they might have to either rent in that area where the proceeds from their windfall will likely cover most or all of the costs of renting or they will have to buy somewhere else more reasonably priced and then have a larger retirement nest egg than the vast majority of Americans simply because of where they bought a house a few decades ago.

There is no magical eternal right to live in an area just because you bought a house there a few decades back. The idea that low or negative net worth people should have to subsidize high net worth people in order to prevent them from having to realize their extraordinary profits is ridiculous nonsense.

If simply wanting to live in the house is what they are after and it’s not to keep their inflated house price AND not pay taxes on it then I’ve got a great deal for people. Let’s repeal prop 13 and I’ll personally guarantee some elderly person that they won’t pay any more in property taxes than they do today. The caveat is that when they die I get their house. Since it’s not about money this should be fine, right?

Why should people have to move away from their homes of the previous 30 years simply because they need to accept that unsustainable population density growth is the patriotic thing to embrace? Nope, don't buy it. And in those areas, they simply aren't building affordable medium to high density housing. It would be condos for yuppie silicon valley jerks, or horrendous McMansions for some Chinese businessman that will leave it vacant for years, never visiting it.

 

[woolfe9998]

Why is it necessary to lie? There was no hard cap on taxable values, it was limited to inflation or 2% per year. No one in CA is paying property taxes on their homes at their 1978 assessment.

You're correct. I'm mistaken. I checked and it increases 2% or the rate of inflation, whichever is less. It's only been under 2% five times in the last 39 years, so let's assume it's 2% every year. If your house was worth $100K in 1978, you were paying $1,000 per year then, and by 2017, you're paying $2225. That's on a $1.5 million home. Which is a little over one-tenth of one percent of the value of the home.

You're right that there was no need to "lie." The correct calculation doesn't really alter my point. If you hold property for a long time in CA, you pay absurdly low property taxes.

 

[woolfe9998]

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?

You're forgetting that we have higher than average income and sales taxes. Sales taxes in particular are regressive. Also, sales and income taxes decline more in a typical recession than does property taxes, which is why CA always has a huge state budget crisis every time a recession hits. I don't mind the 1% rate, but properties should be periodically reassessed, probably once every 5 years, or possibly 10. Then they can lower income and sales taxes.

If you own a home worth so much that the reassessed property taxes will kill you on a fixed income, sell the house and move somewhere else, then live like a king.

 

[Maxima1]

Why should people have to move away from their homes of the previous 30 years simply because they need to accept that unsustainable population density growth is the patriotic thing to embrace? Nope, don't buy it. And in those areas, they simply aren't building affordable medium to high density housing. It would be condos for yuppie silicon valley jerks, or horrendous McMansions for some Chinese businessman that will leave it vacant for years, never visiting it.

Then you can just rent in the area if it's so important to be there. What it really is about is people want to be advantaged as homeowners and extract the full rental value of land.

 

[Pulsar]

You're forgetting that we have higher than average income and sales taxes. Sales taxes in particular are regressive. Also, sales and income taxes decline more in a typical recession than does property taxes, which is why CA always has a huge state budget crisis every time a recession hits. I don't mind the 1% rate, but properties should be periodically reassessed, probably once every 5 years, or possibly 10. Then they can lower income and sales taxes.

If you own a home worth so much that the reassessed property taxes will kill you on a fixed income, sell the house and move somewhere else, then live like a king.

I have to disagree with that. The average pensioner living on a fixed income would quickly be out of a house. Sorry grandma, you can't afford this house because times have changed. No way.

 

[Maxima1]

I have to disagree with that. The average pensioner living on a fixed income would quickly be out of a house. Sorry grandma, you can't afford this house because times have changed. No way.

From USAtoday, I see this for 2016 CA. So median is likely $3K or so. lol A dump one bedroom apartment here is $1000 a month, and you'll never own one iota of it.

Average Home Value: $619,491

Average Property Tax: $4,783

 

[ivwshane]

Man, these poor people have really fallen on hard times now that they’ve been saddled with a 1200% return on their investment. Better tax people up to their eyes in student loans more to help them out.

What return? There is no return unless they sell. Should people who got their education paid for via government loans be required to pay an adjusted interest rate for their own since their education has now become more valuable and presumably increased their potential value?

I guess I just don't understand your argument. Are you of the opinion that people shouldn't be allowed to retire in the house they've been paying for their entire life? Is there another type of property that one owns where they must pay the appreciated value in order to keep it?


Lets attack this issue from a different angle. What is it that you hope to achieve by tying property taxes to the current assessed value of a home?

 

[woolfe9998]

I have to disagree with that. The average pensioner living on a fixed income would quickly be out of a house. Sorry grandma, you can't afford this house because times have changed. No way.

The average pensioner can afford 1% of the assessed value of their home per year. Unless you live in a place like the Bay Area, where your average home is worth $1.3 million and, oddly enough, you're living on a fairly low fixed income. This is not a typical situation, but if you're in that boat, sell the house and move somewhere where it's cheaper to live. It's what they should do in that situation even if prop 13 remains unchanged. Sitting on an asset of that value while you live off a meager fixed income is stupid.

 

[ivwshane]

The average pensioner can afford 1% of the assessed value of their home per year. Unless you live in a place like the Bay Area, where your average home is worth $1.3 million and, oddly enough, you're living on a fairly low fixed income. This is not a typical situation, but if you're in that boat, sell the house and move somewhere where it's cheaper to live. It's what they should do in that situation even if prop 13 remains unchanged. Sitting on an asset of that value while you live off a meager fixed income is stupid.

Unless your friends and family lives around you and they take care of you from time to time.

 

[Maxima1]

What return? There is no return unless they sell. Should people who got their education paid for via government loans be required to pay an adjusted interest rate for their own since their education has now become more valuable and presumably increased their potential value?

I guess I just don't understand your argument. Are you of the opinion that people shouldn't be allowed to retire in the house they've been paying for their entire life? Is there another type of property that one owns where they must pay the appreciated value in order to keep it?


Lets attack this issue from a different angle. What is it that you hope to achieve by tying property taxes to the current assessed value of a home?

You have to tax something. Estate/land value taxes are one of the better ones. Why? Because property values go up due to location and development around the area. That wasn't from contributions of the homeowner.

 

[ivwshane]

You have to tax something. Estate/land value taxes are one of the better ones. Why? Because property values go up due to location and development around the area. That wasn't from contributions of the homeowner.

So what's wrong with taxing something at the value you originally bought it at, adjusted for inflation?

 

[fskimospy]

Why should people have to move away from their homes of the previous 30 years simply because they need to accept that unsustainable population density growth is the patriotic thing to embrace? Nope, don't buy it. And in those areas, they simply aren't building affordable medium to high density housing. It would be condos for yuppie silicon valley jerks, or horrendous McMansions for some Chinese businessman that will leave it vacant for years, never visiting it.

I didn’t say anything about patriotism, I said that they shouldn’t get special privileges simply for living some place for a long time. As for what housing is affordable, those Silicon Valley jerks are currently occupying all the high cost housing and driving up the middle cost housing too. If you build more fancy houses those jerks move into them, freeing up cheaper housing for regular people. Even if they are mostly building higher cost housing it still drives down the cost of all housing, helping everyone.

I’ve never understood this argument that building more housing in super expensive markets somehow won’t lower the cost of housing because the new housing will be high end in a lot of cases. It makes no sense.

 

[fskimospy]

What return? There is no return unless they sell. Should people who got their education paid for via government loans be required to pay an adjusted interest rate for their own since their education has now become more valuable and presumably increased their potential value?

I guess I just don't understand your argument. Are you of the opinion that people shouldn't be allowed to retire in the house they've been paying for their entire life? Is there another type of property that one owns where they must pay the appreciated value in order to keep it?

My opinion is that people shouldn’t get extra special tax breaks based on how long they have occupied a specific address. If you are taxing property it makes no sense to tax two equally valuable pieces of property different amounts based on how long someone has lived there.

Every argument I see in favor of prop 13 is an emotional one about how people should be able to live in a house they bought a long time ago in perpetuity. I see no reason for this

Lets attack this issue from a different angle. What is it that you hope to achieve by tying property taxes to the current assessed value of a home?

It has so many benefits it’s just crazy. Prop 13 is seriously one of the worst pieces of ‘legislation’ ever created in the US.

First, it would vastly increase housing market liquidity by removing the incentive to turtle. For example, say you are a couple that used to have a bunch of kids in the house that all grew up and want to downsize from a four bedroom house to a more modest one because you can’t use the space. If you move to that one bedroom across the street though, your property taxes get reset at a new, much higher level, so now you don’t save anything. What do you do instead? Stay there and leave three bedrooms empty because it’s actually cheaper to waste space even during a housing crisis.

Second, it returns balance to the tax system by eliminating the super regressive nature of prop 13. Currently, newer and less wealthy people pay vastly higher taxes on their property than older and wealthier people. For every poor grandma on a fixed income not getting forced out of their home you have tons of people with very high incomes in their 50’s paying a small fraction of what younger, poorer people are paying in property taxes. It’s yet another intergenerational transfer of wealth. Don’t even get me started on how it does nothing to protect the people who actually tend to get priced out, poor renters.

Third, it removes a massive source of instability from government. As woolfe mentioned since prop 13 kneecapped property tax revenues California has raised other taxes to compensate, ones like the sales tax which is highly unstable. This is one of the reasons California almost went bankrupt during the financial crisis as they are now vulnerable to huge swings in revenue.

I could go on, but that’s a bunch of pretty great things for California to achieve. Everyone likes to focus on grandma sitting in her house and nobody likes to focus on the suffering inflicted on other people in order to do that.

 

[fskimospy]

Then you can just rent in the area if it's so important to be there. What it really is about is people want to be advantaged as homeowners and extract the full rental value of land.

Yes, this is what it really is. People want to retain the value of their property when they go to sell it but don’t want to pay taxes on the value of the property while they own it.

Maybe a good middle ground would be to allow people the option to pay taxes based on the value they bought their property at, but when they die or move out the state pockets all increased value from the sale, as remember it’s not about having their cake and eating it too, it’s about pensioners not being forced from their homes. Something tells me very few people will go for this because we all know it’s about money.

 

[Puffnstuff]

Yes, this is what it really is. People want to retain the value of their property when they go to sell it but don’t want to pay taxes on the value of the property while they own it.

Maybe a good middle ground would be to allow people the option to pay taxes based on the value they bought their property at, but when they die or move out the state pockets all increased value from the sale, as remember it’s not about having their cake and eating it too, it’s about pensioners not being forced from their homes. Something tells me very few people will go for this because we all know it’s about money.

Since all property taxes are based upon fair market value that method wouldn't work. The solution is for local municipalities to curtail spending aligning it to tax revenues which almost all do not want to do. Here taxes keep going up on everything to fund operations not to mention that the city pays 100% retirement on police and fire department retirees.

 

[fskimospy]

Since all property taxes are based upon fair market value that method wouldn't work. The solution is for local municipalities to curtail spending aligning it to tax revenues which almost all do not want to do. Here taxes keep going up on everything to fund operations not to mention that the city pays 100% retirement on police and fire department retirees.

I mean it was kind of a joke.

 

[Moonbeam]

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.

This makes no sense at all to me. There was a time long ago when working class people could afford to buy homes in areas where they now cost millions. Those that did have little savings because a house payment even 40 years ago in many of these areas was income to mortgage very steep. Now these lower class folk are living amongst millionaires that can only afford to by in the same area now and the cost of living has gone up much faster as a result than any retirement they may earn. Also, even if they moved away with the nice tidy sum from their homes, they will be moving at an advanced age to an area where they will have no ties and no friends. A lot of people are deeply emotionally attached to place. I used to have daily contact why hundreds of old people who rented and they were all driven away by massive rent increases.

I mean, why not just recommend a real solution to the housing crisis, a massive plague or war that wipes out 90% of the population. They will be giving away houses by the bundle.

 

[fskimospy]

This makes no sense at all to me. There was a time long ago when working class people could afford to buy homes in areas where they now cost millions. Those that did have little savings because a house payment even 40 years ago in many of these areas was income to mortgage very steep. Now these lower class folk are living amongst millionaires that can only afford to by in the same area now and the cost of living has gone up much faster as a result than any retirement they may earn. Also, even if they moved away with the nice tidy sum from their homes, they will be moving at an advanced age to an area where they will have no ties and no friends. A lot of people are deeply emotionally attached to place.

Do you not see that because of preferential housing policies like prop 13 and exclusionary zoning that those feel good cases of lower class people buying houses in the past can’t happen at all today? Isn’t that even worse?

I used to have daily contact why hundreds of old people who rented and they were all driven away by massive rent increases.

This is another good example of why prop 13 is so bad. The people most likely to be displaced by rising housing costs are renters, not relatively wealthy property owners, and rent control laws, where they exist, are much laxer than prop 13. Instead, by misallocating housing resources prop 13 increases housing costs even more so if those people driven away lived in CA they probably have prop 13 to blame in some small part.

I mean, why not just recommend a real solution to the housing crisis, a massive plague or war that wipes out 90% of the population. They will be giving away houses by the bundle.

I wonder if there’s a middle ground between giving people preferential tax treatment to sit in the same house for a long time and the death of 300 million people.

I’ve got one: stop giving people preferential tax treatment to sit in the same house for a long time and don’t kill 300 million people.

 

[Moonbeam]

fskimospy: Do you not see that because of preferential housing policies like prop 13 and exclusionary zoning that those feel good cases of lower class people buying houses in the past can’t happen at all today? Isn’t that even worse?

No, it's terrible but not worse. The people who bought affordable homes when they were affordable couldn't buy luxury homes. They could only buy what they could afford. They could have bought in the boonies back then for really cheap too, but they bought what they could afford. And if you fix the problem of housing by taxing the rich to pay for it, property values will fall and those same people will go right on living where they do but not have some unused nest egg. They stay where they are because they can and want to, and the value they will get on selling means nothing to them. They didn't cause property values to rise, only the rich of those three hundred million better off dead did, right?

f: I wonder if there’s a middle ground between giving people preferential tax treatment to sit in the same house for a long time and the death of 300 million people.

I’ve got one: stop giving people preferential tax treatment to sit in the same house for a long time and don’t kill 300 million people.

M: You didn't give a shit about moving the old out of their life long homes the stress of which would kill many, what's another 300 million to such a cold mind?

Change the laws so that people can live down town in cardboard slums. Why not ban the sale of homes and the ownership of income property and make it so homes can only be traded or bought new.

 

[fskimospy]

No, it's terrible but not worse. The people who bought affordable homes when they were affordable couldn't buy luxury homes. They could only buy what they could afford. They could have bought in the boonies back then for really cheap too, but they bought what they could afford. And if you fix the problem of housing by taxing the rich to pay for it, property values will fall and those same people will go right on living where they do but not have some unused nest egg. They stay where they are because they can and want to, and the value they will get on selling means nothing to them. They didn't cause property values to rise, only the rich of those three hundred million better off dead did, right?

I don't think you understand the consequences of the policies you're putting forth. If property values fall that might mean those old people don't have a 'nest egg' but many, many times that number of people can... you know... actually afford a place to live. What is more important to you, a large retirement asset for select property owners or affordable housing for everyone?

It was like when another poster earlier in this thread unironically decried how that old person's house would be replaced by 5 hipsters living together. Do you know why those five hipsters are living together? Because they're rendered so poor by housing prices inflated by the policies you want that they have to cram five of them into a one bedroom apartment.

M: You didn't give a shit about moving the old out of their life long homes the stress of which would kill many, what's another 300 million to such a cold mind?

Change the laws so that people can live down town in cardboard slums. Why not ban the sale of homes and the ownership of income property and make it so homes can only be traded or bought new.

That's the point though, I'm the one who is actually looking out for the welfare of people. You guys see a few old people forced out of their homes and your response is to enact policies that prevent many many times that many people who are far poorer from having homes to begin with. Those cardboard slums you are talking about? They already exist, in significant part due to the housing policies you're trying to protect. In case you didn't notice, homelessness is skyrocketing in California despite a booming economy. You guys might think you're doing good things but you're part of the problem. Maybe it's the human bias to loss aversion that makes it so people value someone losing a house more than ten people who couldn't get one to begin with.

I will have to put the 'you are willing to accept pricing old people out of homes so that we can have affordable housing for everyone. Therefore, you should have no problem with a national genocide' right up there in the annals of ridiculous hyperbole for here though, haha.

 

[pmv]

We are already 150 Million people over where we should be. Replacement means things never get better.


We should look to Japan to guide us. They know exactly how to get their population to stop having children and start improving the environment around them.

Japan has a big problem with an ageing population. I don't think it's a model to follow.

There's no population growth problem in the developed world. Indeed there isn't one even in most of the developing world. Most countries have seen population growth level off dramatically (including poorer places like Bangladesh), and the West would be significantly shrinking if not for immigration. The big exception (and it seems a slightly puzzling exception) is Africa, where families still have way above replacement level numbers of children, even in countries that have been getting wealthier. Considering humans are by most theories considered to have originated in Africa in the first place, there seems something cosmically fitting that the future of humanity looks to be increasingly African.

Africa will be home to 2 in 5 children by 2050

The problem is not a growing population, it's an uneven concentration of wealth and jobs, causing everyone to try and squeeze into the same few areas of the globe. It happens both between countries and within them. In both respects we need to somehow make it viable for people to spread out a bit more.

 

[pmv]

The average pensioner can afford 1% of the assessed value of their home per year. Unless you live in a place like the Bay Area, where your average home is worth $1.3 million and, oddly enough, you're living on a fairly low fixed income. This is not a typical situation, but if you're in that boat, sell the house and move somewhere where it's cheaper to live. It's what they should do in that situation even if prop 13 remains unchanged. Sitting on an asset of that value while you live off a meager fixed income is stupid.

My problem with that idea is that in practice it means when the rich move into your area, everyone else is driven out, away from all their social support networks and their family roots, and potentially out to areas with no jobs. (It seems as if a neighbourhood can either have jobs, or affordable housing, but not both.)

It becomes a form of colonisation and a recipe for segregation by wealth.

 

[pmv]

That's the point though, I'm the one who is actually looking out for the welfare of people. You guys see a few old people forced out of their homes and your response is to enact policies that prevent many many times that many people who are far poorer from having homes to begin with.

The trouble is what too often happens in practice is that the new homes don't house those 'far poorer' people, they house people wealthier than those driven out, or they just sit empty as wealthy absent owners count their capital gains.

Edit, of course I'm probably parochially thinking of what seems to happen in London, rather than San Francisco. The thing can go either way, which is what seems to make it complicated.