Well, if you didn't have prop-13 wouldn't your taxes just go up anyway even if you didn't sell? Around these parts all real property is reassessed every five years. So the tax burden would hit right away rather than when you sell which would be worse.

I have a family friend whose neighborhood became really high end since the 30 years she bought the house. Her taxes are really high now and it's becoming a financial burden on her.

Unless I'm mistaken.

A hidden consequence of prop-13 is that every city wants commercial real-estate and none want residential because they get more taxes from businesses. This restricts the supply of housing, and is one of the root causes of high prices and long commutes.

Without prop-13 we'd have more housing, more convenient housing options, and lower prices. Yes, long-term residents would have higher taxes. However most of us would save both time and money on our housing costs.

Thanks for the explanation.

The cap gains is also a big factor. Even if prop 13 were not a factor, the higher prices go, the more expensive it becomes to make a lateral move, or even to downsize.

This is pure nonsense.

Lateral move or downsize are two different transactions. Capital gains has no effect on the second one.

People who are complaining about the capital gains taxes pretending that such taxes prevent them from either moving laterally or downsizing are complaining that other properties also appreciated in price. What they would have preferred is that their property appreciated and the properties they wanted to move to did not.

If I buy a house for 50k and want to immediately move laterally to another house worth 50k then the cost is 0 + overhead. If I buy a house for 50k and want to move laterally when it's worth 100k then the cost is the taxes of the 50k profit + overhead.

This gets even worse if you want to buy a larger house (if appreciation is percentage based).

That's not correct.

In the second case:

You bought a house for $50k, which in a year appreciated to $100k. You sell the house for $100k, pay the capital gains of X% on the $50k of appreciation which gets you $100k - ($50k * X% ) to play with.

You lateral move would not be to a house worth $100k, it would be to a house worth $100k-($50k * X%) because you d not have $100k, you only have $100 - (50k * X%).

If you wanted to defer capital gains and play with entire 100k, then instead of doing a sale you would do 1031 exchange.

> Capital gains has no effect on the second one.

Of course it does. A loss is a loss. It doesn't matter whether it comes out of your checking account or your home equity.

> What they would have preferred is that their property appreciated and the properties they wanted to move to did not.

That's generally not an option if you want to move locally.

if you sell your asset for less than what you paid for it there's no capital gain, and hence there's no tax.

> That's generally not an option if you want to move locally.

You don't get to have your cake ( gain money on a sale of appreciated house) and eat it too ( buy at the price before the appreciation )

I believe that lisper is saying that he would prefer not to have his cake.