It does have the problem you describe of landed gentry not getting hit with high property taxes, but also it does protect middle class people from getting kicked out of their homes due to the popularity of the area they live in. My parents are the perfect example of this, my dad is a plumber and my mom is a teacher, my entire life they barely broke 100k combined and were BARELY able to give me and my sibling a decent life in LA. If their property taxes had risen with the rate of the area that they bought a house in as we grew up, we would have been unable to continue living there and forced to leave. The same thing goes with my grandparents.
California has very high income tax, which arguably compensates for the low property taxes. This strikes me as more fair, as the high earners are the ones hit with the tax bills rather than my grandma, who made nothing and had no way to pay the tax that comes with a $2M property valuation, despite having worked hard to buy her house when she was younger.
So yeah, you're right in some sense, but its not fair to completely ignore the alternative of lower/middle class people being kicked out of their homes if they didn't have prop 13. The real problem here is the NIMBYism that you describe and restrictive zoning.
ALSO, the landed gentry are sort of limited as well. Yes their primary home (the one they live in) has a limited tax bill, but additional homes they own, they will probably end up renting out, and that rental income will be subject to California's high income tax.
It's called the California Tax Postponement Program and solves exactly the problem you're discussing.
We're ensuring stability for the older generation, at the expense of a younger generation who couldn't possibly afford the same neighbourhood they grew up in.
Those with millions in real estate equity can use that equity and financial engineering to defer the property tax increases until their death.
Now with Prop 19 children can only keep the lower tax basis if they use the home as their primary residence and it only excludes up to 1m in value.
https://www.hollisterlawoffice.com/the-llc-loophole-in-the-a...
What does this statement actually mean for an individual family? Most working class people cannot just demand more money from their employer. So really it just means "get ready to move out and find a new home", which means uprooting your family, commuting further, finding new schools for your kids to attend, potentially worse ones because its probably a cheaper/poorer neighborhood.
>It's also not clear that being forced to sell over high property tax bills is a bad thing
I just plain old disagree with this; my family would have been forced to move because some rich people would have displaced my working class parents, and it honestly sounds like you consider that a good thing, "well they're poorer so they don't deserve to live in a place where a lot of people want to live" is really what that argument boils down to. Even though they worked hard and saved for many years to afford to buy that place. There are very few condos in the neighborhood I grew up in, and the ones that exist are on the edge of the city in much less desirable areas. I would have had to go to a different (worse) school, lose touch with my friends and generally have much less space than I had as well. Your argument only makes sense if you consider people as wanting to live somewhere purely as a financial enterprise rather than a good safe place to raise a family.
If you eliminated the zoning restrictions and power of the NIMBYs then this would allow for the best of both worlds. We could continue to allow a tax rate for working class people, but also allow the development of more profitable/denser units. As people naturally move around, companies could buy the houses and redevelop them into denser units.
Often rent alone isn't profitable in CA if you have to get a mortgage and even if you don't - the rent you would get is a low ROI, so investors rely more on appreciation. For some it's considered a win if the monthly cashflow is around break even, but some investors bet so heavily on appreciation and rely on the low property taxes that they find having a renter isn't worth the risk. They just want to own something that's going up in value $100,000 every year with minimal hassle.
On top of this, when they go to sell, it will often be through a 1031 exchange where they can sell the property and not have to pay taxes on the appreciation right away as long as they quickly buy another-like property within a short period after. Eventually they will have to pay the capital gains if they ever just want to sell and keep the money, but they've spent years with a negative cashflow (especially if they just let the buildings stay empty) which will help out with those capital gains taxes.
This is similar to arguing that people shouldn't even be allowed to own land in the first place. We're all just renting from the government and the government should ratchet up the price so that only the richest and most successful people should get to live in the nice desirable areas.
>When you have an asset you get taxed on its value.
I mean, no? We tax different assets in different ways. If you buy a bunch of stocks you don't have to pay tax on it as its value changes month by month or year by year. You only pay when you liquidate it. We can choose how to tax things for different reasons.
I'd rather see us adopt lower but uniform property tax rates that are revenue-neutral with Prop 13 rates.
Of course I'm only an aspiring property owner so I have a significant bias here.
Yes. Prop 13 is priced in to the market. Buyers are willing to bid higher because they expect that tax cut.
The local government will get the money in a different way so you end up paying twice.
>The local government will get the money in a different way
This is a feature IMO, the government can get that tax revenue but in a more fair way e.g. income taxes that are skewed higher towards the ultra wealthy rather than just kicking people out of their homes, where they probably do want to live.
That, of course, was Proposition 13, a ballot initiative. The fallout was exactly what people predicted.
Prop 13 did two things. It capped property taxes, though there have been a variety of ways of getting around that. The other thing was it capped increases in property taxes.
Not quite Prop 13 but you can't have high increases in property values, and simultaneously have affordable housing.
Imagine, here in the SF Bay Area, 100,000 apartments magically appeared tomorrow morning. I don't think we'd see rents going up 15% a year after that.
Sure you can, you just also need to build new housing. The key is that the new housing has to be higher density than the old housing — the value is primarily in the land, not the house.
If a developer could legitimately and easily build a 4-plex where any single-family home exists right now, the prices of SFHs would likely stay high — they are still a luxury, and become more so as they become rarer, raising prices further — while the units in a 4-plex (still housing!) are more affordable.
Everyone wins. Except we can’t do that, because we can’t build denser housing in basically any of California.
Definitely a step in the right direction though!
Certainly allowing something as modest as allowing say 25% of lots in R-1 areas to be duplexes would go a long way to helping, as would allowing so called granny units (small houses in back yards or as part of garage) would also make quite a difference.
If you means test things, it can work better. If you're an artist or a retiree in san francisco, and then someone goes and invents the internet, prices will go way way up around you. If you don't want to force the artists and retirees to learn to code to keep up with housing catering to newcomers, something like prop 13 helps. But then if they do go and learn to code, taking advantage of the new skyrocketing job market, then they don't need prop 13 protections. Prices went up but their income kept pace, so they don't need the protections.
A lot of these kinds of issues seem to come back to lack of means testing or poorly implemented, non-holistic, perverse incentivizing means testing.
Artists? They can cash out for enormous windfall profits if they can't sell enough art.
Renters have little protection in most communities.
The problem with this is that there were only two contractors that met the requirement, and as a result they could charge whatever they wanted since it was practically a no-bid contract.
Los Angeles could've spent dramatically less, and housed more people, had they simply purchased housing on the open market with the money. These prices are pure graft.
Corruption deep on both sides of the aisle.
Yes, but “find a political cypher of a celebrity, run in an irregular election leveraging a crisis created by Republican state and federal policies, and appoint an listen to a lot of establishment Dems as advisers while ignoring Republican Party insiders and donors because you don't need them once you have the dual advantages of celebrity and incumbency and don't care about the party as such” isn't really a structurally-repeatable strategy.
Man those were some crazy times.
I don't think it was known, in advance, that this would be the resulting cost, assuming that figure is accurate. I don't think any rational person would put forward such a program and that $837,000 to build a single studio house seems insane to everyone, not just non-Californians.
I think the point OP is trying to make is that the skyrocketing cost is partly caused by a certain class of privileged Californian's continuing to fight the effort to build more housing.
That's not what is happening. Per the article:
14% of the units build exceeded $700,000 each, and one project in pre-development is estimated to cost almost $837,000 per unit.
Do you have any evidence of that?
> Spending $837,000 to build a single studio to house a single homeless person seems insane to most of the country.
That's not what is happening, in any meaningful way.
This is a totally valid question. Wouldn't the overwhelming liberal majority rule in California be evidence in and of itself? I guess there could be liberals in name who enact conservative policy (or maybe little policy at all), but I haven't seen evidence of that.
It's a very good point. I find it very disingenuous to claim republicans are at fault in a blue state like Claifornia. The null hypothesis should be democrats are responsible for the state (good or bad) of California. Anyone, who claims otherwise, should provide evidences for their claim.
Good points.
First, what do the outcomes depend on? Policies of California state and local government are only limited factors. They do not create the economy, migration, weather, real estate development, etc. etc. (though they some limited effect on all of them). There are many other powers in the world. The government's power to control events is pretty limited.
Second, do we see any correlation between California government and these outcomes? Homelessness has existed worldwide probably for all time. A fundamental question is, with what is increased homelessness correlated?
Third, we don't know what the outcomes would be without the policy or with other policies. Negative outcomes don't indicate bad decisions - things could be worse. If you are dying of terminal disease, you don't assume the doctor's decisions are the cause, and therefore we'd be better off without healthcare. We are dealing with a difficult problem.
Finally, not all decisions and policies are partisan; people and publics are not politically consistent anwyay, and make policies for all sorts of reasons. And California has had Republican government on and off for a long time, and anything effects of government policy you see now are the outcome of decades of governance.
You can find a nice graphic of homelessness by state here: https://www.usich.gov/tools-for-action/map/#fn[]=1300&fn[]=2...
States like CA and NY seem to have the most growth in homeless population. That might be considered supporting evidence.
"They do not create the economy, migration, weather, real estate development, etc. etc. (though they some limited effect on all of them). There are many other powers in the world. The government's power to control events is pretty limited." I disagree with this statement, look at all the shutdowns as of late. The government seems to have almost unlimited power which court systems are unwilling to check, they can literally shut entire sectors of the economy down and stop home showings, in direct contradiction to your statement. In normal times they hold enormous influence over these sectors with licensing requirements, regulatory schemes, and political corruption. The result is migration, which also as of late has resulted in net outflows in CA, NY, and IL.
> The result is migration, which also as of late has resulted in net outflows in CA, NY, and IL.
Those outflows began decades before Coronoavirus.
yeah right... this is all 'the republicans' fault. Say what you will about conservatives, but a party that has held majority since the nineties (and more recently a supermajority) has no one but themselves to blame.
Obviously prop 13 / single family zoning has had an effect on housing, along with taxes, onerous building codes and environmental regulation. However, as long the Homeless Industrial Complex controls the narrative with well-intention voters, and gets to call the shots on where / how to 'address' to problem, the problem of pervasive homelessness is not going to be fixed. We've simply created the wrong set of incentives.
A sham? Unless you argue that most people are buying property under false pretenses, especially given the public nature of property taxes, the expectation would be that those purchasing land do so understanding the existence of on-going financial duties.
As to why land is potentially materially different from other assets:
1. Land is only yours while some party will coerce all other parties to respect your claim. The cost of that infrastructure is on-going.
2. Most land might accrue some small value because of the actions of the land owner, but mostly accrues in value because of externalities from the action of others. Taxing those externalities so that the commons benefits rather than the individual seems at least equally as just as the current model where the wealth generated by collective action is overwhelmingly privatized. Reasonable arguments can be made for deferring that tax until sale or equivalent, rather than on a continuous basis.
3. In terms of being inexorably linked to specific governments, land is much more akin to citizenship and / or residency than fungible widgets. Citizenship and residence also frequently incurs ongoing tax duties.
4. Other scarce asset classes have been controlled in the past: https://en.wikipedia.org/wiki/Executive_Order_6102
You're right, everyone knows it's a sham, that doesn't make it NOT a sham.
City infrastructure needs constant maintnence, city services need to be constantly funded. And local schools (where most property tax in much of the USA goes) keep going even after your house is built (suffice it to say, areas with the best schools have the highest property taxes).
> And why is the amount you need to pay pegged to what other people in the neighborhood around you are doing?
The more developed your property is, the more city services you consume. And this is ignoring the speculation deterrence that property tax enforces, which is very important also.
https://www.latimes.com/archives/la-xpm-2003-jun-30-me-prope...
for people unfamiliar with los angeles, is very much a city of landed gentry. republican legislation designed to curtail rising taxes for elderly residents 40 years ago wound up creating a cloistered elite of land-owners that pay nearly nothing in tax and resist any attempt to create additional housing. They coast on a bubble of six-figure increases in equity per year with little to prevent a ramshackle bungalow in inglewood from fetching a cash-only two million dollar price.
when legislators typically try to address the very same landed gentry's cries for relief from the homeless, they wind up collecting windfall bond measure revenue. as they gain momentum and start striking ground, most communities put up fierce NIMBY opposition and mire whatever initiatives that are approved in court. the city in turn eventually gives up, settles, and uses the remaining funds to quietly continue sanitation and cleanup efforts of camps, occasionally running the homeless away for a day or two.
for the city to bemoan rising costs and slow pace is a bit ironic as well. when LA decided to give up on property taxes it had to find a way to make up the difference. hence a league of esoteric inspections and byzantine permitting started popping up for new homes. it means contractors sit idle and watch the price of lumber skyrocket while your self-licking ice cream cone melts in the sun.