Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How California Became America’s Housing Market Nightmare

bloomberg.com

Post reply on HN
Print view View original

111–120 of 170 posts

Re: How California Became America’s Housing Market Nightmare

#111

Post by d1zzy »

Starkus wrote: post #49
rcpt wrote: post #2

> California also has a distinct burden: Proposition 13, a measure approved by voters in 1978 that limits property-tax increases on homes until they’re sold. That’s been a boon for Baby Boomers who’ve lived in their houses for decades and aren’t assessed at anything close to their property’s market value. But it’s especially unfair to their children, who are in effect subsidizing their parents’ generation. yup

A Californian law that is inefficient and restrictive? No surprise there. California has been extremely fortunate with major economic forces driving their economy for decades, but paired with ineffective governance to this beautiful state, is incredibly disappointing. No pity for CA though, a lot of their voters over the years enabled this

But to make some things clear for those that might be reading and aren't familiar with California politics, Prop 13 is not the result of some politicians voting against the public interest or being populist or our out of touch any of those things, it's the result of direct democracy[1]. "The People" thought this is in their best interest, so they are now going to deal with the consequences.

[1] https://en.wikipedia.org/wiki/1978_California_Proposition_13

Re: How California Became America’s Housing Market Nightmare

#112

Post by d1zzy »

fortran77 wrote: post #36
rcpt wrote: post #2

> California also has a distinct burden: Proposition 13, a measure approved by voters in 1978 that limits property-tax increases on homes until they’re sold. That’s been a boon for Baby Boomers who’ve lived in their houses for decades and aren’t assessed at anything close to their property’s market value. But it’s especially unfair to their children, who are in effect subsidizing their parents’ generation. yup

Everyone benefits, not just "boomers". Anyone who buys a house ever gets the same protection. No more than 2% property tax increase/year. So if you bought a house in Silicon Valley for $1.5Million and the house next door sell for $3MM because someone had a lot of cash from their facebook stock, your property tax doesn't double.

If you think that a house bought today will see the same relative increase in value over the next 20 years then yes, you'd be right. I'd argue that seems extremely unlikely for a whole set of reasons but the time will who was right.

Note that we're not just talking here about paying lower tax for 1-5 years where the property prices go up, we're talking about taking advantage of this benefit over the course of multiple decades, that's where it adds up and I doubt the same will be true for those that buy a house in Silicon Valley today at market price.

Re: How California Became America’s Housing Market Nightmare

#113

Post by malvosenior »

coenhyde wrote: post #109
malvosenior wrote: post #68

Earlier quoted context omitted.

The younger generation can do the same thing the older generation did and buy a house in a cheaper real estate market. It's funny that people feel entitled to buy a house in the most expensive place on earth. I think a lot of the people who bought houses for 100k in California in the 1970s would not have expected to buy a condo at the same time on 5th Ave in Manhattan (for instance). It's a recent phenomena that youn…

I think it's funny that people feel entitled to these property tax breaks. I'm less concerned about individuals feeling left out, and more concerned about the systemic issues lack of home ownership for this generation will cause. We've distorted the market so much through a variety of bad policies, i don't think it is an unreasonable request to start reversing the trend.

This generation has an unrealistic idea of where they should live (some of them at least). It's not like the people who bought houses for 100k in the Bay Area in the 1970s were making 300k a year working for Facebook. There's nothing stopping people from moving to Ohio and getting a less well paying/glamorous job but buying a house.

The solution is there today, people just don't want to take it because they want to live in SF/NY... When houses were affordable in those areas, they didn't have the cachet they have now.

Re: How California Became America’s Housing Market Nightmare

#114

Post by yonran »

ericmay wrote: post #105
yonran wrote: post #100

Earlier quoted context omitted.

Like all progressive taxation, the property tax is not solely a fee for government benefits received by the taxpayer. The property tax is a tool to reduce inequality— especially when it is applied to gains in land value. If we did not have property taxes (or when we protect existing landowners regardless of land rent increases under Proposition 13), then increases in land value from increased population would be enti…

You’ll have to summarize any key points from the book, since I don’t own a copy. You say that property tax is a tool to reduce inequality, but I’m not 100% sure about that. For example, I don’t even know where my property taxes go. Maybe some small portion goes to the state, but I believe all go directly toward local projects, firefighters, police, and schools. Further, I’m not sure what I’m supposed to do if my home…

> You’ll have to summarize any key points from the book, since I don’t own a copy.

The first few chapters of Rethinking the Economics of Land and Housing describe the distinction between competitive capital (whose price signals the economy to create more) and land (which cannot be created) and thus why they should be taxed differently. I think it is mostly based on this essay by Mason Gaffney: “Neo-classical Economics as a Stratagem against Henry George” (http://masongaffney.org/publications/K1Neo-classical_Stratag...)

> You say that property tax is a tool to reduce inequality, but I’m not 100% sure about that. For example, I don’t even know where my property taxes go

Broadly speaking, progressive taxation is all about taxing any income that is above and beyond what the average wage-earner earns from wages and competitive capital, and using it to fund services that are used by everybody. Virtually everyone has their own labor, whereas income from ownership of natural resources and monopolies is concentrated, so taxation of income above and beyond wages and interest reduces inequality.

Increases in land rent are unearned income that are not due to the owner’s wages and do not incentivize the creation of capital, so it is fair game to tax it as part of a progressive income tax system. If we don’t tax it using property taxes, then land value increases only become a windfall to the owner, leading to greater wealth inequality.

> Further, I’m not sure what I’m supposed to do if my home value doubles just because of natural reasons

The subject of this article is California’s ”severe shortage of houses.” What you are supposed to do in response to the price signal is expand the building so that more people can live on your lot.

Re: How California Became America’s Housing Market Nightmare

#115

Post by cactus2093 »

ericmay wrote: post #105
yonran wrote: post #100

Earlier quoted context omitted.

Like all progressive taxation, the property tax is not solely a fee for government benefits received by the taxpayer. The property tax is a tool to reduce inequality— especially when it is applied to gains in land value. If we did not have property taxes (or when we protect existing landowners regardless of land rent increases under Proposition 13), then increases in land value from increased population would be enti…

You’ll have to summarize any key points from the book, since I don’t own a copy. You say that property tax is a tool to reduce inequality, but I’m not 100% sure about that. For example, I don’t even know where my property taxes go. Maybe some small portion goes to the state, but I believe all go directly toward local projects, firefighters, police, and schools. Further, I’m not sure what I’m supposed to do if my home…

> if my home value doubles just because of natural reasons.

There's a lot to unpack with just that. Decades of aggressive downzoning and increasing regulatory hurdles to make building more difficult & costly, is not a natural reason (even if it is the status quo). Just as an analogy, that would be kind of like saying the tens of thousands of automobile deaths per year in the US are deaths from natural causes, since it's a status quo that we don't even blink twice at anymore.

You're arguing that your lifestyle has not increased just because your home value increased. It definitely has, basically by definition, now you live in a more expensive house and more desireable location. If we were to itemize the additional value you're getting, the big line item is the cost of keeping other people out of the neighborhood and keeping the density low. 30 years ago that was pretty cheap, now that is an extreme luxury that you are getting. Not to mention other tangible benefits, like access to home equity credit or the ability to sell and move to a much bigger or fancier house almost anywhere else in the country. Just because you aren't going to exercise your ability to do that doesn't mean you aren't getting the value from having that flexibility.

This seems to really get at one of the most fundamental things driving NIMBYism, that people's expectation is if they buy a house they have also bought the right to freeze time in their immediate vicinity and remove themselves from the continually evolving outside world. So if they don't perceive that their lifestyle has doubled in value, they're free to just decide that it hasn't and carry on living and paying property tax as if it hasn't.

Re: How California Became America’s Housing Market Nightmare

#116

Post by collias »

x0x0 wrote: post #103
collias wrote: post #52

Earlier quoted context omitted.

Why should someone who bought $100k of Apple stock get $2m years later?

Well, you pay tax on your gains on that stock sale. The claim is you shouldn't on houses; it should be a tax-free investment.

You definitely pay taxes on a sold property (capital gains, like stock), assuming your profit is over $250k, like this example. Prop 13 doesn't affect that.

Re: How California Became America’s Housing Market Nightmare

#117

Post by ericmay »

cactus2093 wrote: post #115
ericmay wrote: post #105

Earlier quoted context omitted.

You’ll have to summarize any key points from the book, since I don’t own a copy. You say that property tax is a tool to reduce inequality, but I’m not 100% sure about that. For example, I don’t even know where my property taxes go. Maybe some small portion goes to the state, but I believe all go directly toward local projects, firefighters, police, and schools. Further, I’m not sure what I’m supposed to do if my home…

> if my home value doubles just because of natural reasons. There's a lot to unpack with just that. Decades of aggressive downzoning and increasing regulatory hurdles to make building more difficult & costly, is not a natural reason (even if it is the status quo). Just as an analogy, that would be kind of like saying the tens of thousands of automobile deaths per year in the US are deaths from natural causes, since i…

To be clear (and this is probably my fault) when I said natural reasons I was thinking along the lines of naturally occurring economic reasons. For example, if people move to my town that will drive property prices. On an individual level there isn’t too much I can do. Maybe I vote to restrict immigration or enact anti-growth policies such as a maximum limit on children. Maybe I sell my home to a developer who turns it into a mall or a 5 story apartment building. Many reasonable courses of action here. By the way, we don’t seem to have much of a problem with prices decreasing, even if that causes a larger financial impact (if you buy a home for $300,000 and policies out of your voting control cause you to lose value, you’re just screwed with no recourse).

I don’t buy for a second though, that if your home value doubles that your lifestyle doubles. My mortgage payment and neighborhood are exactly the same. It can certainly have a positive impact, but it’s unrealized.

Largely I think people are too quick to focus on demonizing the NIMBY, without really considering the full scope. What if people in the state legislatures vote for something that increases my home value and I vote, write reps, and do anything a person has a reasonable capacity to do. Now my taxes should double or triple? And if I can’t afford it you force me out of my house, away from friends and family?

Life isn’t fair I guess? But then people can’t get upset if people go and vote themselves Prop 13 or to defund affordable housing. It’s in their self-interest. Economics is hard.

I don’t know the right answer, but as a homeowner in the Great Lakes Region, I feel more sympathy toward other home owners than some here may do.

Re: How California Became America’s Housing Market Nightmare

#118

Post by Fainsan »

helen___keller wrote: post #91
Fainsan wrote: post #87

More Housing is no solution. That's compounding the issue at hand. Lower Property taxes plus value adjustments for areas based on median income could help ensure you don't price residents out of their areas and ensure healthy participation in the rest of the economy.

> More Housing is no solution. That's compounding the issue at hand How so? > value adjustments for areas based on median income What do you mean value adjustments?

Adjustment of Home Values. If any given area is selling at levels higher than standard median income allows and that given area is experiencing a higher than average number of Foreclosures (or pick a reasonable threshold), requirements should be in place to ensure that if a home defaults, it doesn't go back to market at those same values, but lower. After all, if you go strictly by banks rules, housing costs shouldn't be over 35% of income to hopefully prevent this from reoccurring.

Re: How California Became America’s Housing Market Nightmare

#119

Post by [deleted] »

FreakyT wrote: post #15
malvosenior wrote: post #7

Earlier quoted context omitted.

I don't know that it's more "unfair" to the younger generations to not increase property taxes than it would be to the home owners to do so. Why would someone who bought a house for 100k be expected to pay taxes on 2M years later? A lot of these people probably had normal jobs and incomes, they didn't chose for Google/Apple/Facebook to move into town and send the property prices sky high. Yes, they benefit as owners…

> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. I would argue that being able to afford a place in the 1970s does not endow one with an inalienable right to remain there forever. Locking the property taxes creates an artificial incentive to hold onto property forever, thus creating market stagnation.

[deleted]

Re: How California Became America’s Housing Market Nightmare

#120

Post by cactus2093 »

ericmay wrote: post #117
cactus2093 wrote: post #115

Earlier quoted context omitted.

> if my home value doubles just because of natural reasons. There's a lot to unpack with just that. Decades of aggressive downzoning and increasing regulatory hurdles to make building more difficult & costly, is not a natural reason (even if it is the status quo). Just as an analogy, that would be kind of like saying the tens of thousands of automobile deaths per year in the US are deaths from natural causes, since i…

To be clear (and this is probably my fault) when I said natural reasons I was thinking along the lines of naturally occurring economic reasons. For example, if people move to my town that will drive property prices. On an individual level there isn’t too much I can do. Maybe I vote to restrict immigration or enact anti-growth policies such as a maximum limit on children. Maybe I sell my home to a developer who turns…

> I don’t buy for a second though, that if your home value doubles that your lifestyle doubles.

That's just true by definition of how a price works though, it's not really up to each person to agree or disagree with.

I get that you're not realizing the gains when your house goes up in value. But a property tax is not a capital gains tax, it's a wealth tax on a specific type of wealth (that happens to be very important to society and easy to track). The rules that everyone else is playing by, are that you're taxed based on the value of the property. Whether you realize the gains or not, to give you a break on it at the expense of people who happen to be newer, is not somehow inherently more fair. It's a transfer of wealth that is very regressive on average and goes directly from those with less money to those with more. And it has been a huge driver of the housing and budget problems created in California over the last 40 years.

Post reply on HN