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Without affordable housing, Vancouver risks becoming an economic ghost town

business.financialpost.com

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Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#471

Post by JoshTriplett »

toyg wrote: post #467
JoshTriplett wrote: post #456

Earlier quoted context omitted.

I'm talking about taxes on personal residences, used as residences. I don't particularly want to argue in this post about what taxes might apply to second/third/fourth/investment/etc houses, or about the desirability of using excise taxes to control behavior. In the context of property used as a residence, I'm suggesting that property taxes produce undesirable effects, and that other forms of taxation might potential…

But that's what inflates property markets -- investors buying and selling multiple properties, realtors identifying and driving growth in this or that neighbourhood. London, SF, Sydney or Vancouver are all awash in investment cash for properties, that's what drives prices. "In the context of property used as a residence", most European countries do not tax first homes, end of story. It doesn't stop prices from growin…

> "In the context of property used as a residence", most European countries do not tax first homes, end of story.

I'm not talking about sales taxes on the sale price of a home; the US doesn't tax those either. I'm talking about property taxes, as in the taxes typically assessed by a local government to property owners as a percentage of the appraised value of their property. I'm saying that such property taxes produce various undesirable effects (as mentioned several comments up).

That's orthogonal to questions of how to deal with people owning, buying, or selling multiple homes. It may or may not make sense to apply different rules in those cases, such as not providing an exemption for sales taxes on such properties. (Though you'd have to be careful there to not cause problems with rental prices.)

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#472

Post by DrScump »

gorkemyurt wrote: post #211

One of the main reasons of the housing crisis in the Bay Area is Prop 13 ( https://en.wikipedia.org/wiki/California_Proposition_13_(197... ) Prop 13 basically keeps the property taxes constant (or 1% increase) as the value of your house increases (doubles or triples). Your tax gets re-calculated only if you sell your house and the new owner starts paying potentially multiples of what the previous owner has been payin…

No, it sets your base tax value at purchase to 1% of the purchase/FMV price, and its increases from there are annual and limited to 2% of the previous tax.

e.g. assuming a purchase price in 2015 of $1 million:

Year Tax

1: $102,000 max

2: $104,040 max

etc. (initial * (1.02 ^ year#))

Or any other change in majority ownership. It can also be triggered by improvements.

Note that local governments heap many additional taxes in the form of "parcel taxes" that are fixed amounts -- a regressive tax effect (a $20M estate and a $300K condo pay the same amount).

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#473

Post by eightfourteen »

seanmcdirmid wrote: post #420
CountSessine wrote: post #416

Earlier quoted context omitted.

China has a punishing inheritance tax, really? China has no inheritance tax Sorry; proposed inheritance tax. http://www.ibtimes.com/chinas-proposed-inheritance-tax-meets... My point stands; Canadian interest rates could double and Vancouver house prices wouldn't budge; some Canadians would have their homes foreclosed on, but there's so much money in the market from China that homes here would still be unaffordable to…

That is quite old. Anyways, taxes are not a problem in China yet. Anyways we've seen is before with the Japanese in the 80s, and it eventually all crashed down, leaving the Vancouver/Seattle/California real estate markets in a rut for more than a decade! I'm guessing when the Chinese economy comes back down to earth, the exact same thing is going to happen again.

Japan had 120 million people in the 80's. China is currently at 1.35 billion. There were a million new millionaires created in China in 2014. I'm not sure that the Japan situation compares to China very well.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#474

Post by nosuchthing »

gorkemyurt wrote: post #211

One of the main reasons of the housing crisis in the Bay Area is Prop 13 ( https://en.wikipedia.org/wiki/California_Proposition_13_(197... ) Prop 13 basically keeps the property taxes constant (or 1% increase) as the value of your house increases (doubles or triples). Your tax gets re-calculated only if you sell your house and the new owner starts paying potentially multiples of what the previous owner has been payin…

Incentive the use of land to facilitate more people.

Encourage / incentivize mixed use developments with affordable housing units.

Tax unused empty lots, empty apartments, low volume office buildings, etc..

Build affordable compact mobile homes.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#475

Post by seanmcdirmid »

eightfourteen wrote: post #473
seanmcdirmid wrote: post #420

Earlier quoted context omitted.

That is quite old. Anyways, taxes are not a problem in China yet. Anyways we've seen is before with the Japanese in the 80s, and it eventually all crashed down, leaving the Vancouver/Seattle/California real estate markets in a rut for more than a decade! I'm guessing when the Chinese economy comes back down to earth, the exact same thing is going to happen again.

Japan had 120 million people in the 80's. China is currently at 1.35 billion. There were a million new millionaires created in China in 2014. I'm not sure that the Japan situation compares to China very well.

The way things are going right now, it seems to be playing out exactly the same, just the scale is much larger given the increase in population (million of new millionaires were created in Japan also, of course, with a much smaller population base than China!).

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#476

Post by DrScump »

rdlecler1 wrote: post #442
gorkemyurt wrote: post #211

One of the main reasons of the housing crisis in the Bay Area is Prop 13 ( https://en.wikipedia.org/wiki/California_Proposition_13_(197... ) Prop 13 basically keeps the property taxes constant (or 1% increase) as the value of your house increases (doubles or triples). Your tax gets re-calculated only if you sell your house and the new owner starts paying potentially multiples of what the previous owner has been payin…

Those house owning elderly you're feeling sorry benefitted from the biggest bull market it history. They may have saw 100x gains on their house while many youth will are spending 30-50% of their income on housing if they're lucky to get a good job. If they do, they can look forward to paying entitlements to these elderly people while they themselves may never see the same turn done to them because the system will be…

I can't imagine a single unimproved residence being anywhere in that neighborhood (even going all the way to 1978); examples are welcome.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#477

Post by gozur88 »

shostack wrote: post #461
gozur88 wrote: post #381

Earlier quoted context omitted.

>Its hard to imagine the current real estate inflation in the case where home owners had to pay taxes against the fair market value. Prop 13 exists in California because that's exactly what was happening. Prior to its passage you paid on the assessed value of you house, and it didn't stop prices from double digit percentage increases every year. People who'd owned their homes for decades were being forced to sell bec…

While that sucks, that sort of self-correcting market pressure is in fact required for a healthy real estate market. Yes, people would have been pushed out as prices increased. But as areas gentrify, there is no guarantee that the farmers and tradespeople who lived there get to stay forever. That's how other markets work. It sucks to those pushed out, but eventually taxes increase to the point where demand for the ar…

>Further, since you'd have increased liquidity without Prop 13, people could actually afford to move to other areas so there would be more inventory.

People over 55 can transfer the tax basis of their primary residence. In all cases if they move somewhere in the same county, and depending on local ordinances inter-county.

So retired people living in the Peninsula can afford to move to other areas.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#478

Post by nosuchthing »

JoshTriplett wrote: post #443
brc wrote: post #377

Earlier quoted context omitted.

It's even worse in Australia, which most properties do not have a yearly property tax. So you pay a 'stamp duty' when you purchase the property, based on a % of the sale price. This means you have people living in Sydney with multi-million dollar properties - which are just modest houses in now-desirable suburbs - who haven't paid any property tax since the 60's, and who can't move anywhere because they'd be up for s…

This sounds like an excellent argument for getting rid of property taxes altogether. Property taxes have some major fundamental problems, not least of which that using them to pay for local services tends to make such services better in more affluent areas and worse in less affluent areas. They produce potentially unbounded and unexpected expenses long after paying off the house itself (which impacts retirees and oth…

High property tax assumes an area is in high demand for land, presumably incentivizing more efficient use of land per square foot.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#479

Post by otoolep »

api wrote: post #428
msvan wrote: post #82

It seems like many major cities of the world are experiencing this problem, and no city has been able to come up with a good solution. It always leads to displacement and newspaper articles about displacement, but no real solutions. Here are a couple of solutions: 1. Build really tall. Hasn't worked out all that great in Hong Kong, though. 2. Rent control. This is often unfair and inflates price of non-rent controlle…

I think it's a symptom of something else: the hyper-centralization of relevance and cultural center of gravity in only a few places. When I was younger (1990s), I don't remember it mattering so much where you were located. I've spoken to older people and they concur: they've all said that when they were young being in, say, Indianapolis or Toledo was not a big deal. Today, at least in the USA, there's a strong sense…

As far as I can see this is exactly what is happening. More powerful computers and communications are amplifying the power of individuals, and as a result making relationships even more important. And cities have always been the places of innovation and relationships. Just even more so now.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#480

Post by DrScump »

rayiner wrote: post #350
Agustus wrote: post #334

Earlier quoted context omitted.

How does Prop 13 work? The people who wrote that paper are saying that it is a subsidy; absolutely not. The tax rate is frozen, so as I understand it, the person simply pays a lower rate, it is not a system where a tax is paid and then has it refunded to them. I am going to be highly critical of an economic research paper that looks at a tax as a subsidy, so here we go: 1. A tax rate lower because of a law than your…

A child deduction is absolutely a subsidy for having children. Not having you pay $500 is economically equivalent to giving you $500.

it's more direct a subsidy than that -- there are refundable child tax credits (you can get any overage paid to you; it's not just deductible).
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