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Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

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Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#61

Post by ohyes »

jordanb wrote: post #58
gred wrote: post #56

Earlier quoted context omitted.

People often criticize "defined benefit plans" like pensions, where the employee is guaranteed a certain pension payment by the employer. This guarantee means that the employer, rather than the the employee, takes on most of the market risk. Employees (via e.g. unions) often push for pension guarantees that are likely to exceed realistic market returns, further increasing risk to the employer (as has happened in many…

This is a good definition of "pension" and "401k" but it doesn't explain why the former is unsustainable and the latter is sustainable. Why is it sustainable to shift all the risk of bad investment, mismanagement and unexpected longevity away from institutions and onto individual workers? Are workers in a better position to shoulder those risks than institutions are? Or are they in a better position to minimize the r…

The difference is that the 401k the matching contributions go into the employee's fund immediately. The pension is really just a promise of funds in the future. Historically pensions have been:

a) reneged on by the employer b) underfunded by the employer

It is correct to say that there is no reason a reasonable pension couldn't be just as good as a 401k, but it hasn't played out. The money keeps getting spent twice. I personally think this is nothing short of criminal. Because of the way the 401k works, the money can't be double spent, and you didn't have this problem of the retirement funds 'disappearing'.

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#62

Post by thephyber »

voidlogic wrote: post #24

If the current residents can't afford the property taxes, they need to relocate. On a personal level is very unfair, if its unfair at a societal level, we can debate. But the reality still stands- If you can't pay your property taxes, you need to move. It is a financial imperative. For Detroit in general, these pejoratively described "gentrifiers" could be the best thing to happen in a long time. What kind of failing…

> If you can't pay your property taxes, you need to move. I would argue you are talking in the wrong tense.

Detroit has suffered from resident and employer flight for 40 years. About A MILLION people took your advice before you gave it. It has caused a tremendous downward pressure on property values and gutted employee mobility.

Those people that are currently living in Detroit who can't or can just barely pay their property taxes are unlikely to be able to afford to leave and/or probably have too much hope / faith / pride (the regular irrational actors) to face the hard reality. I would bet that a lower intelligence and/or education level is likely to correlate highly with people who stick around despite the city crumbling around them.

Also, if residents can't afford to pay $500 to buy their own house at county auction, they also can't afford to move and start new somewhere else. Even if they could manage to leave before foreclosure, that does not absolve them of their obligation to pay property taxes on a property they still own and likely can't sell. People that can't afford property tax bills likely also have bad credit, which is another impediment to being able to afford a move, rent / buy a new place elsewhere, and even being able to apply for a new job.

I would argue that people who can't pay this month's bills don't worry about "long term". That's why there are more short term ("PayDay") loan centers than there are McDonald's restaurants nationwide.

Not trying to absolve them of their bad economic sense, just pointing out some likely reasons they haven't already moved elsewhere.

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#63

Post by thrownaway2424 »

sitharus wrote: post #52
thrownaway2424 wrote: post #45

Earlier quoted context omitted.

The question is whether the pensioner provided enough benefit during their career to justify their pension. In a lot of cities the retirement benefits are completely out of proportion to the benefit provided by the government employee. The social contract works both ways. We're supposed to provide for the security of old people in retirement, but they were also supposed to leave a better future for young people. If t…

The problem with that is these people planned for what was promised to them. As a younger person in a skilled occupation, like most HNers I expect, I have no expectation on the state to provide for me and consequently have my own provisions for retirement savings. I've been placing a percentage of my income aside for a while now to fund me later in life. My grandparent's generation (in the UK) however were promised s…

Right, like I said the promise goes both ways. The city or other authority offering the pension expects a certain amount of productivity out of the employee and in many cases the employees "pulled out the cover" on their city. In general I support the idea of defined-benefit retirement plans, and even to some extent the right of public employees to organize into unions, but when I think about the secretary at the local bureau who types one letter at a time on her computer, with a pencil eraser, because her fingernails are six inches long, or when I think about the bus drivers who can't be fired from the San Francisco MTA, even though they are convicted criminals who can't hold a commercial drivers' license, then my faith in public systems begins to erode. Goldbricking and loafing can only proliferate a certain amount before the ability of the city to pay for the promised pension is impaired.

Your argument favors the idea of state or national pension systems, because they are large enough to average out the stupidity. With municipal systems you're virtually guaranteed to have a few cities unable to meet their promises.

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#64

Post by mullingitover »

thrownaway2424 wrote: post #45
themartorana wrote: post #40

Earlier quoted context omitted.

Edit: rant ahead, not aimed directly at bluedino I will never understand this. I agree life-time pensions are unsustainable. I argue constantly for a) all new public employees being enrolled in a 401k and pensions being phased out and b) offering younger workers buy-outs, allowing them to invest their contributions themselves in reward for opting out of the pension system. But that said - every pensioner out there wo…

The question is whether the pensioner provided enough benefit during their career to justify their pension. In a lot of cities the retirement benefits are completely out of proportion to the benefit provided by the government employee. The social contract works both ways. We're supposed to provide for the security of old people in retirement, but they were also supposed to leave a better future for young people. If t…

> The question is whether the pensioner provided enough benefit during their career to justify their pension.

Hilariously wrong. The question is whether the city entered into a labor contract with the pensioner, and whether they fulfilled their end of the contract. Do you go to a restaurant, eat a seven course dinner, then skip out on the bill because you don't think the price was reasonable?

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#65

Post by mullingitover »

Scramblejams wrote: post #8
jMyles wrote: post #5

Earlier quoted context omitted.

One of the first times I've seen that property tax really does read like serfdom.

Property tax is really onerous for those who own their houses but fall on hard times. Its implementation can be terribly unfair, because it essentially says that you don't really own all of your property. You own most of it, but if you don't kick that little bit up every year, then you're out on your duff and what you get back is subject to the whims of the auction bidders. That's a troubling implication for me. I'm…

> If you bought it, it should be yours. I'm deeply uncomfortable with the notion that you must always pay rent to the government on something you ostensibly own, or you get the boot. > There are so many ways this could be addressed. Property taxes could be eliminated and other taxes raised for a revenue neutral solution.

I made this same argument in my high school civics class. As I recall, the deal is you're not paying 'rent' on the property but for the services that property receives courtesy of the state/nation (e.g. fire, police, protection from invading armies, etc).

Real estate taxes are a pretty progressive tax, I'd hate to see landowners (generally in the upper echelons of income distribution) get a tax break and have that passed down to the lower tiers with something horribly regressive like sales tax (which is the general go-to funding scheme). It'd be a lot better to eliminate all other taxes and make all government revenues come from a flat land value tax.

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#66

Post by Scramblejams »

mullingitover wrote: post #65
Scramblejams wrote: post #8

Earlier quoted context omitted.

Property tax is really onerous for those who own their houses but fall on hard times. Its implementation can be terribly unfair, because it essentially says that you don't really own all of your property. You own most of it, but if you don't kick that little bit up every year, then you're out on your duff and what you get back is subject to the whims of the auction bidders. That's a troubling implication for me. I'm…

> If you bought it, it should be yours. I'm deeply uncomfortable with the notion that you must always pay rent to the government on something you ostensibly own, or you get the boot. > There are so many ways this could be addressed. Property taxes could be eliminated and other taxes raised for a revenue neutral solution. I made this same argument in my high school civics class. As I recall, the deal is you're not pay…

There are plenty of ways to pay for the services the property owner receives courtesy of the state/nation. It doesn't have to be by a tax that in the case of arrears results in eviction of the property owner, and many taxes can be made as progressive as you like.

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#67

Post by mullingitover »

Scramblejams wrote: post #66
mullingitover wrote: post #65

Earlier quoted context omitted.

> If you bought it, it should be yours. I'm deeply uncomfortable with the notion that you must always pay rent to the government on something you ostensibly own, or you get the boot. > There are so many ways this could be addressed. Property taxes could be eliminated and other taxes raised for a revenue neutral solution. I made this same argument in my high school civics class. As I recall, the deal is you're not pay…

There are plenty of ways to pay for the services the property owner receives courtesy of the state/nation. It doesn't have to be by a tax that in the case of arrears results in eviction of the property owner, and many taxes can be made as progressive as you like.

> It doesn't have to be by a tax that in the case of arrears results in eviction of the property owner, and many taxes can be made as progressive as you like.

As a renter, I have a hard time feeling sympathy for the downtrodden landowning class. While there may be cases where an unfortunate landowner is forced to liquidate and find a place to live that's in line with their income, there are more cases where a drop in real estate tax simply means the landlord gets a better profit margin.

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#68

Post by spdustin »

rayiner wrote: post #60
themartorana wrote: post #40

Earlier quoted context omitted.

Edit: rant ahead, not aimed directly at bluedino I will never understand this. I agree life-time pensions are unsustainable. I argue constantly for a) all new public employees being enrolled in a 401k and pensions being phased out and b) offering younger workers buy-outs, allowing them to invest their contributions themselves in reward for opting out of the pension system. But that said - every pensioner out there wo…

Contracts aren't inviolate. When you contract with an entity to receive money in the future, you always take on the risk that the entity will discharge the obligation in bankruptcy. And people who have unsecured obligations, like pensioners, would normally be low on the totem pole in bankruptcy. Ultimately, there's an inter-generational conflict. Voter participation at the state and municipal level is low, and its no…

Your comment excludes a large group of pensioners: those that retired from state-funded employment, such as teachers or other public service personnel. Their contract stipulates an ongoing obligation that the state has to them once they retire, and many states (all?) don't have the legal right (or the realistic ability) to discharge their debt to their pensioners in bankruptcy. No potential employee would consider their future pension a discharge-able debt, and thus, they would not realistically consider the loss of their pension to be a risk to be accepted.

In other words, their in-kind exchange is: they work as instructed in return for immediate pay and a future obligation based on the time they worked.

Disclosure: from Illinois, where many public service employees are getting the shaft.

EDIT: additionally, teachers in Illinois expect to receive a benefit from the Teacher's Retirement System, and as such, they weren't contributing to federal social security programs. There has been an ongoing concern that the TRS funds will vanish and all those teachers would be without the usual post-retirement income that this country's social and taxation policies have all but guaranteed. Yeah, they are basically made to forego debt owed to them by the federal government in return for debt owed to them by a state government. The same state that brought you Rod Blagojevich, George Ryan and Dan Walker, prompting at least one person to suggest that they need to build a governor's wing at the prison.

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#69

Post by Scramblejams »

mullingitover wrote: post #67
Scramblejams wrote: post #66

Earlier quoted context omitted.

There are plenty of ways to pay for the services the property owner receives courtesy of the state/nation. It doesn't have to be by a tax that in the case of arrears results in eviction of the property owner, and many taxes can be made as progressive as you like.

> It doesn't have to be by a tax that in the case of arrears results in eviction of the property owner, and many taxes can be made as progressive as you like. As a renter, I have a hard time feeling sympathy for the downtrodden landowning class. While there may be cases where an unfortunate landowner is forced to liquidate and find a place to live that's in line with their income, there are more cases where a drop in…

If there's a big enough reduction in property taxes, the market will adjust, absent other dominating effects, and your landlord's margin will be reduced.

Also consider that the vast majority of the landowning class consists of a person or family that owns one SFR, and most-to-all of their wealth is tied up in it. Those are the people that will get hurt if they can't keep up with property taxes, and it includes most of the middle class that isn't renting. I rent too. My landlord is not wealthy. If he can't cover his property taxes, then I'm the one who gets the boot.

And lest you think this is mostly a theoretical consideration, there were enough cases where an unfortunate retiree was forced to liquidate that it prompted the California electorate to pass Prop 13, which froze property taxes. If real estate values increase rapidly, for whatever reason, a property tax that rides that slope creates terrible injustices.

Re: Detroit gentrifiers face daunting task buying $500 homes evicting poor residents

#70

Post by rayiner »

spdustin wrote: post #68
rayiner wrote: post #60

Earlier quoted context omitted.

Contracts aren't inviolate. When you contract with an entity to receive money in the future, you always take on the risk that the entity will discharge the obligation in bankruptcy. And people who have unsecured obligations, like pensioners, would normally be low on the totem pole in bankruptcy. Ultimately, there's an inter-generational conflict. Voter participation at the state and municipal level is low, and its no…

Your comment excludes a large group of pensioners: those that retired from state-funded employment, such as teachers or other public service personnel. Their contract stipulates an ongoing obligation that the state has to them once they retire, and many states (all?) don't have the legal right (or the realistic ability) to discharge their debt to their pensioners in bankruptcy. No potential employee would consider th…

Most teachers are employed by municipalities, which are subdivisions of the state which can go bankrupt.
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