Which was created to combat the problem of grandma kicked out of her house because she can't afford her property taxes. How do you get around that?
..and somehow NIMBYs are painted as the heartless ones?
In other real estate markets, this is a huge downward pressure on housing prices by the fact that if taxes get too high, it increases the inventory by the amount of people forced out. The Bay Area is almost entirely lacking in that pressure, which combined with other Prop 13-related issues and the area's popularity makes a perfect storm for this current fiasco.
Nobody wants ol' granny, or that single mom who has lived there forever, etc. to have to uproot their life and leave, but there simply is no way to have a happy outcome for everyone. And, to your point, if property taxes have increased that much, the increased home value should take some of the sting out of it when they go to sell.
There are very real emotional downsides to all of this, but ultimately I'm of the opinion that people being forced out of areas as they gentrify due to property taxes are a necessary part of a healthy real estate ecosystem.
Really curious to see what happens in the long game as the families who inherit homes that were locked into old tax levels are forced to sell as they can't pass them on to a second generation without the tax rate resetting.
Anyone have an estimate on when that may be? Perhaps we'll see a major correction in Bay Area house prices at that point as the inventory increases from that.
That game has already been played. Transfers between generations do not cause reassessment.
http://www.boe.ca.gov/proptaxes/faqs/propositions58.htm#1
Congratulations, California voters. You made bad into worse.
Bad into worse just about sums it up. If it wasn't for Prop 58 and 193 you'd expect that eventually, decades from now once the majority were reset, that Prop 13 would have a chance of being struck down, but this just ensures that future generations have every incentive to keep homes in the family.
Thanks for sharing the link.
If the law allows it and the regulatory compliance costs are low enough, maybe grandma can take out a home equity loan and turn her 1-story ranch into a 3-story apartment and take advantage of the cash flow. If she needs a little more, and her neighbors are also having trouble paying their property taxes, they can pool their resources together and build an even larger apartment block to replace their old houses. Win-win for everyone, except for busybody NIMBYs who care about "neighborhood character" to the exclusion of everything else.
Oh, and BTW, this idea that "techies" aren't people, or somehow less deserving of moral consideration than everyone else, is reprehensible.
- Service workers (everything from baristas to cops to teachers) either disappear or have to deal with punishing commutes
- Brain drain. When even people making a decent salary get pushed out, it's bad for cities (http://sanfrancisco.cbslocal.com/2015/05/26/silicon-valley-e...)
- Many people believe living in the place one was born/grew up in should be a right. That's a value difference. Markets do not get to dictate everything if we don't allow that.
Luckily, the market does have a solution to the housing problem itself: build a lot more of it, and prices will drop.
Personally, I don't have any vested interest SF housing, as it's really not one of my favorite cities. But I keep thinking of what I would do if this was happening to a city I did actually love and live in, and I think in that situation I would be more sympathetic to the NIMBYs than the newcomers. I don't think there's any moral imperative for cities to keep growing.
SF isn't my favorite city either, but what has happened in my current and favorite city (Boston) has made my less sympathetic to NIMBYs, both the high-income (I want my house to appreciate without doing any work!) and low-income (I want 20% of units just for me!/Screw the middle class!) types--they are the ones making things worse. Cities grow because businesses move there, and businesses move there because they want to be close to and network with other businesses. Employees can't exactly prevent that by staying in Nowhere, KS. I agree, there isn't any moral imperative for cities for keep growing, but for now at least, there is a practical one, and thus there is a moral imperative for cities to accommodate those to wish to live there.
We're seeing the unintended consequences of one alternative. Of course, we haven't tested all of the possible universes yet.
No, it wasn't created to combat that problem; if it was, it would have (even had the same general approach been used) been narrowly drawn to residential property, and maybe even only to properties that are primary residence of the owner.
> How do you get around that?
Lots of ways, including going to full value annual assessment of all property, but allow, for owner-occupied primary residences, deferment of taxes in excess of the lesser of the total tax due in the year of sale [0] increased by 2% per year since the sale or some function of the owner's income (the exact function is an implementation detailed) to be deferred until the property is sold [0], with the taxing authority acquiring a lien on the property.
[0] Note that you can expand "sale" to include the same kind of improvements that allow new assessments under Prop 13, as well.
The city puts on the lien on the home for the value of the accumulated rise in property taxes. Once the owner dies, family members sell the house, and pay off the lien.
I have no idea why Prop 13 was created when the aforementioned solution allows grandma to stay in her house without destroying the housing market in the process.
It's basic economics. If you have a somewhat fixed demand and artificially restrict supply, the price is going to shoot through the roof.