So if your neighborhood gets popular you get kicked out? Sounds like a healthy policy. Have you ever thought more than 2 minutes about it?
In other words, if California actually did kick out homeowners for their neighborhood getting too popular, it would have been much less of a disaster.
It was true that before Proposition 13 many older homeowners who could not keep up with rising taxes were forced to sell. But taxes were rising because house prices were rising, so they were able to sell at a nice gain.
This is essentially a relatively benign form of eminent domain, which has the same consequences without the implication of a good financial outcome.
Not in Michigan (where Detroir is). The rate of increase on property taxes is capped, so if prices go up quickly your tax doesn't. It gets reset to market if you sell.
The most valuable thing you can have for retirement is a home free and clear. Incentives to disrupt that in favor of what others think is a "better use" are very un-American IMHO.
Prop 15, a modest modification to Prop 13 that wouldn't have affected homeowners, just commercial property, failed. Removing Prop 13 protections for homeowners would be much less popular.
Maybe people in California do think the system is a disaster, but they like it and don't seem to want to change it.
Either current residents are protected from property tax increases, or property taxes can be deferred until sale or death and the estate pays them (common in many jurisdictions).
And yet it is immensely popular. Why do you think that is?
I believe it's because rather than thinking home owners are evil rent seeking capitalists, most are hard working people who bought a house and think it's fair that the government not tax them out of it.
It would still suck to have to sell, but it's not nearly as dark as you seem to be suggesting.
Besides any legal hiccups (how common are such contracts? Is this well-understood law or are we trailblazing this?) there's the practical concern that if I sell my place and it takes a year or two to build the housing complex, well, I still need a place to live while it's under constructions.
I think the best that current American society could do is "...if the former owner could be guaranteed enough money from the sale to move someplace else nearby".
Still - if anyone has ideas about how to sell one's current residence so that more dense housing could be built, and then one could move into an apartment/condo in that new, denser, housing I'd be really curious to hear them.
(Depending on how life goes, it might be relevant to myself in the next 5-10 years)
If there are more people like you, maybe I’ll become a developer.
Single family homes are redeveloped into 7-8 floor condos and 4-5plexes are frequently redeveloped into 12-15 floor condos. The residents are paid handsomely in rent for a few years and the new apartment is usually more luxurious and larger.
It's a win win
- a delay or cap on taxes for first time/single home owners; to make it not so punishing if you're just buying it to live there
- a number of properties below which the tax isn't applied or is reduced; to allow people to build equity in their house and maybe a vacation home or two, but stops someone from owning 5+ homes and locking up all the supply
- a tax that applies more heavily to corporate owners of residential homes; to keep the Blackrock's of the world from snapping up significant amounts of residential homes for padding their portfolios. Could even apply to LLCs of a certain size.
We just need to get creative!
In reality, individuals and businesses like to make long term plans. This expectation makes it incredibly unreasonable for a recently constructed home, office, or retail space which has an expected useful lifetime of decades. They shouldn't be expected to replace it all only after a few years.
This is why I think a reasonable compromise is to have a type of limited "rent control" for land value tax where it is only allowed to increase by no more than 1 percent more than the rate of inflation. This limit comes into affect when a building is constructed and lasts for the duration of the expected lifetime of the building, perhaps 55 to 65 years. That's at least 2 full depreciation cycles (if you're familiar with that). It resets to market value if the property is sold but the limit is not extended any further into the future.
I see it all the time. There is some office building with a weird looking residential unit on the top floor. The resident gets residual rent income together with the developer. New residents take advantage of increased supply of housing and commercial space. It is a win-win-win.
Just don't do what Prop 13 did in California where they applied the property tax limit even to commercial property for some reason.
There's a Prop 13 style cap on property tax increases. It's the lesser of 5% or inflation. I'm not a fan of it, but it's not nearly as bad as Prop 13's low cap.
The California approach is to let the owner get massive appreciation, which they receive at sale, but never pay tax on any of it.