I personally think it's awful to see elderly people getting priced out of a house they've owned for decades, young families have to move their kids in their high school years because the taxes have become unmanageable, how it disproportionately impacts POC as gentrification occurs, and all the other ways it impacts people's lives who just thought they were buying a house to set roots for their lives/families but then externalities cause it to suddenly become unaffordable.
It's extremely perverse when you consider that these people's tax dollars are often used by politicians to encourage the very "growth" that contributes to their affordability problem. They court corporations and give huge tax breaks to move their offices/factories to Texas, which drives up the demand for housing, etc.
The issue is availability of property flat out. As long as there's no incentive to make affordable property available, every actor wants their property values to rise and cares little for the negative effects it has on everything else.
Those property taxes exist for good reason because you have to be able to pay for the services / infrastructure from it. Without those matching the area, problematic spirals occur.
What, their retirement savings? How much is recommended to be saved by 65 now - 2 million dollars or something?
The exact situation you're referring to caused Prop 13 in CA, and something has to be done before something like that gets enacted.
Prop 13 wasn't passed as a law to help the unfortunate. It was anti tax hatred of the government. Jarvis wanted a "tax revolt" which is why all property in the state, even oil fields and golf courses, gets the tax break.
No, but it was sold to the public that way of course.
Today yeah the marketing is 100% that it's a welfare program for seniors.
Do you have any more information? At first blush I can see how inheritance schemes would create massive loopholes in this for example.
If so I wonder if that can create the opposite of the problem of elderly people being forced out by rising taxes. Namely someone who wants to move out but can't afford to because after all the deferred taxes are paid from the proceeds of a sale they won't have enough left for another place.
Again, these things are already done in other states, and it doesn’t have to be perfection, just better than it currently is.
There's another way that is better than it currently is, without the downside of building a potentially large debt if the senior manages to live a long time after retirement before finally needing to move.
That's exemptions and/or freezes. E.g., here in Washington if you are at least 61 and have a disposable income under 70% of your county median income they freeze the assessed value of your property and exempt you from part of the state-wide property tax. On a $400k assessed value home that would cut the taxes from $3400/year to $2200/year in my county. The 70% threshold is $65k.
There are more exemptions at 60% ($56k) and 50% ($46k) that remove more of the state-wide tax and also some of county and city taxes. For those below the 50% threshold in my county that would reduce the tax on a $400k assessed home to $900/year.
Washington does also have a tax deferral program, but that is aimed to low income in general rather than seniors. I think it is meant for cases where you have a temporary reduction of income but are expected to recover.
They’ll just record them and wait. It’s the one thing the government has that normal companies/people can’t do. Wait it out over lifetimes.
Meanwhile, I'm pretty sore about the 10% year over year thing, particularly when I hear about how Republicans run a low-tax state or that a wealth tax is unconstitutional/infeasible. I pay my wealth tax every year, but I suspect I'm too poor for the kind of wealth tax they mean. I can at least enjoy the irony.
True but if you're turning 65 after you're tax bill has grown 10% for over a decade as your transitioning to your fixed income years; it's not a good thing just to freeze the tax bill. You might not have time to earn and save enough to cover the value it gets frozen at. It does help soften the blow for many though.
> But honestly it might be better for them to downsize into something more appropriate and perhaps free up the larger houses for families.
I wholeheartedly despise this line of thought, unless it's coming from their individual decision to downsize. You're basically treating the house like a commodity. It's a Home this person lived in, raised family in, hopes to continue hosting holidays in, where grandchildren can go to visit, etc. They should be able to use it until they decide to leave. On average, they only have another decade or so of life left anyway after their taxes get frozen at 65, let them enjoy their home.
It either is an asset or it’s a commodity as far as the market goes. If you want generational housing and for housing to be generally affordable something has to give. Kill it as an asset class and you get what you’re looking for.
10 years is a long time in the housing market. Assets sitting for 10 years under utilized is another way to think about it.
These two ideas - that housing is an investment and that people shouldn’t be incurring tax burdens on them like this - do not square
I personally do not think 10 years is that long in housing. Sure a lot can change in housing over that time but at any given moment, If I'm in need of housing and supply doesn't exist, I can build a custom home in less than 2 years. I can buy in a development basically immediately. This might not be a global truth but it's the state of things in Texas specifically, and has been for a long time. Affordability is the limiting factor, not time.
I think the property taxes in Texas make sense if RE grows at rate of inflation. For a long time, we had affordable housing and now that's not necessarily the case. So the rules/laws need to change to protect people from getting priced out due to taxes is all. It's an issue that didn't bother anyone before because they were assuming their raise in income would cover the raise in taxes. But wages don't increase 10% annually like our taxes do (whole other topic LOL!) so they get put in a hole. Anyone coming into the market now knows the prices, it's all available information, and they can decided if they want to move here or not. It could all be a bubble that pops and corrects one day, but not until inbound population growth slows down.
I don’t propose what you’re saying either. A land value tax is more than sufficient, by any research I’ve seen on this topic. It doesn’t in any sense mean what you’re saying here. Only that under utilized land (usually classified as unbuilt or vacant) is taxed more heavily. Thats one facet. The other is that it shifts the property tax off of building values and onto land values can make both buildings and land less expensive. This has a knock off affect of reducing the value of real estate holdings to varying degrees in terms of value in the short term but stabilizes in the medium and long term.
That would be better in my view but as it exists today, we instead have to rely on building more housing or putting more existing supply in the market, neither of which in broad strokes are happening in a way that keeps pace with demand unfortunately
Also: not everyone who can afford to buy a home can buy a home built from scratch. There are different classes of home buyers and the vast majority aren’t moving into custom homes like that. Its unreasonable to think that it’s common place in aggregate
No, housing is a cost, not an productive investment.
What we actually want, as a society, is for housing prices to go down so people can live places.
Removal of sub class zoning for housing would also be beneficial. Its one thing to zone an area for industrial vs housing but it should not be permitted that when land is zoned for housing they can zone specifically for single occupancy homes for example.
Fact is, everyone needs that to happen right now.
If we change the latter, expectations related to the former will change too.
Quite the opposite, regulation of the housing market rarely ends well. There's quite a few countries that can speak to the horrible deadlocks that occur when regulation suffocates the housing market.
There's nothing particularly wrong with investment per se, now if you make the market so regulated such that there's no competition, you're destroying any kind of forces that push the price down, or if you make the investment so costly the prices go up to compensante.
Heck, there's even countries where the regulation was so insane it was far better to hold an empty home than to actually rent it out.
You can’t have your cake and eat it too. Everyone wants their home to be worth more and more year over year but doesn’t want to incur any obligation for it.
How do you square that with the idea that communities and social connections are more important? Look at what California did with prop 13. It’s a disaster by all accounts. We need to switch models not create more complicated exemptions around property taxation.
Land Value Tax is more equitable and doesn’t have the intrinsic volatility and unpredictably of how we do property taxes today which is assessed in the unit value not the land and only punishes under utilization and vacant land holdings. This encourages building and to some extent smaller parcels of land per unit built
Yet somehow I dont think those two personas make any amount of the "everyone" posting here on HN
Housing being seen as this generational I own it forever thing that Americans have doesn’t also square with the American narrative of housing as an investment.
It’s one or the other. If you want housing to be seen as something that more or less “always goes up” but you can’t be taxed in the increased value then you are by nature distorting market dynamics you don’t see elsewhere.
We need a land value tax instead it’s more fair and less volatile
Not necessarily. The fact that they're getting priced out right now via taxes on the estimated value of the house doesn't mean they can sell the house at that value (being forced to sell) and that they can find a cheaper alternative that works as well for them. So they can be in for a net loss, all things considered.
It's not a premium. It's what housing costs. If they take their "premium" and buy the next house, their tax bill is unchanged (more or less). They have to actually go find a house that is much cheaper so they can afford the tax bill.
More often than not, it causes them to move out of an area that has seen growth to an area that has not seen as much. This might be moving from Houston to a suburb of Houston, or moving from a suburb of Houston, to a small town 100 miles outside Houston.
The correct "Other way to think about it" is like telling someone this;
You bought this property when the neighborhood was worth nothing. You lived here for years when it was nothing. That might mean it was rural or crime ridden or whatever; but it was cheap and you could afford it. Good job sticking it out all those years and then letting "us" build it up around you. However, now that we've done that, we feel you are still a nothing if you can't afford the tax bill, so go find another rural/crime ridden area to live in. That's where you belong.
In practice it’s not that cut and dry
I agree with this part. Viewing it as investment is the wrong choice.
This makes it more of a modest investment overall, one that people would stop tying their entire net with to
Deferring tax increases based on the sale of a house until the next owner is what California does and it’s a disaster.
Land value taxes are more equitable and treat it closer to a commodity and drive more efficient utilization
I'm not sure i agree with this take.
The building is clearly a depreciating asset. If left alone the house will eventually be worth nothing because a decrept properly carries liabilities instead (neighborhoid fire hazard, penalties , fees etc) So there no nominal value there.
Onward to the land. The only real reason for land to appreciate is because it ia scarce resource. But then you see that the land also has a carrying cost (taxes) that is fixed regardless of its use. Therein lies the dilemma. If land is an asset that generates expense , and then that expense only grows as time passes but theres no income associated with it, are you really seeing land appreciation when you sell, or are you simply recouping your carrying cost during the term it was held?
If I were 5x leveraged my net worth on a jackpot like that I'd probably cash out and move to an island to.
Depending on the structure of TX property taxes, it is certainly possible to have your tax bill increasing rapidly while property values are stagnant or even falling.
If grandpa and grandma are just living in their house in Texas and surviving on the last of the pension, they're not even vaguely in the same category as a property owner deciding which of the next condo buildings to buy.
Alternatives exist (eg taxable value set by what you paid not marked to market)
Having one reducing reliance on property taxes
I will also accept inheritance tax at 90%, if you really want to skip property taxes :)
LVT would actually negate the parent posters complaints, as only the underlying land would be assessed and the penalties only really kick in if the land is unoccupied or is not utilized (sitting vacant is the most common of this, followed by lack of utilization, for instance under many LVT implementations large lot owners with single homes also get hit with underutilization penalties to encourage subdividing and utilization of the land which is a net win for society And often the immediate land owner. Objections tend to philosophical on this point)
It disincentives empty / under-utilized land holdings like vacant lots or lots that could support more utilization (usually via an activities like building homes on top and selling / renting them or farming)
There is nuance in implementation details but in broad strokes that covers it in tl;dr fashion
I’m glad we cap ours at 3%. And our community hasn’t collapsed for lack of property tax revenue yet.
And we are a progressive state, while Texas is conservative. Would have thought it would work out the other way around but I guess not.
https://www.nbcdfw.com/news/local/frisco-soldier-gets-home-b...
The amount was in the low hundreds (maybe $300).
HOA liened her house, then forced sale.
A local landlord put a bid that was found later to be about 70% under market (like $125,000 offered for a $400,000 home). The HOA Board voted to accept the offer and sold the house to this landlord.
In the drama that unfollowed there was also this little nugget: the landlord was on the HOA Board, and was one of the ones who pushed for the forced sale, and then voted in favor of the Board accepting his short offer on the house.
I don't recall the details of the outcome, although I believe some compensation was paid out to her.
Our rates are 23 mil.
I think this is outside the realm of what most people run into affordability wise and frankly at that level of income I’m willing to bet affording the property tax is much less of a concern
Do you actually have numbers on this? It's a huge talking point for the anti tax crowd but as far as I can tell there's no epidemic of house rich boomers being forced out of their homes.
If you are at least 61, and your disposable income is less than 70% of the median income for your county you get two forms of property tax relief:
1. The assessed value of your property is frozen at the value of the first year you signed up for the tax relief. If your disposable income goes about the threshold for a year but comes back down the next you won't lose your frozen assessment. If you go above the threshold for two consecutive years you do lose the freeze. When it comes back down again you get a new freeze at whatever the current assessment is.
2. You are exempt from all "excess property taxes" and part of the state property tax that is for schools. An "excess property tax" generally means voter-approved levies, such as local school taxes.
If your disposable income is under 60% of the median income for your county but above 50% in addition to #1 and #2, you get:
3. You are exempt from regular property taxes on the maximum of $50k or 35% of the property value, but not more than $70k. For example for a $400k property you'd be exempt for $70k, so your regular property taxes would be computed as if your property was assessed at $330k.
If your disposable is under 50% of the median income for your county, in addition to #1 and #2, instead of #3 you get:
#4. You are exempt from regular property taxes on the maximum of $60k or 60% of the property value. For a $400k property this would mean regular property taxes would be based on a value of $160k.
In my county the 70/60/50% thresholds are $65k/$56k/$46k.
In my county a $400k assessed value home for someone below the $46k threshold would have an annual tax of $900, compared to around $3400 for someone not in the tax relief program. Here is a breakdown of the two (with some rounding):
$300 $ 760 fire
$240 $1000 state general
$ 930 local school
$140 $ 360 county road
$100 $ 260 county
$ 50 $ 130 stormwater management
$ 40 $ 111 regional library
$ 7 $ 18 PUD
$ 2 $ 2 noxious weed
Why punish people who helped build the place? Why would you want to steal value from people who simply want to be left alone?
If you want to buuld you dont need to kick people out that have less than you. Instead, you have to make it easier for others to build. If the state makes that impossible via state taxes and regulation, blame the state not the citizen that simply wants to live happy.
You can own two housing units untaxed, as long as you can produce evidence you spent at least 30 days a year in each of them. This doesn't disrupt non-speculators-- even the modest rich with a single vacation home, or the snowbirds who have a home in Minnesota and a winter place in Arizona don't see an impact.
Anything beyond that? Annual tax of 70% of its appraised value.
Nothing appreciates fast enough to justify holding it at that cost, so you'd see a fire-sale on housing. Add some cheap state-backed credit to lubricate the transition period, and unoccupied units glut the market while renters become owners.
Multi-family structures might create some interesting situations. With the landlord effectively forced to divest himself of properties, he has to reinvent himself as a service contractor, bidding for the maintenance contract on the buildings he once owned. This would be a great moment for karmic feedback against the ones who had neglected quality and safety-- who'd contract for $200/month maintenance from the same firm that never fixed anything when you paid $1500/month for maintenance-plus-land-access?
LVT only works if it is applied uniformly and with zoning reform. It will actually be a tax break for landlords because they are utilizing their property near the limit of its value.
* Land ownership is generally public record, or at least orchestrated at local government levels for property tax assessment, school enrollment eligiblity, and other similar local services.
* Some states already have concepts of presence-- different tax regimes for part-year residents versus full-year.
I'd expect that this would end up being relevant in only a very narrow set of cases. Most cases are slam-dunk clearly "owner occupier" versus "investor-owned", and hopefully they'd put more than a HN post worth of effort trying to define rules that handle the ambiguous cases.
I tend to be a bit suspicious of the LVT, because it can create toxic consequences for individual landowners.
Sure, if I have an empty lot and a new Job Factory opens next door, a rising LVT creates incentive for me to build. But if I already had a house there, my LVT has tripled and my house is no longer affordable.
Locking the LVT to the current owner might prevent that toxicity, but it also encourage all sorts of evasion strategies.
Where this love for arbitrary taxation comes from? How much have you donated to your mayor's electoral campaign? Do you golf with aldermen?