[quote=bearishgurl][quote=no_such_reality]While I think long term ownership is more beneficial than long term renting for building financial stability and wealth, that’s not what we’re talking about in this thread.
This is about whether gutting prop thirteen for any non-primary residence and removing the ability to protect the tax basis in family transfers will be better or not for the majority.
The proposal will make it harder for people to buy, harder to move up, harder to save to buy because it will increase rents and push more to corporation run housing which will churn them.
The anti-13 crowd has a lot of wishful thinking on what they want, but no basic economic connection to what will happen in their proposal.[/quote]
NSR, your post above assumes that current landlords who are most benefiting from the existence of Props 13, 58 and 193 are somehow “benevolent” and thus renting their affected propertie(s) below market due to the generous property tax subsidy attached to them.
In the absence of rent control, nothing could be further from the truth. LL’s charge (and get) as much rent as their local market will bear (to still be able to retain longer-term tenants). I will repeat again here that the amount of their annual property tax has nothing to do with this.
The end result of these propositions is that one set of property owners is unjustly enriched over the set who is paying closer to market-rate property taxes, plain and simple. The “unjustly-enriched” set can also afford to be more selective on tenants because they can hold a vacancy longer due to much lesser carrying costs than the “market-rate set” has, since many (most?) of these properties have been in the same family for ~40 years and are likely now free and clear. The latest “owner” (child or grandchild) is no more “deserving” (than the “market-rate set” of owners) of a generous tax subsidy than they are. The child/grandchild owner was simply born to people who were not necessarily even well off themselves, educated or even contributed anything to their communities but owned (or inherited) CA property at the “right time” and often situated in the “right place.”
These props (esp the last 2) are a gross example of unjust enrichment to one group (consisting of many thousands of younger, able-bodied individuals of working age) to the detriment of all the “near market-rate taxpayers” and our state and local governments.[/quote]
Agree that most landlords do not pass on their lower costs to their tenants, though some do. Our old LL charged us market rent when we moved in, but by the time we were moving out almost eight years later, our rent was a good $400-$600 below market, possibly more. There are a number of good and wise landlords around here who have been doing the same thing. But I would agree that they are in the minority.
We also need to distinguish between the different types of beneficiaries of Prop 13 protection:
1. owners who are original purchasers
2. the descendants/heirs of these original purchasers
3. non-owner-occupiers who are renting these houses out (traditional residential rentals, or vacation rentals…they may or may not be heirs, it doesn’t really matter)
4. non-owner-occupiers who are using these homes as second homes or vacation homes
5. commercial/industrial property owners who are original purchasers
6. commercial/industrial property owners who have purchased a share of a property from an original purchaser, which enables them to get the Prop 13 subsidy
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I believe that you, BG have a problem with all of the above, with the possible exception of #1 (and #5?).
I think that #1 should always be protected, and am okay with #2 as long as it is their primary residence and they are not getting any subsidies of any sort on any other properties in the U.S., or even around the world. And if #2 elects to maintain the subsidy, then they (and their own descendants/heirs) would NOT be able to step-up the cost basis of the property when calculating capital gains upon sale — the basis would be the same as the original purchaser’s cost basis.
The rest should not be entitled to a subsidy except, possibly, for #5, and if we were to subsidize these commercial/industrial property owners, they should get a much smaller subsidy — maybe cap the amount that the assessment can rise in a given year to perhaps 4%, and only if the building they own is also their principal place of business and they get no other subsidies on any other properties in California. If there are multiple tenants in their commercial/industrial properties, then they would have to agree to rent control to ensure that the benefit of the subsidy was passed on to their tenants, as the purpose of the subsidy would be to help businesses maintain somewhat lower RE costs, though I’m not entirely behind this idea.
