[quote=dumbrenter][quote=CA renter]
Note: rents did not go down, so the belief that rent would go up as a result of its repeal doesn’t really hold water. What would probably happen, is that properties would flood the market in anticipation of the repeal, which would drive down prices in many cases. Some of us would like to see this happen, as we believe that the rights of people to own their own (affordable) homes trumps the “rights” of landlords to collect rents/profit from people who need housing. Some properties could be excluded from the tax increase, but ONLY if the savings are passed on to renters (especially low-income renters) instead of padding the pockets of the profiteering parasites. At least with pensions we’re getting something in return (the best possible public employees who provide for our safety and security); with Prop 13 subsidies to landlords/landowners, we get NOTHING in return.[/quote]
You say that the rents did not go lower when Prop 13 was introduced hence they will not go up if it were to be repealed. I do not think it is as simple as solving for a mathematical equation.
That said, I see that your expectation in this scenario is for the newer (relatively) landlords to lose the margin and hence put their properties on the market. I admit I did not consider this scenario, but still, the newer landlords will still have to raise rents and they will be even more compelled to do so since they do not have the “advantage” of the older ones. Given that this repeal is across the board, nobody can make a case of collusion in raising rents statewide.
BTW your expectation of future is better for my finances than mine, but I think it is unlikely that it will turn out that way.[/quote]
I disagree entirely that sellers will have a strong motivation to sell properties if prop 13 is repealed, because of lower margins. There may be some circumstances, but it will be pretty rare. Investors have been buying California property with current tax rates. They don’t look at an existing owner’s taxes, they KNOW that property taxes will be approximately 1.1% of purchase price. (outside of MR districts.) A long time owner will probably experience a big increase in taxes, but they will be the same as a new buyer would have. For investor purposes, a cash flow projection is already based on those higher taxes, so what would be the incentive for a landlord to sell?
Current rents are based on demand/supply. A change in the property tax structure is unlikely to change either the demand or the supply. Tenants will not suddenly be willing to pay more, so landlords will not be able to suddenly raise the rents they charge. Rents are NOT determined by a landlord’s cash flow. They’re determined by the market.
And I’m thinking this through as a landlord. I own an apartment building I bought 20 years ago. There is an almost identical property right next door (built at the same, around 1975, but 20% more units). The building next door sold about 4 years ago. That owner can’t charge any higher rents than I can, even though his property taxes are probably 50-60% higher than mine, just like if my taxes went up, I won’t be able to charge higher rents. Competition in the market determines the rents. Not my cash flow.
