Proposition 13.2

[an]

[quote=CA renter]How are they subsidizing me? I’m paying full, market-rate property taxes.

Yes, my long-time LL was an original owner, and was kind enough to “share” the benefit of their Prop 13 subsidy with us by keeping us at below-market rents (started at market rate, and was raised after the first year, per the lease agreement, and then once by us over the years). But that’s because we were excellent tenants who paid rent 6-12 months in advance, handled (and paid for) all of the small repairs/maintenance, and many of the more expensive repair/maintenance items and upgrades…and raised our own rent in order to control the increase and maintain goodwill with the LL.

And yes, an increase in property taxes would most definitely make me reconsider holding onto a property that was older (and in need of more maintenance), and worth a lot of money. This is especially true if other investments begin to look relatively more lucrative given the carrying costs — including the higher property taxes — and risks of keeping the home vs. more passive investments.

We are watching this closely because we’re probably going to inherit a couple of properties in desirable areas in the future. One of these is paid-off, and has been in the family for a couple of generations. Changes to Prop 13 for investment properties will absolutely factor into our decision-making process.

BTW, never said it would prevent current prospective landlords from buying, mostly just the long-time owners who are currently paying well below-market property taxes. Of course, in the desirable areas, there are very few “new” landlords because it’s rare for rents to cover the carrying costs of owning in these higher-cost areas, especially if the deal is financed.[/quote]They’re not subsidizing you right now because you just bought. Just like they’re not subsidizing the new landlord. But going forward, you’ll be paying less and less of your fair share, assuming housing price goes up more than 2% on average each year. You can easily go through all the older neighborhood and see people paying only a few hundred/year on a 1/2 million dollar house. Do you not think somehow that’s not a subsidy?

If you don’t think it prevent current prospective landlord, then what make you think it would increase the home ownership? FYI, those 45% who are renting would not be looking in the desirable areas, because they can’t even afford the cheaper area. So, the supply you’re upset for not being turning over will not help the current renters becoming home owners. The only way you can help those renters become home owners is to give them 0% down option and a drastically reduced price. If we see a drastically reduced price, you’ll again see plenty of people jumping in to be landlord, unless you somehow see a drastically reduced rent to go w/ that drastically reduced price. Logic is telling me what you’re proposing isn’t going to do what you said it would.

FYI, if I was given a paid off $1M house and my property tax was $1k and will go to $11k/year. I would no way in hell sell that. A few reason would be, if it’s a $1M house today, then it probably mean it’s in a desirable area and the area is all built out. So, I’m keeping it for future appreciation. Secondly, that $1M is probably renting for >$3k/month, so, although my cost went from $100/month to $1k/month because of taxes, it’s still WELL BELOW rent. So, I’m still making good profit. Thirdly, if a house has been in my family for many generation, why would I want be the duche generation that destroy that multigenerational legacy. So, while you might sell, I’m sure there are plenty who wouldn’t.

[CA renter]

AN,

Renters are not subsidizing other homeowners. They are subsidizing *their own landlords* if those LLs are paying below-market property taxes. Yes, renters in more recently purchased homes with market-rate prop taxes are subsidizing those who are paying lower taxes, as long as those renters are paying the full PITI costs on market-rate assessments to their landlords.

Personally, I think that if landlords are getting subsidized taxes, then there should be rent control on those properties so that the benefit goes to the tenants (if one is trying to argue that Prop 13 benefits tenants…which it generally does not, currently). That’s one way to make sure tenants aren’t footing the bill for the Prop 13 subsidy.

————

As for holding onto paid off property that with a low, Prop 13 tax assessment, I’m going to break it down a bit. Sorry for taking so long, but I’ve got to look at the individual tax bills and current market values for some properties that I’m familiar with to show the numbers. Just been a bit busy, and not forgetting this.

[an]

CAR, sorry but your logic doesn’t make any sense. If you think landlord who are not pay market value taxes are getting a subsidy, then the same logic also apply to home owners who are not paying market value taxes. Renters are the ultimate payers of these subsidies because they have to pay higher income and sales tax to subsidize those long time owners. It doesn’t matter if they live in the house or not.

[CA renter]

[quote=AN]CAR, sorry but your logic doesn’t make any sense. If you think landlord who are not pay market value taxes are getting a subsidy, then the same logic also apply to home owners who are not paying market value taxes. Renters are the ultimate payers of these subsidies because they have to pay higher income and sales tax to subsidize those long time owners. It doesn’t matter if they live in the house or not.[/quote]

Yes, of course the owner-occupied homeowners are also getting a subsidy if they’re not paying market property taxes. That’s a given. That’s why Prop 13 passed in the first place — so that people wouldn’t be taxed out of their own homes (primary residences) just because local RE prices were going up. That’s exactly how Howard Jarvis sold Prop 13 to the gullible voters who didn’t comprehend that the greatest beneficiaries of Prop 13 would be investors, not granny; and that the revenue lost because of Prop 13 would have to come from somewhere else.

This protection for owner-occupiers is the only subsidy that should exist (if any). It’s one thing to help people stay in their single, primary residences; it’s quite another to subsidize the profits of landlords, commercial/industrial property owners, and developers/owners of large tracts of land.

And it’s not just renters who pay these higher taxes and fees. We all do.

[CA renter]

[quote=no_such_reality][quote=CA renter][quote=The-Shoveler]There may be a small short term one or so year blip on the inventory and price as CAR suggests, but I think in the long run it would not make much difference.

Also I think the adverse affects on rents and the economy ect.. would be greater than expected.[/quote]

Or not. Again, why in the world are we subsidizing the profits of RE investors?[/quote]

Because frankly, that’s just spin BS. Not taxing more isn’t subsidizing.[/quote]

Giving a tax break to “investors” is subsidizing them, period. They are NOT paying market tax rates. Other people are paying higher taxes in order to give this subsidy to RE investors; that’s why so many taxes and fees have increased since Prop 13 passed. PROP 13 IS A SUBSIDY.

Let me spell it out for you:

“Definition of ‘Subsidy’
A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.”

http://www.investopedia.com/terms/s/subsidy.asp

…

From the National Bureau of Economic Research:

“The effect of Proposition 13 on mobility varies widely depending on the size of the subsidy, with the largest effects occurring in coastal California cities where the increase in property values has been greatest.”

http://www.nber.org/digest/apr05/w11108.html

Why do you think we should do this?

[an]

[quote=CA renter]
This protection for owner-occupiers is the only subsidy that should exist (if any). It’s one thing to help people stay in their single, primary residences; it’s quite another to subsidize the profits of landlords, commercial/industrial property owners, and developers/owners of large tracts of land.

And it’s not just renters who pay these higher taxes and fees. We all do.[/quote]
Everybody pays for higher income and sales tax, but renters are the only one who don’t get prop 13 protection, while home owners do, so yeah, they’re the one who’s footing the bill w/out getting anything in return.

My argument is that if you truly believe in higher home ownership, then you should be banging the remove prop 13 completely for everyone drum. I can almost say w/ certainty that there are more long term home owners than long term landlords. I’m still waiting for data to back up your assertion that removing prop 13 just for landlord will somehow increase home ownership.

[bearishgurl]

[quote=CA renter][quote=AN]CAR, sorry but your logic doesn’t make any sense. If you think landlord who are not pay market value taxes are getting a subsidy, then the same logic also apply to home owners who are not paying market value taxes. Renters are the ultimate payers of these subsidies because they have to pay higher income and sales tax to subsidize those long time owners. It doesn’t matter if they live in the house or not.[/quote]

Yes, of course the owner-occupied homeowners are also getting a subsidy if they’re not paying market property taxes. That’s a given. That’s why Prop 13 passed in the first place — so that people wouldn’t be taxed out of their own homes (primary residences) just because local RE prices were going up. That’s exactly how Howard Jarvis sold Prop 13 to the gullible voters who didn’t comprehend that the greatest beneficiaries of Prop 13 would be investors, not granny; and that the revenue lost because of Prop 13 would have to come from somewhere else.

This protection for owner-occupiers is the only subsidy that should exist (if any). It’s one thing to help people stay in their single, primary residences; it’s quite another to subsidize the profits of landlords, commercial/industrial property owners, and developers/owners of large tracts of land.

And it’s not just renters who pay these higher taxes and fees. We all do.[/quote]

No, it’s definitely not just “granny” who benefits from Prop 13. I would surmise that 80%+ of today’s Prop 13 “beneficiaries” are the very able-bodied children and grandchildren of “granny” who were deeded the home before or after granny’s death, are occupying it at present and paying approximately 1/10th of my tax bill, yet reside on either side and across the street from me :=0. Then you have the subset of “granny’s heir-landlords” who have been collecting rent for years and even decades on properties that they’re paying $350 to $800 annual taxes on which they “acquired” in the same manner as above.

I’m not leaving out the mega landlords of 200++ units and mega landowners (whether agricultural or industrial) who “inherited” these many parcels from their wealthy, enterprising parents or grandparents and, although they might be potentially fully subdivided, they pay but a song in property taxes on these many parcels (as CAR is referring to here).

Case in point: In the most expensive city in the state (SF), over 75% of building/pkg lot owners have assessments dating back to 1978 or earlier (+2% per yr) and are likely paying property taxes equal to 1/15th to 1/30th of their “market rate” tax bill. Yet, they are able to fetch among the highest rents in the state if they are not located in a “rent-controlled” district.

Props 58 and 193 are to blame for these VERY widespread inequities, and, at the very least, as “progeny” of Prop 13, these sections should be abolished as their passing by the Legislature was NOT in keeping with the original intent of Prop 13 … that was, keeping granny and gramps in their homes until the last one moved in with a relative, into assisted living or died.

As it stands, granny’s (able-bodied) young “heirs” enjoy the same low assessment as “granny” did on into perpetuity no matter how much the neighborhood in question has increased in value over the years.

This is completely unfair to the surrounding “arms-length” homeowners who paid market prices for their homes in the era in which they bought them in, and, as I’ve said before here, it amounts to unjust enrichment to “granny’s” heirs at the expense of their neighbors.

I’m not against “inheriting” real property in CA but I am against an heir having the right to “inherit” granny’s low assessment.

As the years roll by, there are and will be less and less original homeowners as of April 1978 who are still residing in those same homes, yet the vast majority of these homes have never been marketed as they are still titled to individual(s) “within the family.” Since so many of them have no other redeeming qualities except their “ultra-low” assessment, this is the SOLE REASON why they are being retained by family members who would have otherwise sold them long ago, IMO.

Piggs are constantly complaining here about low inventory to choose from and Props 58/193 are the prime reason for this phenomenon. It isn’t going to get any better.

No other states in the US have these provisions in their laws … and rightly so. They will end up (indirectly) causing the fiscal demise of CA if they are not repealed, IMO.

[CA renter]

Bestor saw an environment where there were clear winners and losers from Proposition 13. There was a shift in the property tax burden from a more equal share between residential and commercial property owners, to a marked decrease in the burden on commercial property. She also saw an environment where a small group of legacy commercial property landlords were reaping the benefits of low property tax bills, without passing any savings on to consumers or reinvesting in the community.

…

She cited an example from her letter to Buffet of gas stations on the same street in Menlo Park with widely differing tax bills but very similar consumer prices:

“The nondescript little gas station on El Camino near my house pays $30,148 a year in property tax for the privilege of selling me less expensive gasoline than the two Shell stations ($14,214; $17,214), the Union 76 ($15,920), and the Chevron ($20,388) down the street. Those big-name stations have service bays to increase revenue and are on major intersections. But the “new guy” in town … is the one who’s paying $10,000 a year more for police, fire, road repair,education, parks and courts.”

She went on to compare two local markets – the Menlo Park Trader Joe’s, which leases the land from a family trust with an address in Cape Cod who pay a measly $11,200 in property taxes while the landlord of a Trader Joe’s just miles away in San Carlos pays almost five times as much.

“Unless this family in Cape Cod is cutting secret checks to Trader Joe’s they are really not seeing any benefit in the lower property tax rate, and neither is the consumer. The prices at both Trader Joe’s are the same.”

…

Like Bestor, Goldberg has armed himself with research, documenting a statewide shift of the property tax burden away from commercial property by examining the tax rolls for each of the 58 counties in California.

This trend is especially dramatic in counties that both support large industries and have had thriving residential real estate markets recently like Los Angeles and Santa Clara counties. In Los Angels County the share of residential property taxes has shifted from 39 percent of the total in 1975 to 56 percent today. In Santa Clara County, the home to Silicon Valley, the share has gone from 50 percent to almost 70 percent.

But Coupal with Howard Jarvis Taxpayers finds the data meaningless. “Lets imagine that you were able to drive all of the commercial property out of California – which is more of a possibility if we split the rolls – then by definition all property tax revenue would be residential.“

A better measure, said Coupal, is the ratio of disparity between how much a property is worth at market value and what it’s taxable value is under Prop 13, which he said is smaller for commercial property than residential.

Coupal referred to the findings of a study sponsored by the California Business Property Association which found that commercial and industrial properties were on average assessed at 60 percent of their market value, 10 percent higher than residential properties on average.

However, economists Steven Sheffrin and Terri Sexton conducted similar research for the Public Policy Institute of California and found that disparity ratios for modified commercial properties, which were usually large legacy corporate properties were significantly higher than either residential or non-modified commercial properties, usually mom and pop type businesses.

“I noticed that these large complicated properties don’t turn over as much and really benefit from Proposition 13 protections more than homeowners,” said Sheffrin. “The benefits of Prop 13 should be for homeowners not for commercial properties.”

http://california-in-crisis.news21.com/node/52

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