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bearishgurl.
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August 17, 2015 at 9:36 PM #21648August 18, 2015 at 4:14 AM #788723
CA renter
ParticipantThe question is whether it would cost more to monitor the tenants’ incomes over the life of their tenancy vs. the costs to subsidize these units for over-income tenants.
The worst part about this, of course, is the fact that so many truly qualified people are on waiting lists while the over-income types enjoy their low-cost units.
August 18, 2015 at 6:20 AM #788724livinincali
ParticipantThis funniest thing in the article is the housing authority’s rational for allowing this to continue.
[quote]
But the 15 authorities investigators looked at told them they had no plans to evict these families, because if they did, poverty would continue to be concentrated in government-subsidized housing. The goal, they said, was to create diverse, mixed-income communities and allow tenants who are making good money to serve as role models for others.
[/quote]August 20, 2015 at 10:07 AM #788763EconProf
ParticipantLike so many government interventions into free markets, rent control laws make no sense for a whole host of reasons.
One reason not mentioned here so far is how it discourages the building of more apartment supply, which would lower rents and thus help the poor. What investor would build into a city that can forever limit their future rents?August 20, 2015 at 1:15 PM #788764FlyerInHi
GuestEconProf, rent control many not make sense, but there is a big government role in making homes affordable.
Singapore, with the 3rd highest GDP in the world, is a success story. They have government-built housing that provides good low-cost shelter to about 80% of the population. Condos are sold to residents but there is a cap on resale. Residents can stay regardless of income, and that translates to high savings rate for the country.There are also plenty of luxury condos for millionaires and billionaires, like in NYC, for those who want them.
So, in fact, there is an optimal mix of socialist policies and free market laissez faire that works wonders in building wealth and improving standard of living. Incidentally, the economist who advised and help build Singapore was Dutch, not free-market American or British.
Do you want the population to live in comfortable housing, or run down tenement like housing? NYC is known for dreadful housing, definitely “third-world” in many respects.
Wealth doesn’t have any ideology. What works simply works.
August 20, 2015 at 1:19 PM #788765spdrun
ParticipantHave you actually been to a third-world country and seen their housing? We don’t have things like electric shower heads (look it up).
August 20, 2015 at 1:19 PM #788766spdrun
ParticipantHave you actually been to a third-world country and seen their housing? We don’t have things like electric shower heads (look it up).
August 20, 2015 at 1:43 PM #788767EconProf
ParticipantFlyerInHi: Singapore is indeed a prosperous and successful city-state that is a strange mixture of capitalism and heavy-handed government. I’d say their wealth is more a result of their culture and work-ethic as harnessed by their long-time leader, President Lee Kuan Yee, recently deceased. Not sure it has much relevance to New York City’s rent control.
August 20, 2015 at 1:59 PM #788768FlyerInHi
Guest[quote=spdrun]Have you actually been to a third-world country and seen their housing? We don’t have things like electric shower heads (look it up).[/quote]
I stayed at a guest house in Costa Rica that had those electric shower heads. Kinda scary looking with electric cables near water.
I’ve seen apartments in NYC that are pretty run down. My friend was going to NYU and rented a room for $1000, nearly 10 years ago. The townhouse caught fire and the owner died. That was multimillion dollar townhouse in Chelsea buy looked like it had not changed in 100 years. The bathrooms were weird addition and you had to step up 8 inches into them. The owner could not afford any improvements and he rented out the rooms to make ends meet.
August 20, 2015 at 3:31 PM #788769bearishgurl
ParticipantThe Golden State bestows (mostly undeserved) housing benefits far in excess of what any US public housing authority could possibly accomplish and its ramifications are much more far-reaching and affect every single resident of this state.
In my mind, this NY family of four is no different than the senior-citizen (or nearly senior citizen or their “heirs”) resident-owner of a CA single family home (even a “modest” one) which was purchased by them (or their “benefactor(s)”) prior to April 1978.
This group owns real property in CA which is assessed at 1/6 to 1/8 of its current market value (assuming they didn’t let the premises “go to waste” over the years).
Make no mistake . . . a LARGE portion of the (original) CA owners qualified for this deep discount have a net worth of $1.5M to $10M or more (avg over $2M) have up to $8K per month in defined-benefit pensions coming into the household, haven’t had a mortgage payment in decade(s) and NEVER MOVED since their purchase date (or date of taking title from their benefactor)! OR they DID move out for a period of time and subsequently returned to reside in the same (already-owned) property.
CA Props 13, 58 and 193 are akin to a GIANT LIFETIME housing subsidy to John and Suzy Q Public whose only “qualifications” were purchasing a home at the “right time” or “long enough ago” and hanging onto it over the years resulting in their property having an inordinately unrealistic lowered assessment today.
The rest of the CA property owners are subsidizing this HUGE group’s (limited and now decimated) municipal and county services. The deeply-discounted group isn’t going anywhere and will never decline (due to being able to take advantage of Props 58 and 193 into perpetuity), IMO.
Sadly, the (near or) market-rate-taxed CA property owners can’t possibly make up the shortfall in state, county and municipal coffers with their property taxes because the deeply-discounted property-tax group comprises too large of a percentage of voters.
CA’s extremely short-sighted former Legislature made this mess (and later added to it with their passage of Props 58 and 193). Unfortunately, it isn’t fixable now or in the future due to too many “taxpayers” reaping the benefits.
In my mind, this statutory scheme amounts to gross unjust enrichment for a very large percentage of CA property owners who have been availing themselves of this gravy train for years, many of whom are able-bodied 25-50 year-olds who “inherited” real property! Most of those eligible for this government largesse can well afford to pay property taxes based upon the market value of their properties but instead get to enjoy a minuscule property tax bill, freeing thousands up annually for other endeavors.
IIRC, some states have “senior citizen exemptions” exempting a fixed portion of property value (such as $50,000) of a (age 65+) property owner’s principal residence from their assessment which terminates upon their deaths. CA is the ONLY state which allows just a 2% increase in assessment annually, regardless of fluctuations in market value and allows this scheme (based upon the original purchase price) to continue on into perpetuity as long as the property is continually deeded via an intrafamily transfer deed, quitclaim deed or via a trust to child(ren) or grandchild(ren).
Prop 13 and its progeny also serve to keep thousands of CA properties in the more desirable established communities OFF the market …. virtually forever. As a byproduct, inventory shortages (chronic in markets where there has been no new construction tracts in decades) have been the norm for years and will remain so, bolstering property values and pricing.
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Food for thought and two questions for Piggs:
If you owned a SFR in SD County in good shape which was worth $400K, it had a current tax bill of $600 per year and could fetch $1750 in monthly rent, would you ever sell it?
If you had one or two siblings and your last parent recently passed and left their principal residence in San Diego County (a SFR worth $550K) to all of you in equal shares, would you attempt to purchase your siblings’ portion from them (~$275K – $367K) to take title to use the property for a rental investment? Current assessment is $78K, resulting in a current tax bill of $850, which would carry over to any new (child or granchild) owner. Monthly rent would be $2200 – $2400.
August 20, 2015 at 4:04 PM #788771EconProf
ParticipantBG: I fully agree that when Prop 13 allowed relatives to keep the same assessment as the original owners a huge and growing “welfare” benefit was created. And it is welfare that is totally unwarranted, as it confers benefits on those with above-average net worth.
Blame the CA legislature, which responded to a small cry-baby segment of the population, ignoring the long-term implications.
Having said all that, I’m not sure a lot of money is involved, since properties constantly change hands, and heirs can’t always take over properties for a variety of reasons.
Do you have any hard numbers of how much this unwarranted benefit is costing in lost CA property tax revenues?August 20, 2015 at 5:51 PM #788772bearishgurl
Participant[quote=EconProf]BG: I fully agree that when Prop 13 allowed relatives to keep the same assessment as the original owners a huge and growing “welfare” benefit was created. And it is welfare that is totally unwarranted, as it confers benefits on those with above-average net worth.
Blame the CA legislature, which responded to a small cry-baby segment of the population, ignoring the long-term implications.
Having said all that, I’m not sure a lot of money is involved, since properties constantly change hands, and heirs can’t always take over properties for a variety of reasons.
Do you have any hard numbers of how much this unwarranted benefit is costing in lost CA property tax revenues?[/quote]Econprof, Firstly, I don’t believe “properties constantly change hands.” In some micro areas of the state (especially coastal areas), properties almost never change hands. And the more “desirable” the micro area, the less frequently properties actually “change hands” (meaning change hands outside of intra-family transfers).
I believe the City of Chula Vista has got to be losing an average of about $2500 annually per parcel in my own micro area in property tax transfers (teeter funds) from the state. And that figure is factoring in that a typical “market rate” assessment is about $100K LESS than current market value. (My area was originally built 55-70 years ago as a “working class area” but many homes have been remodeled over the years beyond that … even far beyond that due to generous lots.)
I don’t really have any “hard facts,” just anecdotal from looking at property tax bills of about 100 homes surrounding my home. But what I’ll do is this. Early next week, I’ll be downtown and will purchase four random “plat maps” of the City of San Diego at $2 page (for starters). Of course, all of them will be of improved parcels or parcels in the process of rehab (not vacant parcels or plats). I’m going to attempt to get one from the La Playa section of 92106, one from the Mission Hills section of 92103, one from either the Linda Vista or Clairemont section of 92111 and one from an established “working class” area outside the city such as Lemon Grove or National City. (I’m not going to have a chance to “cherry pick” the maps prior to purchasing them because it would be too time consuming.) I’ll then take them home and run up the tax bills on each parcel, noting which parcels directly face the bay (with an unobstructed view from the front or behind) or otherwise have superior lots in size, ingress/egress or configuration. Then I’ll post the tax bills of each parcel of each map here using addresses (when possible) without identifying owners but stating whether or not the HOEX was taken.
The Piggs can then look up current for sale or sold comps in those micro-areas at their leisure.
I’m going to illustrate this effect using random micro areas of single family homes in San Diego, CA but Props 13, 58 and 193 are a MUCH BIGGER subsidy to the wealthiest individuals and families, ESPECIALLY for those owners (and their heirs) of large multifamily and commercial properties located in expensive, tight markets such as San Francisco and Los Angeles. If you want to know how landlords are surviving (and thriving) in longtime rent-controlled environments, look no further than the ubiquitous presence of Props 13, 58 and 193!
I believe I can prove how much the existence of Prop 13 and its progeny are costing the state (and its subdivisions) using almost any random parcel map within a CA coastal county which was improved prior to April 1978. I want to include plat maps from two well-established micro-areas which are extremely desirable so we can all see the depth and breadth of these state-sanctioned subsidies awarded owners of these fine properties.
No other state bestows this type of subsidy to the “well off” and “rich” anywhere near to the magnitude that CA does. Most states use a “mill levy formula” to determine what the new assessment will be in a given area and conduct reassessments on ALL parcels every 1-3 years (avg every 2 years).
Note: High net-worth individuals live in all four corners of the county and many thousands of them are still living in homes they purchased ~40+ years ago (or their younger able-bodied heirs are residing in them). You cannot judge a book by its cover in CA coastal counties. Just because an individual lives in a modest home they own and/or owns/lives in a “working class” area and drives an older vehicle doesn’t mean they are “poor” or living paycheck to paycheck. It really doesn’t mean anything. All it means is that these individuals are living within (or well under) their means. There are HUNDREDS OF THOUSANDS (perhaps MILLION(s)) of high net-worth homeowners who fit this description in CA!
August 20, 2015 at 7:05 PM #788773EconProf
ParticipantOK BearishGirl, you can do all that if you want, but I question how that can be a valid measure of what the total revenue loss is due to Propositions 58 and 193.
This question would be a great research paper for someone’s Master’s Thesis. I googled several terms and could not find any published works that could tell us.
BTW, it was not the CA legislature that gave us these laws–propositions, it was the voters, and they did so overwhelmingly. Just shows how attractively-worded propositions get passed by our shallow electorate.August 20, 2015 at 7:47 PM #788775bearishgurl
Participant[quote=EconProf]OK BearishGirl, you can do all that if you want, but I question how that can be a valid measure of what the total revenue loss is due to Propositions 58 and 193.
This question would be a great research paper for someone’s Master’s Thesis. I googled several terms and could not find any published works that could tell us.
BTW, it was not the CA legislature that gave us these laws–propositions, it was the voters, and they did so overwhelmingly. Just shows how attractively-worded propositions get passed by our shallow electorate.[/quote]If you want the breakdown of those owners benefiting from Props 58 and 193, that will likely take a week or two longer. The tax bill shows the date and number of the last (ownership) document filed. If it was “recent” (meaning less than ~37 years ago but more than one year ago), I would have to consult the ARCC grantor/grantee index on affected parcels to determine if it the transferring document was a trust or intra-family transfer (before or after death). If I had any questions as to what the document actually was, I would have to make a list go to the recorder’s office to view those documents (which is just a few blocks away for me).
I think it is ALSO instructive to see how many CA property owners are paying taxes based upon their original purchase price plus 2% annually since then. This HUGE group is ALSO unjustly enriched (pursuant to Prop 13).
If a CA property owner was 55+ years of age at the time of the passing of Prop 13 (which used original assessments “frozen” from September 1976, I believe) and are now in their nineties, I believe THAT was the population which the law was intended to assist. With the (later) passage of Props 58 and 193, many of these owners (now mostly deceased) were able to pass their ultra-low assessments to their heirs. The thing is, people bought their first home at a fairly young age in 1978 and that group (my “brethren”) are +/- 60 years old today. This group (who never sold the property, no matter what they did with it) has been enjoying their ultra-low assessments since their early/mid twenties (all during their working and child-rearing years)! And of course, today’s “heirs” could be anywhere from about 25 to 70 years old, with the bulk of them 50 to 70 years old. This HUGE “heir” group typically lives RIGHT NEXT DOOR to owners THE SAME AGE AS THEY ARE yet has 1/6 the assessed value or ~18% (or less) the tax bill as their “unluckier” neighbors do. On older blocks, the disparities in assessments from house to house on the SAME BLOCK are enormous!
August 21, 2015 at 7:41 AM #788782livinincali
ParticipantI have the assessment data available to me. I ran zip 92117 (Clairemont) for all properties less than 5,000 sqft (there’s no real good way to separate residential from commercial except picking a size)
Here’s the numbers
AverageAssessment = 233038
NumberLessThan100K = 4224
NumberGreaterThan100KLessThan200K = 3175
NumberGreaterThan200KLessThan300K = 3596
NumberGreaterThan300KLessThan400K = 2871
NumberGreaterThan400K = 2178
TotalParcels = 15983I do think bg probably has a point. Just about half of clairemont’s properties are assessed at less than 200K. The average selling price price for a home in 92117 right now is 500K+ from what I can tell.
Seems like that’s true even for newer high end areas. This is 92130 (Carmel Valley).
AverageAssessment = 598220
NumberLessThan250K = 1741
NumberGreaterThan250KLessThan500K = 5038
NumberGreaterThan500KLessThan1M = 7076
NumberGreaterThan1M = 1611
TotalParcels = 15431 -
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