Public Housing,,, Crazy program

[bewildering]

Dumb question. Does prop 13 protect tax rates even if you move out and turn the house into a rental? I assumed you had to be an owner occupier to benefit. I thought prop 13 was meant to protect old people from having their fixed costs change.

[spdrun]

^^^ Yep!

[bearishgurl]

[quote=livinincali]I 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 = 15983

I 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[/quote]

Thanks for this instructive info, livincali. Do you subscribe to a service for this info, and if so, what is the name of the service?

I KNEW CA County assessors had a way of compiling this data but didn’t realize that (like CA County Recorders) they sold it on the open market (to Westlaw, County Records Service, etc). I guess since the SD County Recorders Office is now combined with the SD County Assessor’s Office and the SD County Clerk’s Office (ARCC) that they sell all of the info in their database allowable by law (no birth, death or marriage info without going to their office in person and producing identification, etc).

92117 is not only less expensive than 92111 (its southern neighbor), it is less well-established. 92111 was THE CHOICE location to buy into a new (at the time) tract for the former employees of PSA, Teledyne Ryan, Solar Turbines, General Dynamics, etc, located on the harbor. All of these SD “institutions” (all partially unionized) offered generous defined-benefit plan pensions for their retirees.

Those former employees who are still alive (their younger “heirs” if they are not) would be 75 – 90 years old today. I stand by my assertion that property taxes are still notoriously low today for many single family homes in 92111 on the coveted “mtn streets” (situated on or near Tecolote Cyn).

That is why I want to include a plat from 92111.

The first tract(s) in Carmel Valley were built in the mid ’80’s, IIRC. At that time, it was known as “North City West” (not sure when the 92130 zip code was assigned to that area). The original tracts had more one-story homes and none were of the “mcmansion” calibur which has been built there in recent years. They were smaller in SF on average (1600 to 2600, I believe).

Thank you for your post!

[XBoxBoy]

[quote=bewildering]Dumb question. Does prop 13 protect tax rates even if you move out and turn the house into a rental? I assumed you had to be an owner occupier to benefit. I thought prop 13 was meant to protect old people from having their fixed costs change.[/quote]

Not only does it protect rental properties, it protects second houses that you don’t live in, and surprise, surprise, commercial properties.

Here’s an article lambasting the tax break that commercial property owners are getting from this system.

http://www.huffingtonpost.com/robert-reich/corporate-welfare-california_b_8017580.html

Couldn’t agree more that this is totally wrong and needs to be addressed.

[spdrun]

Prop 13 isn’t the problem. Limiting property tax (essentially a regressive tax) to 1% and change of purchase price is good policy. So is limiting increases per annum. What stinks are the protections against revaluation when a property is transferred, if the transfer is done in a “clever” manner.

[flyer]

It’s true there are a lot of “loopholes” in CA laws that do benefit families who purchased property here over the past decades as our family has.

Imo, anyone, given the opportunity, would take advantage of these legal rights. That said, I wouldn’t be surprised if there are changes in the future.

[bearishgurl]

Prop 13 was legally challenged over 25 years ago and the case went all the way to the US Supreme Court and lost. The court’s main rationale for their decision was that the disparity in tax treatment between earlier owners and later owners (as a byproduct of Prop 13) did not violate the equal protection clause. But the opinion talked in circles, essentially implying that the earlier (prior to 1978) owners relied on a “predictable” tax bill when they purchased their properties. However, nothing could be further from the truth. Throughout history, CA property owners HOPED their properties would increase in value and gave no thought to increased assessments at the time of purchase or any other time. Prop 13 was not even on the radar screen! The opinion also stated that later owners (who purchased post-1978) already knew what they would be getting into (as far as their property’s assessment floor being initially set at their purchase price and increasing 2% annually) before they decided to buy. It stated, in essence, “If this group didn’t like the rules, they could choose not to buy.”

http://caselaw.findlaw.com/us-supreme-court/505/1.html

http://articles.philly.com/1992-04-15/news/26004157_1_limited-assessment-increases-property-tax-tax-burden

The lengthy dissent by Justice Stevens is very telling. Covering every single nuance of Prop 13, he discusses all the (faulty) rationale used by the court to uphold it. He missed absolutely nothing about this “statutory scheme” . . . he understood every single detail and ramification of it. He even referred to CA property owners prior to 1978 as “squires” (those existing owners at the time the measure was passed).

See “Aftermath” beginning at “Negative Effects” and then “Analysis” in the wiki page below.

https://en.wikipedia.org/wiki/California_Proposition_13_%281978%29#cite_note-46

Gov Jerry Brown was at the helm when Prop 13 was passed and fully realized (then and now) the long term ramifications of the measure. Immediately after his (re)election to the same post (over 30 years later), he stated:

“Proposition 13, because it took away the power of counties to tax, for the most part, it sent the decisions up to Sacramento. So we want to redistribute all that,” Brown said Tuesday.

Brown made clear Tuesday he was not blaming the state’s current problems on Proposition 13. But, he said, the decisions made by state lawmakers in the wake of Proposition 13’s passage have created an untenable situation.

“It was what the Legislature did after 13,” Brown said. Proposition 13 was not the problem, “it was what happened after 13 was passed.”

http://latimesblogs.latimes.com/california-politics/2011/01/gov-jerry-brown-talks-prop-13.html

Brown is correct, imho, but now stuck between a rock and a hard place, requiring tough decisions leading to unpopular cuts.

[bearishgurl]

[quote=flyer]It’s true there are a lot of “loopholes” in CA laws that do benefit families who purchased property here over the past decades as our family has.

Imo, anyone, given the opportunity, would take advantage of these legal rights. That said, I wouldn’t be surprised if there are changes in the future.[/quote]

I understand everything flyer. Of course, CA eligible property owners should take advantage of every legal way to avoid reassessment upon transfer. And that’s okay and well within the law.

But you must admit a few things to yourself:

1) CA families who managed to amass multiple real estate holdings amongst themselves prior to 1978 without needing to sell a formerly-purchased property in order to buy another property were very likely already solvent enough to be able to afford the property taxes on each parcel, whatever they came out to be.

2) Whether or not you owned any real property prior to 1978, you had parents who owned property who could ostensibly leave it to you after November 1986 (and perhaps did) before or after their deaths with their own low assessment(s) intact pursuant to Prop 58. You possibly had grandparents who could have left you real property after March 1996 with their own low assessment(s) intact pursuant to Prop 193.

3) Had you received a stepped-up basis (for assessment purposes) on any real property you “inherited” (as my siblings and I did in three other states) and thus were required to pay tax on it based upon its current market value, you may have made completely different decisions regarding the disposition of your inherited properties. You may also have decided not to purchase more real property on your own if you chose to keep any properties you inherited with tax bills attached to them which were 6 – 10 times the tax you have actually paid on them over the years and what you are paying on them today.

In other words (strictly for illustration purposes), let’s assume the passage of Prop 13 but not the later passage of Props 58 and 193 (allowing prior owners’ assessments to extend into perpetuity). If you inherited a property back in 1997 that your grandparent(s) paid $34K for in 1949 (a LOT of $ back then), decided to hang onto it and today it is worth $1.7M, your current tax bill on it might be $11K or more, NOT the ~$1500 tax bill you are enjoying. If you inherited two or more properties which had tax bills in the tens of thousands (instead of $800-2K), you have to ask yourself if you would have bought additional properties on your own over the years, thus increasing your property tax burden even more.

You’ve spoken here of your kids being financially independent and now making good salaries. They can well afford to pay “market-rate” property tax, no? Yet, by law you will be able to deed them or leave them valuable real property which has yours, your parents or your grandparents former assessments attached to them before or after you pass on. (But knowing well the “millenial mindset,” I’m not saying here that your kids would keep them instead of sell them.)

My point is, the financial decisions you made in life may have been very different had Props 58 and 193 not existed. You may have not been financially able or even desirous over the years to amass the RE holdings you have or may not have been able to hang onto every parcel which was bequeathed to you (not saying here that you even wanted to or did, but you DID have the choice and flexibility to due to the existence Props 58 and 193).

All three initiatives are VERY regressive. They disproportionately benefit CA families who had considerable wealth amongst them long before Prop 13 was passed. The passage of Props 58 and 193 were simply icing on the cake for this group’s estate-planning purposes. The only “qualification” needed to take full advantage of these “loopholes” (as you call them) is to already own real property in CA prior to the passage of Prop 13 and the more parcels owned … and the better located … the higher the subsidy bestowed upon the family members (including their descendants).

CA natives and other lifelong Californians who didn’t already own property by then (or whose parents sold their CA property long before the passage of Prop 13 and moved out of state, as mine did) didn’t get to benefit from the measures nearly as much. Sure, this group may currently have assessments which are 1/2 to 2/3 of current market value (depending upon time of purchase, area located and if the size of the dwelling was ever increased). But this group will never be able to benefit from assessments as low as 1/6 to 1/10 of current market value, like those who bought real property before (and long before) 1978. The Supreme Court Opinion stated that it agreed with Respondent (LA County Assessor) that “neighborhoods would be preserved if owners had a predictable tax bill and thus could properly maintain their properties.” I don’t agree. What I see on the street is that very, very marginal “heirs” are attempting to keep their parent(s) or grandparent(s) former home as “shelter” for themselves but since many of them never received an education (some never graduated from HS), they rely on very low social security checks (or SSDI, VA Disability, etc) to support themselves. There is absolutely no way that these owners can eat, put gas in their vehicle (if they have one), pay their monthly utilities and their $500 annual tax bill (based upon their ancestor(s) assessment), much less maintain their property on their extremely low (in some cases, less than $800 month) income.

Had this group been faced with a a $3000+ annual property tax bill at the time of “inheriting” the property, they would have likely sold it and taken the cash because there is no way in h@ll they could afford to pay that amount every year. They would have been better off in a low-income and/or senior housing unit.

This type of CA “heir” exists in all types of neighborhoods and leaves the rest of their neighbors having to permanently deal with their sorry-a$$ inability to maintain their properties in any way shape or form because they quickly got in over their heads in trying mightily to keep their inherited property.

[flyer]

BG, I’d be the first to admit many of the legal benefits many families have taken advantage of when building real estate portfolios in CA over the years may not be “fair” in many ways–but they are what they are for the many reasons mentioned here–at least for the time being.

When we, and many people we know chose this path, no one ever dreamed San Diego, and the state in general, would develop as it has.

When, in the late 1800’s, some of my relatives were clearing land in areas that developed into major neighborhoods around the city, I’m sure they never imagined the magnitude of what lay ahead.

We appreciate the opportunities we’ve been given, and realize they were simply a matter of being at the right place at the right time with the right resources and vision to make the most of it all.

[CA renter]

[quote=XBoxBoy][quote=bewildering]Dumb question. Does prop 13 protect tax rates even if you move out and turn the house into a rental? I assumed you had to be an owner occupier to benefit. I thought prop 13 was meant to protect old people from having their fixed costs change.[/quote]

Not only does it protect rental properties, it protects second houses that you don’t live in, and surprise, surprise, commercial properties.

Here’s an article lambasting the tax break that commercial property owners are getting from this system.

http://www.huffingtonpost.com/robert-reich/corporate-welfare-california_b_8017580.html

Couldn’t agree more that this is totally wrong and needs to be addressed.[/quote]

This is what I’ve been saying here for years. Prop 13 is a subsidy to many very wealthy people. I know of an apartment building in L.A. that has been owned by the same family for decades. It’s worth millions, but their tax bill is ~$14,000, IIRC.

Unlike BG, I don’t have as much of a problem with inheriting the Prop 13 tax basis (though heirs should not be able to step-up their cost basis for cap gains, either, if they keep the Prop 13 subsidy), because the reason Prop 13 passed was to keep people from being taxed out of their homes. I don’t think anyone should be taxed out of their family homes, but these homes should be their only residence.

While I fully agree with Prop 13 protection for a single primary residence, there is no reason in the world for us to be subsidizing landlords, vacation rental owners, absentee/second home owners, and wealthy commercial and industrial property owners, not to mention people like the Pardee family who are probably getting tax subsidies in the millions each year (not just Prop 13, but the Williamson Act).

http://www.conservation.ca.gov/dlrp/lca/Pages/Index.aspx

[bearishgurl]

Like CAR, I agree that Prop 13 should have applied to the original owner on their principal residence only at the time the initiative was passed (1978) regardless of their age at the time it was passed. Had the measure been worded to ONLY include the principal residence as long as the owner OCCUPIED IT and the later Props 58 and 193 were never passed, the youngest owner-residents who most benefited by Prop 13’s rollbacks (having an original assessment floor equal to the Sept 1975 rolls, not 1976 as I originally posted here) would have been approximately 60 years of age today and half or more than half of those receiving the subsidy would have been deceased by now, along with their subsidy. By 2035, the lingering effects of Prop 13 would minuscule to none. As such, the measure would have, in the end, amounted to “senior citizen tax assistance,” which is precisely how it was sold to the voters at the time.

As it stands, a very large portion of properties in CA’s most desirable coastal communities will be kept off the market into perpetuity because it costs its owners nearly nothing to keep these properties … even if vacant.

[bearishgurl]

[quote=flyer]BG, I’d be the first to admit many of the legal benefits many families have taken advantage of when building real estate portfolios in CA over the years may not be “fair” in many ways–but they are what they are for the many reasons mentioned here–at least for the time being.

When we, and many people we know chose this path, no one ever dreamed San Diego, and the state in general, would develop as it has.

When, in the late 1800’s, some of my relatives were clearing land in areas that developed into major neighborhoods around the city, I’m sure they never imagined the magnitude of what lay ahead.

We appreciate the opportunities we’ve been given, and realize they were simply a matter of being at the right place at the right time with the right resources and vision to make the most of it all.[/quote]

I understand that your family felt they may have been taking a big gamble when they purchased multiple properties (incl vacant land) in the lazy “branch-office town” that was once San Diego, flyer. I did not arrive here until the ’70’s but even then, arriving from a large, well-established city which was larger in population than SD at the time (Denver, CO), I immediately moved to Banker’s Hill and noticed the same two aging quonset huts facing the bay and the 3.5 (2.5 aging), semi-tall buildings dtn which your family did and laughed, thinking SD was “quaint” and sort of “bucolic” but had a gritty and lonely downtown. I also lived in (what was then semi-rural) Alameda County, CA thru age 12, where we frequented the Oakland Coliseum (nka the Oracle Arena) and the Cow Palace on the SF peninsula for events. In my mind, SD did not hold a candle to either Denver or SF/Oakland at the time and was in no way comparable to either city in amenities or sophistication. I was also used to dressing in the city, brought clothing to do so and quickly realized that no one actually ever dressed up in SD.

HOWEVER, based upon the aggregate of your prior posts, I feel your family would have not have been worth anywhere near what it is had it not been able to avail itself of the HUGE tax subsidies permitted by Props 13, 58 and 193, simply because it would have been way too costly to keep real property in their “portfolio” for decades (regardless of what their holdings were rented for) while at the same time acquiring more and more real estate. And your family is just but one small example in the big picture of the lasting effects of this ill-thought-out statutory scheme. On a larger scale, I know of two (Chinese) families in SF who were actual descendants of the crew who built the Golden Gate Bridge. These descendants (now age 35 to 45) each manage more than 150 residential units full time for their siblings which are scattered in three Districts of SF, situated both in multifamily buildings, converted warehouses into lofts and scattered 2-4 unit bldgs with “flats,” all “acquired” or “inherited” by their parents, grandparents and great-grandparents (these individuals and their siblings purchased NOTHING on their own). These young people were able to hang onto all the properties bequeathed to them simply and ONLY because their annual property tax bills are artificially low, i.e. $1100 – $1800 (for a 2-4 unit bldg); ~$5K for a 27-unit bldg; and $3,300 for a former 9k sf comm’l whse (now with residential lofts). As long as these young owners don’t add any additional stories or square feet to the perimeter of their properties (to trigger reassessment), I predict they and their siblings could easily be worth tens of millions apiece by the time they hit retirement age. Combined with the astronomical monthly rents they are now able to command for each unit (except in their few rent-controlled bldgs, which they are only required by law to maintain to the bare minimum), it was actually Prop 13 and its progeny which allowed their families … and later themselves, to amass this level of fortune. These two individuals possess RE licenses but no college degrees and DO NOT come from a highly-educated families! They are young multimillionaires simply by birthright (and CA laws later enacted which heavily favored early RE investors). And they are just a drop in the bucket of what is SF today.

Yes, I feel it IS grossly unfair to those long-time Californians whose parents sold their RE early on and/or who had to sell or deed away long-owned, coveted CA homes during their lifetimes for a variety of reasons which have nothing to do with defaulting on a mortgage. I DO deeply resent having to pay a HUGE portion of my low income ($4K++ annually) to the tax assessor when nearly half of my neighbors on my tract pay $380 to $800 per year in property tax (and another ~1/3 pay $800 to $1500)! And I’ve owned my latest home over 14 years. My neighbors greatly benefiting from this scheme are all within eight years of my own age and the vast majority are just as able-bodied as me and no more “deserving” of a tax break than I am. Even if our incomes are nearly equal, I find myself pinching pennies in cheap motor lodges with my ice chest on the open road in a 21-year-old vehicle while they fly, dine out and rent new vehicles on their trips. WHY? Their “vacation money” isn’t being spent at the tax assessor, plain and simple.

Well, if you can’t beat them, I say join them, folks. I’m going to find a nicer home than mine (even if only its “bones”) on a bigger lot in a “participating county” and avail myself of Prop 90 (a one-time deal). This may take me longer than I had originally planned, but so be it. I want my piece of the action … however small. I don’t care what happens to the CA RevTax Code after MY Prop 90 contract is processed and approved by my new tax assessor because it will be “grandfathered” and every property owner in CA deserves “grandfather privileges” … including me.

[Coronita]

[quote=bewildering]Dumb question. Does prop 13 protect tax rates even if you move out and turn the house into a rental? I assumed you had to be an owner occupier to benefit. I thought prop 13 was meant to protect old people from having their fixed costs change.[/quote]

Actually, it gets better than that. Your kids get to keep the tax basis too if they inherit your property. And I believe there are rules if you want your grandkids to inherit it too.

One of my relative’s neighbor pay $1500/year in property taxes in LA for a home that they bought back in 1979.. That home is probably worth about $1.4m.

I think the rule would also apply to a home that is owned by a corporation… Don’t know, haven’t looked into it. I guess in that case, the property tax would be pegged indefinitely, so long as the corp lives on 🙂

[ltsddd]

[quote=livinincali]
I 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.
[/quote]

Up until the late ’90s, most SFH in clairemont (3/2 or 4/2, 2-car garage) valued below $200K. I would say that 50% of the houses exchanged hands in a period of less than 20 years is quite significant.

[bearishgurl]

Sorry for the long T/J, HLS, but Prop 13 and its progeny are CA’s version of a “public housing subsidy” with which its “rich” and most “well-established” families just so happened to be the most “poised” to take the ball and run with it at the time Prop 13 was passed, subsequently reaping the most benefit from the laws.

Thanks for the platform, anyway. After my plat-map studies, I’ll create an instructive new thread on this very controversial subject (“holy grail or no,” lol) which is that elephant squeezed in front of the dais at 1301 10th St, Sac 95814 with no room to drop its peanut shells:

[img_assist|nid=25458|title=CA Assembly Chamber|desc=|link=node|align=left|width=220|height=165]

If I was a (properly funded) lobbyist for CA tax reform, I would have no problem whatsoever with helping to draft reform measures for the state ballot and going to county to county with my power point presentation graphically illustrating to the voters the gross inequities within their own counties which were inherently built into our present (failed) property tax “system” which was and is 75-80% the cause of CA’s broken budget, imho (the other 20-25% cause being the effects of unfunded mandates due to illegal immigration).

[Author]

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