Public Housing,,, Crazy program

[CA renter]

[quote=no_such_reality]That laborious activity is what is needed. Corporations don’t need prop thirteen. An heir I’m more neutral on. Like the housing authority starting the thread, is the problem less than 1% of owners or 30% of owners?

As for non principal residence, I think those impacts would actually hurt the 99% more than it would benefit them. It would severely impact the rental market quality and availability and I doubt it would lower sales prices as the homes. Net result, desirable areas would become even more income elite with even fewer rentals.[/quote]

Prop 13 has kept many properties of the market because long-time owners are having their profits subsidized by all of the other taxpayers who are paying market-rate taxes. The subsidy is an incentive to hold onto real estate, as opposed to pushing landlords and owners of second (or third, fourth, etc.) homes to sell during market peaks.

Property taxes would rise to unreasonable levels mostly during RE bubbles. If rents don’t keep up with the rising taxes (and they won’t because renters can’t get NINJA mortgages to pay rent…you can only charge what the market will bear), it will incentivize landlords and other owners of non-owner-occupied properties to put these properties on the market to sell. This would put a damper on prices and help offset the bubble’s momentum at exactly the right times — when prices start to become unsustainable.

While I detest gimmicky mortgages and manipulations that are purported to “help people buy their own homes,” I do believe that the rights of people to own their own homes should trump the rights of landlords to profit off of renters. IMHO, society is better served when families control their own homes and housing costs, when they are more engaged in their communities (as owners and more established residents tend to be), and when people can own a paid-off residence as they near retirement age. Ideally, homes should be very affordable to buy, and they should be viewed as shelter, not as “investments” or speculative purchases.

In California, part of the reason that our housing prices are so high is because the majority of our housing units (apartments are included in this) are owned by investors. While I understand that everyone would like to be a mini-Trump, I don’t think it’s good policy to allow the already wealthy to profit from the poorer members of our society.

[CA renter]

[quote=bearishgurl][quote=EconProf]BG: Not everyone wants to be a landlord.
The decision of heirs to rent out rather than sell an inherited SFR depends upon a whole host of considerations. First, most heirs, especially if they are several, may have differing liquidity needs. They also face the question of managing the property, perhaps from afar, and dealing with all the headaches of landlording. SFRs are the least profitable of real estate categories from a cash flow standpoint. Yes, they may appreciate, but CA has had years-long episodes of depreciation at times, and having a tenant for a few years usually hurts the value.
Property taxes are only one of many expenses involved in making this investment decision, so it alone will not be the deciding factor.
BG, I agree with your opinion about the unfairness of the present laws. They grant an unearned tax break to an underserving population. This “subsidy” must be made up by other taxpayers.
But you have a tendency to jump to broad and unwarranted conclusions based on your own experiences in your particular older neighborhood. What’s needed are in-depth, unbiased, peer-reviewed studies of the total revenue loss due to these two Propositions.[/quote]

EconProf, I myself never want to be a landlord again. I agree with heirs’ differing liquidity needs but one of my questions (if there were siblings) was “Would you attempt to buy them out (in order to get an investment property with an ultra-low assessment)?”

I did not state it here but both properties which were the subject of my two questions were free and clear. This fact, combined with their low assessments, makes turning them into rental investments (for a locally-based heir) a good option, considering the “safe” alternatives today. Frankly, I’ve never seen a house passed down around here which wasn’t free and clear at the time of the owner’s passing, EXCEPT ONE around the corner which had been vacant for nine years prior and in terrible disrepair (where ~$20K is currently owing on it). When their mom finally passed, the 60-something son and daughter finally came in on weekends in a 4-month time period and did major repairs themselves and cleaned the property up.

My “broad and unwarranted conclusions” stem from what I’ve personally seen and witnessed on the ground almost the entire time I’ve lived in SD (~40 years). At all times, I have lived in well-established areas where there were always “heirs” occupying SFRs (some were still caring for infirm parent(s) but were expected to “inherit” the family home one day). In most instances, they were only children. Usually, the only child or sibling who took care of their parent until they died never made good money on their own to begin with so did not really “sacrifice” a career to take care of mom and/or dad. In any case, they usually needed a “free” place to stay at various times in their lives, and their parent’s home was always convenient for that.

One of my biggest “heir” issues is with extremely low-income “heirs” attempting to shelter themselves in their former family home after their last parent’s death. This typical heir either did not receive any cash, received very little cash or had to use what cash they were entitled to from their parent’s estate to buy sibling(s) shares out of the property. The vast majority of them had no savings of their own and likely could not qualify for a mortgage. I actually know of two “heirs” who took over their parent’s home after their deaths who had been living out of their car and 5th-wheel camper for months/years before their last parent passed and did not want to leave SD under any circumstances.

Even if a SFR is 1000 sf or less, it is a SFR, usually more than 40 years old with a >=5000 sf lot and needs constant maintenance which, as we all know, is not cheap, especially pest control and tent fumigation. Nor are gas & elec and water and sewer cheap (low-income ratepayers eligible for 20% discount on SDG&E bill, however). If a very low-income heir takes title by themselves of a home they inherited, the property invariably ends up quickly going to waste with trash and discarded items piling up around the property in 4′ high weeds causing neighbors to report the address to the city, who fines the heir/”homeowner” (for the first time in their lives). You can’t squeeze blood out of a turnip.

It’s a sorry situation for their neighbors and I’ve seen it all over SD, South and East County (I’m sure it happens in North County as well as all over the state).

There IS a such a thing as being “too poor” for homeownership … even if that home is free and clear and has an ultra-low assessment attached to it.

I’ve had this very discussion with one of the top probate attorneys in town, who told me, “I don’t care if they (the heir) had been thrice bankrupt and/or just got released from prison yesterday. If they are named in the trust, they are entitled to their portion. If they are only children and the trust leaves them whatever the remaining parent still had at the time of their deaths, then it is all theirs. What they choose to do with it is their business.” The attorney was right, except a lot of these “heirs” never had an attorney and never received good advice for their personal situations after their parent died. Since some of them have been making poor choices all of their lives, what is to stop them from making poor choices when they are finally “heirs?”

I apologize if the above sounds judgmental to some folks. This is my “brethren” I’m discussing here and I don’t have a college degree myself (but had a good public K-12 education and 2.5 years of college). For the life of me, public schools used to be very good to excellent in SD, South and East County (at the time these people attended them or abt 1955 – 1975). I’ve interviewed dozens of people (mostly age 55-62) in recent years in attempting to help them with their seemingly intractable problems and I often had a difficult time understanding how they allowed themselves to end up in the situations they were in. I came to the conclusion that they apparently just never took charge of their own lives.[/quote]

Just to be clear, I do NOT have as much of a problem with inheriting the Prop 13 basis, but if an heir chooses to do that, then the cost basis should NOT be stepped-up for the purpose of lowering cap gains taxes. These are obviously different taxes, and different allocations, but just saying that either you inherit the cost basis, as with Prop 13, or you don’t — pick one, because you can’t have it both ways.

Personally, I believe in enforcing private property rights, especially as it relates to one’s primary residence. And a home that has been in the family for many years — especially one that is the primary residence for one or more heirs — should not be taxed in a way that would force the family member(s) out. But this applies to only a single property for the person living there. If they get Prop 13 protection on the family home, then they should not get it on any other property. I advocate that in every case, FWIW, people should only get Prop 13 protection on a SINGLE piece of property, and it should only apply to a primary residence.

What I oppose is a tax subsidy for corporate owners, wealthy owners of large swaths of land, and landlords who are not subject to rent control laws that would ensure that the tax subsidy is passed along to the renters.*

*I’ll address NSR’s suggestion that Prop 13 keeps rents low for renters in the next post.

[no_such_reality]

Answer the right statement then, I didn’t say low, I said increase the tax expenses would increase rents

I’m not opposed to removing it for corporations either but again, like BGs point above I still don’t see why a massive tax grab is being proposed

Nor have I seen plans that don’t throw the baby out with the bath water

Either way I’m done with this discussion since its just a repeat of the higher taxes and more government discussion with no plans for either.

[bearishgurl]

As far as land used for agricultural uses in CA, I’m mostly okay with current owners keeping the original assessment of their parent/grandparent as long as the descendant continues to operate the land for agricultural uses and doesn’t instead subdivide and attempt to develop it with its ultra-low assessment intact. My rationale is that CA supplies food for the entire nation (especially western states) and food is a necessity. I DO realize that these landowners also receive agricultural exemptions from their respective assessors as well, which may or may not be a better deal for them than their parent/grandparent’s original assessment.

As far as wineries, I’m really on the fence here whether their current operators should be allowed to “inherit” their ancestor’s ultra-low assessment (most of them have) as they operate for profit and wine is not a necessity. However, wineries DO bring a lot of tourism to CA, and, for the most part maintain their land well, create beauty and contribute heavily to their surrounding communities. I also realize that a new winery may take several years to turn a profit and (like domestic dog or cat breeding) it is mostly a “labor of love” and is slow to show a profit, if at all. This is evidenced by the many startup wineries which end up being folded into or having to contract with larger wineries due to ultimately being financially unable to process their crop and bottle on their own. The existence of wineries in CA has also been doing a GREAT job of keeping thousands of acres of prime real estate OUT of the hands of Big Development which has undoubtedly averted more urban and suburban sprawl.

As far as your typical Norwalk Section 8 heir/slumlord (and there are many thousands in CA which fit this description, btw), AFAIK, he/she should receive title to their parent/grandparent’s multifamily investment property with a tax bill equal to its stepped-up value on the date of their deaths (or title transfer), whichever occurs first. The reason is because HUD is going to pay that landlord/heir market-rate rents on time every month no matter how much they are paying in property taxes. The landlord’s expenses are irrelevant to HUD. They pay landlords market-rate rents according to the condition of the complex/units and what the local rental market will bear no matter how much their eligible tenants’ monthly portion of the rent is. Likewise, heir/owners of CA market-rate investment properties (both residential and commercial) should also pay property tax based upon their “inherited” property’s stepped-up value on the date of title transfer. These two sets of LL’s (as well as their “straw `owners'”) who have been (legally) sucking CA and its cities/counties dry and pocketing the proceeds every month are the prime reason why Prop 58/193 needs to be repealed and the sooner, the better.

[livinincali]

I think there’s a couple points here to consider.

Tax policy in CA certainly encourages inherited properties to be kept within the family either via heirs moving into the property or as a rental.

I’m not entirely convinced that in 10 to 20 years that we could see significant owner user communities turn into mostly renter communities for a couple of reasons.

1) I just don’t think the market for dated 3/2 smaller properties at @ $2500+/mo is really that deep.
2) I think some significantly portion of properties will get the equity striped out via reverse mortgage or some other means.
3) I think this next generation that inherits these properties may want the instant gratification of selling rather than land-lording even though it might be in their long term interest to do so.

The last point is that there is a significant number of likely dated properties that could potentially hit the market over the next 10-20 years. Might be a flippers dream come true or it might just mean appreciation going forward in housing is much more limited than people are currently considering.

[bearishgurl]

[quote=livinincali]I think there’s a couple points here to consider.

Tax policy in CA certainly encourages inherited properties to be kept within the family either via heirs moving into the property or as a rental.

I’m not entirely convinced that in 10 to 20 years that we could see significant owner user communities turn into mostly renter communities for a couple of reasons.

1) I just don’t think the market for dated 3/2 smaller properties at @ $2500+/mo is really that deep.
2) I think some significantly portion of properties will get the equity striped out via reverse mortgage or some other means.
3) I think this next generation that inherits these properties may want the instant gratification of selling rather than land-lording even though it might be in their long term interest to do so.

The last point is that there is a significant number of likely dated properties that could potentially hit the market over the next 10-20 years. Might be a flippers dream come true or it might just mean appreciation going forward in housing is much more limited than people are currently considering.[/quote]

livinincali, among these “dated 3/2” (and 2/1) SFR’s, I only see about one-fourth of them being turned into rentals by heir(s) from my street view (and those LL-heirs do reside within SD County and manage the property themselves). What typically happens is that one of the original owner’s boomer (or early Gen X) children moves in the old family homestead to occupy before or after their parent’s death, likely for the rest of their lives. If they are only children, then there is no one else with which to fight over the property. In the case of heir-siblings, there always seems to be at least one sibling who has been down on their luck for many years and/or has never been able to “own” a home and is more than happy to be able to occupy their childhood home (if they haven’t already moved in under the guise of “taking care of the last parent”). I haven’t really looked too deeply on how these heir-siblings are financing the property if there was little cash left in the estate when the last parent died (and I have only examined a couple of probate cases in this regard). Most of these homes were in trust and kept out of the courts. It is very possible that the “successful-in-life heir-sibling(s)” are carrying a low-rate, unrecorded loan (for ten years?) to give the occupying heir time to pay off the non-resident heir(s) their portion of an agreed-upon value of the property before the estate issues them a quitclaim deed. I’ve actually seen this done twice, both times with out-of-state/out-of-county heirs making the loan to the less-fortunate local heir who is already occupying or wishes to occupy the family home.

I don’t think Props 58 and 193 have the effect of actually changing the complexion of single family neighborhoods (ie mostly owners to mostly renters). They have the effect of keeping properties off the market indefinitely because the “more unfortunate heir” wouldn’t be trying mightily to make their parent’s/grandparent’s old property theirs if the taxes were $4000+ …. like mine are …. on the very same block/subdivision. And heirs taking advantage of these Props are on the (undeserved, imho) receiving end of a gross inequity among similarly-situated homeowners living in very similar homes amongst each other.

Inheriting a parent’s old home (no matter what the condition) is absolutely a windfall for those who are 55+ and have not been able (or willing) throughout their lives to earn a pension, have no savings, have never owned a home and perhaps don’t even yet have enough quarters of employment under their belt for a SS (OASDI) award in their own right to begin collecting at age 66+. First and foremost, this group needs stable housing that they don’t have to get on a 3-year+ waiting list for and which they can’t be evicted from and their former family home fills this need.

As far as these homes being desirable to today’s SD millenial buyers, they might be if they were located near the beach (but would then be too cost-prohibitive for them). Millenials seem to heavily prefer new or newer construction to buy or rent (even with HOA/MR added in). And millenials typically do NOT want to mow lawns or do any heavy landscaping. Even my own kids don’t. They just don’t care whether the property they buy has any land around it (even if just for buffer space). I think those are strange values to have while attempting to raise kids, but whatever. SD millenials with school-age kids will buy older homes on blocks where a relative resides who is willing and available to take care of their kids all day (or after school) or both during the business day while they work. Especially if they have relatives willing to help them get the house (usually make the downpayment for them).

In other coastal counties of CA, millenials will buy whatever they can get an accepted offer on, (age be damned) and are thrilled to be able to buy any home at all. SD Millenials (now the biggest buying group) has been spoiled over recent years to “new” and “newer” construction because there is always a lot of it on offer in 3 of 4 corners of this county (excepting the SW corner). I don’t think they care much about difference in commute times, either. “New” or “newer” is king to them.

[bearishgurl]

livincali, I don’t see a proliferation of “dated properties” (SFRs) flooding the market at any one time, ever. I believe those owners of “dated properties” who succumb to reverse-mortgage lenders are far and few between in SD. The majority of senior citizen-homeowners in SD County have more pension/SS monthly income than they can even use, due to many thousands of them collecting pensions and survivor benefits from the VA and CSRS/FERS/SDCERS/SDCERA + SS. Tricare for Life charges military retirees and survivors very little in monthly premium (and no copays except for a small copay for brand name drugs) for their Medicare Part B and D coverage. SD at one time was a city/county populated by predominately government workers and military and a good portion of those senior-homeowners (now retired) are still alive and not going anywhere …. nor will they ever need to take out a reverse mortgage, IMO.

The only seniors I know of who were stupid enough to do that owned fairly expensive homes in Bonita, free and clear. Their spoiled 30-40-something kids convinced them to get a reverse mortgage to (a) bail them out of the fog-a-mirror-get-a-loan mess they created for themselves; and, (b) pay for their grandkid’s college education when they could ill afford it. The first spoiled kid ended up losing their own home, anyway, in spite of mom’s earlier bailout and the second spoiled kid’s son had to drop out of college after he found out that his mom spent the rest of his college fund on a luxury vehicle for herself.

Seniors shouldn’t be so codependent to their loser-adult children and fall for their manipulation but oftentimes they are and do … to their detriment.

[CA renter]

[quote=livinincali]I think there’s a couple points here to consider.

Tax policy in CA certainly encourages inherited properties to be kept within the family either via heirs moving into the property or as a rental.

I’m not entirely convinced that in 10 to 20 years that we could see significant owner user communities turn into mostly renter communities for a couple of reasons.

1) I just don’t think the market for dated 3/2 smaller properties at @ $2500+/mo is really that deep.
2) I think some significantly portion of properties will get the equity striped out via reverse mortgage or some other means.
3) I think this next generation that inherits these properties may want the instant gratification of selling rather than land-lording even though it might be in their long term interest to do so.

The last point is that there is a significant number of likely dated properties that could potentially hit the market over the next 10-20 years. Might be a flippers dream come true or it might just mean appreciation going forward in housing is much more limited than people are currently considering.[/quote]

Agree with this.

And we can’t forget the foreign investors who were speculating on U.S. real estate because they had so much money from their own countries, thanks to their own central banks and governments. If their economies crash, this could have a major effect on U.S. real estate.

[bearishgurl]

[quote=bearishgurl]livincali, I don’t see a proliferation of “dated properties” (SFRs) flooding the market at any one time, ever. I believe those owners of “dated properties” who succumb to reverse-mortgage lenders are far and few between in SD. The majority of senior citizen-homeowners in SD County have more pension/SS monthly income than they can even use, due to many thousands of them collecting pensions and survivor benefits from the VA and CSRS/FERS/SDCERS/SDCERA + SS. Tricare for Life charges military retirees and survivors very little in monthly premium (and no copays except for a small copay for brand name drugs) for their Medicare Part B and D coverage. SD at one time was a city/county populated by predominately government workers and military and a good portion of those senior-homeowners (now retired) are still alive and not going anywhere …. nor will they ever need to take out a reverse mortgage, IMO. . . [/quote]

Okay, well I’ve got my SD Co plat maps now and will endeavor to work on them on Sunday. But I’m going to have to retract my statement above as it applies to some NorCal zip codes. I just spent an hour+ perusing single family home listings in Saratoga, CA (Santa Clara Co) which I have not done in about 3 yrs. My search criteria was simply a SFR, 3/2/2, one story with a fireplace. 95070 has always been one of my fav zip codes :=))

There are quite a few listings currently on the market in 95070/71. Over half of the listings I looked at were assessed at $75K to $95K but nearly ALL OF THESE were asking $1.2M to $2.8M. Average lot size was about one-third AC and there were several lots much larger. House SF was about 1600 to 2800 (avg about 2250 sf). Year built was 1955 to 1970. None of the listings had any (legal) additions which added to the footprint (or the assessment) of the property. I didn’t take any notes, but based upon my memory, market time was 1-68 days with about 1/4 “pending” and maybe four which appeared to be relists (BOMKs) with 2-3 of those with slight price reductions.

Okay, now for the general condition of these listings:

–Very few had lots which had been watered regularly. Lots of brown and patchy lawns and dry landscaping and one vacant listing had a green pool. Much of the landcaping was elaborate and high-maintenance.

-Several had the original pink/maroon trim and beige/tan trim classic Daltile in the bathroom(s) and matching fixtures (circa 1950’s).

-MANY had 40+ year-old carpeting throughout, even kitchen carpeting, both (1970’s era) high/low plush in orange/brown and avocado/gold … even shag carpeting!

Most of the kitchens were only partially remodeled (meaning newer appls usually but maybe newer countertops but the old cabinets and flooring were left). I saw SEVERAL listings with plywood kitchen cabinets with their (intrusive) black hammered hinges and knobs of the era! Some had been painted over.

Most of the window coverings were castoff curtains the realtor threw up there and tied in a knot (on a vacant “staged” house) or very heavy multi-layered elaborate custom drapes with cornice boards and swags (circa 1970’s – ’80’s).

A few houses had grab bars and other bathroom modifications suggesting that senior citizens (or their estate) were the sellers.

Okay, so we’ve got a few dozen SFR listings on large lots just 10-15 mins from Cupertino or Sunnyvale (freeway optional) with some virtually at the foot of the redwood forest which have been owned for decades by the same owner (or their heir). Of course, I’m still able-bodied, but if I owned (or inherited) one of these properties (condition be damned) I’d by happy to pay the $850 annual taxes (+2% per year) and live there until I die. But that’s just me. Perhaps most of these sellers ARE now alone, sick/incapacitated (or both) and can no longer take care of the property.

I’m now of the opinion that there must be a “tipping point” where the gain (if they are able to successfully sell) is so great that, as a prospective senior-citizen seller, it is not worth keeping your ~$850 annual tax bill anymore.

Evidenced by a number of those listings now sitting on the market 47-68 days (an anomaly for this region), I DO believe that seniors (and their heirs) are now attempting to “test the market” to see how much someone will actually pay for what amounts to a gut/remodel (for most of today’s buyers) on a good-sized lot in their area. This tells me that even those buyers who can afford to buy these properties around there are letting them sit at the current asking prices. Obviously, a seller who thinks they might get $1.6M++ for a property they paid ~$32K for in 1961 (and has done little to the property over their years of ownership) is looking for a windfall to help fund the rest of their retirement or deposit into their “estate.” Or their “heir” is looking to fund their own retirement because they were unable to save enough themselves lol.

When a SD owner-occupant of a dated (even run down) SD house can only recover $300-$500K upon sale and their annual taxes are $850, it probably isn’t worth it to them to sell because they don’t know how much longer they’re going to live and they have to live somewhere. Also, storage units cost about $275 mo apiece and if one needs several of them (because they can’t bring themselves to get rid of anything) it can get pricey, so they decide to use their old (now vacant) home for storage. It’s more beneficial for them to just let their kid(s) deal with the house when the time comes. But if a similarly-situated senior citizen might instead recover $1.5-$2M upon sale of their longtime home, that’s a game changer. That’s plenty of money to pay one of their kids “rent” into eternity or their choices are exponentially increased as to where they could spend their remaining years.

I “saved” a few of these listings so I can monitor what they actually sell for and how long it took for them to sell. This was a very eye-opening “experiment” for me.

A little further up the coast (Half Moon Bay and Pacifica in SM Co) I also found 3-4 of what I thought were pretty good deals on larger lots listed in the $700’s today. These small “cities” are “off the beaten path” on the other side of the mountain range from SV and can be difficult and time-consuming to commute in/out of for SV worker-bees, especially when it rains. Hence, it seems some pretty good deals can still be found in there. I can’t currently qualify to buy into one of those areas but I sure wish I could put them on my retirement “short list.” :=]

[bearishgurl]

I’m now very interested to see how this “tug of war” between buyers and sellers in Saratoga ends up playing out! Saratoga IS the best town in SV (it’s not really IN SV but adjacent to it). It you’re looking for a sprawling rancher, no other SV city can compare to it.

It has (one of the) best quality of life in the nation, IMO.

[bearishgurl]

Question for the Piggs: Would a weed-filled vacant lot of 1/3 AC in Saratoga, CA and zoned R-1 be worth over $1M today?

[bearishgurl]

I forgot to add that a large portion of the driveways in Saratoga are asphalt and many of them in the listings I saw (even the concrete ones) are full of cracks. A (concrete) driveway of that size costs about $25K to pour today.

[Happs]

If Prop 13 were eliminated, what % of current assessed value do you all think is a fair amount for residential property, commercial buildings, raw land, agricultural land, etc?

Speaking of “public housing,” I’m happy that some fortunate and well deserving people will be able to live along the coast in Solana Beach in a forthcoming affordable housing project.

http://www.sandiegouniontribune.com/news/2015/aug/19/court-ruling-solana-beach-the-pearl-development/

Communities that resist these types of developments and also affordably priced businesses don’t realize that they will end up paying more for goods and services.

[no_such_reality]

[quote=bearishgurl]I forgot to add that a large portion of the driveways in Saratoga are asphalt and many of them in the listings I saw (even the concrete ones) are full of cracks. A (concrete) driveway of that size costs about $25K to pour today.[/quote]

I’ve being seeing that for three years in my neighborhood. Homes that have been owned for 40 years go up for sale at near market. they eventually come to reality and sell about 10-15% lower to one of the many investor flippers (last one I talked to had five investor offers first day. It then comes off market for 1-3 months and back on the market about 20-25% above their original listing.

I’ve watched home after home after home change hands.

[urbanrealtor]

[quote=bearishgurl]Question for the Piggs: Would a weed-filled vacant lot of 1/3 AC in Saratoga, CA and zoned R-1 be worth over $1M today?[/quote]
My family is in the biz up there.
I will ask.

[Author]

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