Public Housing,,, Crazy program

[CA renter]

[quote=no_such_reality]For the 1 or 2 out of ten that get to buy it, but buying it is more expensive than renting. And frankly, many renters are renting out of necessity. They don’t have the money to close the deal on $500,000.

The other 8 will be squeezed into an even tighter renting pool that is already experiencing signifcant rent increases.http://www.ocregister.com/articles/rent-680104-month-three.html

And then prop 13 elimination plans will universally raise costs to ALL landlords.

What happens when all producers experience cost increases? They raise prices.

BTW, the largest slumlord in California is about to sell off a bunch of properties. CalTrans is going to sell the homes they own in the path of the never built 710 extension in Pasadena.[/quote]

Yes, the down payment is a huge obstacle for many people, especially when a “starter” home costs $450K and up. But owning can be cheaper than renting in many areas. In our neighborhood, it’s pretty close, precisely because of the ridiculous rent increases, especially if you have 20% down.

[no_such_reality]

While I think long term ownership is more beneficial than long term renting for building financial stability and wealth, that’s not what we’re talking about in this thread.

This is about whether gutting prop thirteen for any non-primary residence and removing the ability to protect the tax basis in family transfers will be better or not for the majority.

The proposal will make it harder for people to buy, harder to move up, harder to save to buy because it will increase rents and push more to corporation run housing which will churn them.

The anti-13 crowd has a lot of wishful thinking on what they want, but no basic economic connection to what will happen in their proposal.

[bearishgurl]

[quote=no_such_reality]While I think long term ownership is more beneficial than long term renting for building financial stability and wealth, that’s not what we’re talking about in this thread.

This is about whether gutting prop thirteen for any non-primary residence and removing the ability to protect the tax basis in family transfers will be better or not for the majority.

The proposal will make it harder for people to buy, harder to move up, harder to save to buy because it will increase rents and push more to corporation run housing which will churn them.

The anti-13 crowd has a lot of wishful thinking on what they want, but no basic economic connection to what will happen in their proposal.[/quote]

NSR, your post above assumes that current landlords who are most benefiting from the existence of Props 13, 58 and 193 are somehow “benevolent” and thus renting their affected propertie(s) below market due to the generous property tax subsidy attached to them.

In the absence of rent control, nothing could be further from the truth. LL’s charge (and get) as much rent as their local market will bear (to still be able to retain longer-term tenants). I will repeat again here that the amount of their annual property tax has nothing to do with this.

The end result of these propositions is that one set of property owners is unjustly enriched over the set who is paying closer to market-rate property taxes, plain and simple. The “unjustly-enriched” set can also afford to be more selective on tenants because they can hold a vacancy longer due to much lesser carrying costs than the “market-rate set” has, since many (most?) of these properties have been in the same family for ~40 years and are likely now free and clear. The latest “owner” (child or grandchild) is no more “deserving” (than the “market-rate set” of owners) of a generous tax subsidy than they are. The child/grandchild owner was simply born to people who were not necessarily even well off themselves, educated or even contributed anything to their communities but owned (or inherited) CA property at the “right time” and often situated in the “right place.”

These props (esp the last 2) are a gross example of unjust enrichment to one group (consisting of many thousands of younger, able-bodied individuals of working age) to the detriment of all the “near market-rate taxpayers” and our state and local governments.

[CA renter]

[quote=bearishgurl][quote=no_such_reality]While I think long term ownership is more beneficial than long term renting for building financial stability and wealth, that’s not what we’re talking about in this thread.

This is about whether gutting prop thirteen for any non-primary residence and removing the ability to protect the tax basis in family transfers will be better or not for the majority.

The proposal will make it harder for people to buy, harder to move up, harder to save to buy because it will increase rents and push more to corporation run housing which will churn them.

The anti-13 crowd has a lot of wishful thinking on what they want, but no basic economic connection to what will happen in their proposal.[/quote]

NSR, your post above assumes that current landlords who are most benefiting from the existence of Props 13, 58 and 193 are somehow “benevolent” and thus renting their affected propertie(s) below market due to the generous property tax subsidy attached to them.

In the absence of rent control, nothing could be further from the truth. LL’s charge (and get) as much rent as their local market will bear (to still be able to retain longer-term tenants). I will repeat again here that the amount of their annual property tax has nothing to do with this.

The end result of these propositions is that one set of property owners is unjustly enriched over the set who is paying closer to market-rate property taxes, plain and simple. The “unjustly-enriched” set can also afford to be more selective on tenants because they can hold a vacancy longer due to much lesser carrying costs than the “market-rate set” has, since many (most?) of these properties have been in the same family for ~40 years and are likely now free and clear. The latest “owner” (child or grandchild) is no more “deserving” (than the “market-rate set” of owners) of a generous tax subsidy than they are. The child/grandchild owner was simply born to people who were not necessarily even well off themselves, educated or even contributed anything to their communities but owned (or inherited) CA property at the “right time” and often situated in the “right place.”

These props (esp the last 2) are a gross example of unjust enrichment to one group (consisting of many thousands of younger, able-bodied individuals of working age) to the detriment of all the “near market-rate taxpayers” and our state and local governments.[/quote]

Agree that most landlords do not pass on their lower costs to their tenants, though some do. Our old LL charged us market rent when we moved in, but by the time we were moving out almost eight years later, our rent was a good $400-$600 below market, possibly more. There are a number of good and wise landlords around here who have been doing the same thing. But I would agree that they are in the minority.

We also need to distinguish between the different types of beneficiaries of Prop 13 protection:

1. owners who are original purchasers

2. the descendants/heirs of these original purchasers

3. non-owner-occupiers who are renting these houses out (traditional residential rentals, or vacation rentals…they may or may not be heirs, it doesn’t really matter)

4. non-owner-occupiers who are using these homes as second homes or vacation homes

5. commercial/industrial property owners who are original purchasers

6. commercial/industrial property owners who have purchased a share of a property from an original purchaser, which enables them to get the Prop 13 subsidy

—————–

I believe that you, BG have a problem with all of the above, with the possible exception of #1 (and #5?).

I think that #1 should always be protected, and am okay with #2 as long as it is their primary residence and they are not getting any subsidies of any sort on any other properties in the U.S., or even around the world. And if #2 elects to maintain the subsidy, then they (and their own descendants/heirs) would NOT be able to step-up the cost basis of the property when calculating capital gains upon sale — the basis would be the same as the original purchaser’s cost basis.

The rest should not be entitled to a subsidy except, possibly, for #5, and if we were to subsidize these commercial/industrial property owners, they should get a much smaller subsidy — maybe cap the amount that the assessment can rise in a given year to perhaps 4%, and only if the building they own is also their principal place of business and they get no other subsidies on any other properties in California. If there are multiple tenants in their commercial/industrial properties, then they would have to agree to rent control to ensure that the benefit of the subsidy was passed on to their tenants, as the purpose of the subsidy would be to help businesses maintain somewhat lower RE costs, though I’m not entirely behind this idea.

[bearishgurl]

Good post summarizing the problem in detail, CAR. Yes, I don’t have a problem with 1 or 5 because the folks in the “1” group who are still residing in their property with the original Prop-13 assessment will eventually pass on, making their ultra-low assessment moot (and eventually Prop 13 itself moot). It was the later-enacted Props 58 and 193 which allowed the ultra-low Prop 13 assessments to pass on down a family into perpetuity and that wasn’t the original intention of Prop 13. It was mainly to keep senior citizens (read: 65+ years of age) from being taxed out of their homes. It wasn’t to provide their hotshot age 30-40-something children or grandchildren in (expensive) SF or LA a $25K++ property tax subsidy on each multifamily building they’re currently trying their hand at slumlording over.

As far as #5, I do think agricultural landowners who inherited their property should get a pass-thru of their ancestor’s assessment as long as they are still using ALL the property for agriculture. If they decide NOT to farm or ranch for a season while they negotiate with Big Development over subdividing their land (and eventually sell it to that developer) then their assessment should be increased retroactive to July 1 in the year they decided not to farm anymore, regardless of when the sale actually consummates. I haven’t figured out the formula for this increase, but it should be substantial enough to keep them from “gaming the system” to stretch out their ultra-low assessment (or trying to transfer title to a child or grandchild who is a developer or will act as a middleman to unload the property on a developer). Also, if the state has any other programs which act as waivers of assessment for CA farm and ranch land owners and which have the effect of lowering their assessment per acre LOWER than what Prop 13 provides for, then the landowner shouldn’t be able to use both programs simultaneously on the same parcels of land. If the landowner is being paid by the Dept of Agriculture NOT to grow certain crops for particular season(s) or to leave their land bare, then this should have no bearing on their assessement for those particular parcels.

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