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November 27, 2012 at 5:37 PM in reply to: OT: Luckily we taxed Amazon so they bring jobs here! #755380
bearishgurl
ParticipantVery insightful post, Econprof.
My experience has been that these projects which need a “set aside” of a certain number of units for rent or purchase by low-income individuals and families (in order to get a permit to build at all) are invariably situated in smaller cities who want to “grandstand” that they’re “doing something” about the cost of housing. I’ve seen this type of “set aside” in complexes in Del Mar and Coronado (yes, Coronado). And there are several in Carlsbad. They serve as political “showpieces” for these small governments who can now say they did! “And look, [visiting dignitaries] … here it is! Let me take you on a tour of the grounds. We’re so proud of it!” Of course, they don’t advertise the fact that those new sucker “owners” are going to lose their a$$es on their “investment” in this debacle.
I’ll bet if the same developer wanted to put up low income rental units on 69th Street or Skyline Dr in SD and sell them to non-profits and let the local housing agency manage them, the City of SD would not only give them tax credits to do so but PAY THEM a BIG BONUS to tear down and clean up the unfinished albatross the last “low-income” housing developer left behind 20+ yrs ago when they went belly-up! They could REALLY MAKE A DENT in the “affordable housing” problem there. They won’t HAVE to “set aside” a “token” amount of units built on expensive land. It may have an existing teardown but they can likely still get a very suitable parcel for these projects in 92105, 92113, 92114, 91945 and 91977 … yes even today.
My personal feeling (however “unpopular” it may sound) is that housing in CA coastal cities has traditionally been tiered in a “caste system.” The “dues-paying” homeowners (ones with prior “sweat equity” in two or more CA coastal properties or those who are otherwise independently well off) are the ones who are likely to have the cash and stamina for the long haul to purchase and maintain a SFR in the most coveted coastal areas.
A “transplant” family of four making <$50K should not expect to waltz into one of these counties and demand to live in a beach area or other coveted, established area, unless they can otherwise afford it. They can start their property-shopping (or rental shopping) expedition on 47th St in SD (or other similarly situated areas), just like I did. And a “native” family of four making <$50K can often employ their local relatives' help in obtaining and getting a nearby available fixer ready for them to occupy. Many young locals DO go this route, especially those who want grandparents nearby (for childcare). Some Piggs might be shocked to learn that if they took a door-to-door survey of longtime homeowners on the best streets in SD (WTH, start on Rutgers Rd in LJ) they would learn that many of these owners bought their FIRST properties in nondescript tracts on very "humble" streets in 92102, 92104, 90105, 92115 and 92116. Everybody has to start somewhere. I'm not referring to the OP here (don't know how old they are or their preferences) but too many Gen Y entering the housing market today seem to just want the best areas or nothing. Or brand new construction or nothing. Their "expectations" are very often unrealistic for their earning capacity and asset level, IMHO. The most desirable CA coastal cities have never been "set up" to house families who can't afford to live there. They're not for everyone. That's what places like Fresno, Victorville, AZ and TX are for 🙂
Participant[quote=flu]…I “fixed” the other link too…[/quote]
http://piggington.com/cash_out_refinance_then_tax_free_muni_investment_0
Hey flu, why did you feel you had delete your OP when you got some good, valuable responses?
Participant[quote=flu][quote=bearishgurl]Uhh, I remember glancing at it. It was just another one of flu’s convoluted “what if? scenarios” asking for opinions. Kinda hard to follow ;=]
A similar thread he posted later made more sense:
http://piggington.com/cash_out_refinance_then_tax_free_muni_investment_0
[/quote]Well, gee BG, if that’s the case don’t send me an PM asking me for investment advice…
But thank you reminding me (again) why I’m wasting my time here. Because not that anyone really who knows is willing to share anyway![/quote]
flu, I appreciate the advice 🙂 and I’m not qualified to give an opinion on most of the subjects you post here. Maybe other Piggs wouldn’t have found your (deleted) thread “convoluted.” I did because I couldn’t follow it very well. But “financial advisor” has never been one the hats that look very good on me :=0
ParticipantUhh, I remember glancing at it. It was just another one of flu’s convoluted “what if? scenarios” asking for opinions. Kinda hard to follow ;=]
A similar thread he posted later made more sense:
http://piggington.com/cash_out_refinance_then_tax_free_muni_investment_0
Participant[quote=SDEaves]BG,
Just as you said last month, homes in our price range are getting snatched up by cash buyers.
Since last month’s post, we have put in 2 offers in LM but to no avail. One was taken by an investor; the other we were outbid.
We are still searching. As you and other Piggs have said, inventory is extremely low in our price range. So this all should come as no surprise to you 😉 Your last post implies some sort of impatience at us taking our time with buying and asking questions in the meantime. Perhaps I read into your last post wrong? We will gladly update you once we close escrow on a home. Please send us good luck with our search- we need it![/quote]Glad to hear you have been actively placing offers, SDEaves. The reason of my mentioning that you stated on your previous thread that you took a year to “look?” is because that is a very long time to simply “look” while interest rates are inching lower and lower, thereby increasing your competition. Perhaps you also placed (unsuccessful) offers during that time frame but my understanding was that you didn’t and were just “looking.”
I stand by my prior recommendations for you of SFR’s in LM, LG, Lakeside, Santee, and even Spring Valley (now on the SR-125). As a family of five with three small children, you don’t have to accept a condo today. With a condo, even in the absence of low income units, your future saleability and future sales price is largely out of your control. These factors are in the control of your neighbors in the complex, the quality of construction and most of all, the HOA. If you buy a condo now, you will invariably grow out of it and may not easily be able to sell. Even if you CAN successfully sell and recover all or most of your DP, you will then have to qualify to purchase the same SFR’s you are looking at today at a higher price. You stated your family is not a “dual income” family.
The type of residential market we’ve had here in the past 18+ months is the type where buyers (ESP those in your price range) must be willing and able to immediately act and have your counter offer figure at the ready in case there is competition for the property. You can sort out the condition of the property later in escrow with an inspection contingency. The only way I see that you can initially lose out this way is if the property is an obvious “heavy fixer” (which you would not likely place an offer on, anyway) and cash investors waiving the inspection contingency are flocking to it. This doesn’t typically happen today unless there is a LOT of potential “sweat equity” in the property due to its “location.”
If I was in your shoes and had to choose a daily commute of equal distance using the SR-52 or SR-125, I would consider those communities along the SR-52 first. The SR-125 is much more crowded because it now comes from the int’l border (its toll road ceases at SR-54). HOWEVER, the properties in your price range will have more “curb appeal” (likely have older, raised foundations) in LM and LG. Lakeside DOES have some properties like this, but many of them have split-level backyards (which you might like – they are “horse properties”).
If you will continue to look and place offers in the areas I have just mentioned again here, I don’t believe you will run up against as much competition as you have been. These areas are favored by individual buyers who grew up there and also for their larger lots with more liberal zoning. You won’t be running across these hundreds of “dual-income parent” buyers from somewhere else who are primarily looking for a “lifestyle” as you may have been in the past. You will hopefully instead land a good solid home with room for possible expansion that would last your family for many years.
JM2 cents … and the best of luck on your search, SDEaves.
Participant[quote=CA renter][quote=bearishgurl][quote=CA renter]…I know an owner of an older, mid-sized apartment complex in LA, and their property taxes are less than $12,000/year![/quote]
Do you know how many units are in this complex and their approximate composition (ie 40-1br, 30-2 br and 16 3-br units)?
This would shed some light on the per-unit breakdown of that $12K tax bill.
Thx.[/quote]
BG,
It’s a ~24-unit building in a busy, expensive area near LA. Just checked, and their current tax bill is for ~$14,000, so it’s a bit higher than what I last heard, but still…
Not sure of the exact unit setup, but there are at least a few 3/2s, with probably half (or more) being 2/2s. The rest are 1/1s, and I’m not even sure if they have any studios. The property is probably worth a few million (~$3 million, probably more).[/quote]
If this building in a “busy, expensive area near LA” was purchased today at just $3M, its first full tax bill would be just over $35K. That is $21K more than they’re currently paying.
And not to be too facetious-sounding, but pray tell, are these owners the ones who bought it before April 1978 or are they “heirs?” Do they have any outstanding mortgages against it?
And what is the gross annual rental income of this building, if you know ….
Just curious ;=]
Participant[quote=CA renter]BG, I don’t even think we need to worry about the inherited aspect of Prop 13, as long as it was for a **single primary residence,** but do think that we need to allow people to EITHER:
-retain the Prop 13 basis and disallow the stepped-up cost for cap gains upon sale
OR
-allow the heirs to step up the cost basis for cap gains, and use this value for property taxes.
It has to be one or the other. It is totally wrong that heirs get to use their ancestors’ cost basis for property taxes, and then use the stepped-up value for cap gains…[/quote]
I agree with this, given the current realities.
But fundamentally, I believe Props 58 and 193 should be repealed, as they are NOT in keeping with the original intent of Prop 13, which was to keep seniors from being taxed out of their homes. An able-bodied young parent with minor children (heavily using public school services and all other local services) can ostensibly “inherit” a primary residence and in doing so “inherit” the same assessment (+2% snnually) of the parent/grandparent who left it to them. They often have the means to pay the tax based upon the stepped-up basis upon death being equal to the *new* assessment … but … they aren’t required to and never will be as long as they own the property. It’s a “loophole” which amounts to unjust enrichment (to varying degrees) at the expense of similarly-situated taxpayers who purchased their properties after April 1978. This “loophole” will go on into perpetuity and will have the effect of keeping the vast majority of CA’s most valuable and best-located properties off the market. There is LITTLE TO ZERO INCENTIVE for these longtime owners (or their heirs) to EVER sell … unless they have no heirs to leave their property to or none of them want the property upon their deaths (rare).
A Prop-13 protected tax bill for a ~1600 sf SFR in a “working class” area of SD was currently about $368 at the time of a 2011 death. 1.02 x $368 = $375 (heir’s tax bill for 2012) …. and so on. Their assessments are coming from such a low floor that it will likely never come close to hitting their property’s fair market value in their lifetimes!
The fallout of Props 58 and 193 have had the unintended consequences of severely reducing CA’s city, county and school budgets and Teeter funds (which run the courts and prisons), and are/will be playing a HUGE role in eventually bankrupting our state!
This problem, created by our (misguided) Legislature in the 80’s, is not small. A HUGE AMOUNT of property owners have availed themselves of these perks and will continue to do so with nearly every death of a longtime CA property owner.
Prop 13 (as it applies to the original owners who still own the same property today, will eventually become moot with the deaths of its last beneficiaries (approx 2040), assuming Props 58 and 193 are repealed.
Repeal of Props 58/193 would go a long way in getting CA out of the fiscal “black hole” it has managed to get itself into, IMO.
Participant[quote=spdrun]Frankly, in an ideal state, R.E. taxes would approach zero, and all revenue would be from income and sales tax.[/quote]
If a system like this were in place, Gen Y (that’s YOU, spdrun) would be SCREWED.
Retirees no longer have W-2 wages to pay “income tax” with and don’t “consume” anywhere near what younger generations do, so don’t pay much sales tax, either.
Participant[quote=CA renter]…I know an owner of an older, mid-sized apartment complex in LA, and their property taxes are less than $12,000/year![/quote]
Do you know how many units are in this complex and their approximate composition (ie 40-1br, 30-2 br and 16 3-br units)?
This would shed some light on the per-unit breakdown of that $12K tax bill.
Thx.
Participant[quote=CA renter][quote=paramount]In California the only people who matter are gov’t workers and their subjects.
A policy of confiscation applies to everyone else.[/quote]
Are you on auto-record or something? You never say anything useful; you just keep regurgitating these talking points without ever addressing facts that counter your nonsensical blather.
Address the problems caused by Prop 13, especially as it applies to commercial property owners, residential investors, and owners (including owners like Pardee) who are sitting on vast tracts of incredibly valuable land, yet are not paying market property taxes. Why are taxpayers (and public sector workers!) expected to continue subsidizing the profits of these entities?[/quote]
CAR, you forgot about the thousands of SF landowners (comm’l AND residential) who have multiple holdings in the country’s most expensive city for which they are paying =<$400 to about $1600 annually in property taxes, all due to these parcels' "eligibility" to be assessed pursuant to Props 13, 58 and 193. Next stop .... Santa Monica .... where multiple aging beachfront towers have been subject to "rent control" for decades. How much would you estimate the assessments are on those?? Does an average of $15K per unit sound about right?
Then we move down to that cute 1100 sf Birdrock cottage with a “peek view” of whitewater … currently owned by a single 62 yo “heir.” She’s actually paying $368 annually in property taxes.
And everything in between and beyond in CA’s finest coastal communities …. I could go on … and on :=0
Do you think CA’s cities, counties and Sacramento are actually getting their “fair share” from all of their longtime and/or “native” residents (whose families used and continue to use the exact same services as the rest of us)?
Think again.
Participant[quote=urbanrealtor][quote=SDEaves]These income-qualified units are being sold for 20 percent less than regular sale units.
No holding clause but they would only be able to resell their unit to another income-qualified person/family.
When you go to sell your regular unit, would those affordable housing comps be excluded from comparison to the regular sale?
Seems like there should be some special provision to protect regular resale but not sure?[/quote]Re resale:
Typically, the units I have dealt with, have a 40 year deed rider that ties the resale value of the property to the median county income. That means that if values spike, you sell at the income-defined price (which would be below market). Likewise, if the values tank, you sell ABOVE market (or, rather, fail to sell).In other words, you have all the risk of being a homeowner with virtually none of the rewards (except static cost of housing). Without some speculative potential reward, there really is not a huge incentive to buy.
Re appraisal:
By definition, the affordable units are not open market sales. However, not all appraisers know about this program and not all listing agents mention it in the remarks. Therefore, I have had multiple appraisals plopped on my desk when my loan officer (who has the desk next to mine) says “What the fuck is this?!!!”.In other words, it shouldn’t affect normal sales but in practice it does because the deed riders and restrictions don’t show on databases as they should.
I am a liberal and a believer in government helping the less privileged.
This is not an example of that help.
This is a terrible program and only will cause hurt to owners.
Avoid it.[/quote]Ah, the Piggs thank you, UR, for your predictably wise “in-the-trenches” counsel on this rather “thorny” subject. As I suspected, what happens on the street and what should “theoretically happen” are often night and day from one another 🙂
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SDEaves, I take it you did not purchase the SFR’s, PUD or the Tierrasanta townhome you were considering back in October:
http://piggington.com/townhouse_close_to_work_or_house_in_the_burbs
and when the Piggs tried to help you get clarity then:
http://piggington.com/for_piggs_with_kids_what_would_you_rather_buy
… you never let us know the outcome of which type of housing you actually decided on ;=]
The fact of your price range being ~360K was the catalyst which led you to a project such as the one you viewed over the weekend, IMHO. This sort of implies that you are leaning towards any new construction which could be found in your price range.
Since you stated you have been looking for a residence for more than a year, would you mind filling us in on the results of your recent search since your last threads? 🙂
ParticipantI just pm’d Pigg UR on your behalf to respond to this thread. There are a few newer bldgs in his stomping ground (ex: East Village) which had a few low-income units for sale when the projects were new.
Perhaps enough units have resold in these projects to be able to answer your question.
ParticipantEven though its only five units, depending on how much their carrying costs are (PITI + HOA + poss MR), I just feel that the buyers of the low-income units will be more vulnerable than the market-rate buyers (ie forced to sell or walk away). These carrying costs added up together are FAR MORE than if the low-income buyer was simply a tenant.
If the five units were going to be occupied by tenants renting from a local housing authority or agency, I would opine that these units won’t affect either the marketability OR resale-ability of the market-rate units. In coastal CA counties, these rent-subsidized tenants seldom cause ANY kinds of problems because they would be in danger of losing their (lifetime) voucher upon eviction. Thus, depending on location, they will likely remain for many years.
ParticipantI am unaware of any appraisal standards which would preclude CA appraisers from using the “low-income” comp as a sold comparable to appraise the exact same market rate unit in the same complex. Of course, the listings of the low income units would state that they can only be sold to income-qualified buyers.
Will the low-income owners in the complex have to re-sell in the future at 20% less than “the current market” (whatever that turns out to be)? If so, how is their resale listing price determined? And who determines it? Are they allowed to make a profit upon sale?
I am not an appraiser (any Piggs??) but have taken the CA RE Appraisal course.
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