I would like the value of my home to rise, while my property taxes fall
conversableeconomist.com169 points by colinprince 8 hours ago
169 points by colinprince 8 hours ago
In the last three years, a number of states have substantially reformed their property tax systems, providing huge tax benefits to owner-occupied homes and shifting the burden of paying for services like schools and police to commercial property owners (including rental apartment buildings)
That sounds like shifting the property tax burden from homeowners to renters - homeowners are generally wealthier than renters, so it's placing more of the property tax burden on those less able to afford it.
The second order effect will be that rental properties are driven from places where this applies.
That has some not-fun generational aspects.
(1) If schools have lower taxes, their ability to attract good educators for children is reduced. That in turn leads to lower home values since the school quality factor is reduced.
(2) If munis are unable to collect a sufficient tax base, they must reduce services. There will be hemming and hawing about things like cutting the pensions promised decades ago to attract competent service workers, but those are harder to reduce rather than not fixing the fire trucks, the water pipes, and other hidden taxes citizens pay for by reduced services. So your property values will also be reduced in the long term. Small towns are prime examples of this happening, when towns fail.
Trying to build a community out of one socioeconomic class works about as well as trying to redline. It leads to a less vibrant community, less adaptable community, and people are poorer in life and in their finances for it.
Imagine a town with a number of wealthy homeowners, most of them old enough that their kids have grown up. Their municipality is already flush with cash. They already only need few schools for their kids and grandkids. They just want to pressure the less wealthy undesirables away, and use tax (dis)incentives to do that.
> If schools have lower taxes, their ability to attract good educators for children is reduced.
"Good schools" are mostly about avoiding bad kids and bad parents. Expensive homes (without Section 8 or equivalent in the neighbourhood) is a feature, as it keeps most of them away. It's not a good way of doing it -- it excludes lots of perfectly good kids and parents and it is really expensive. It's just the best way available to most people in the West.
While it may be common, it certainly isn't universal. I've worked in schools in poor communities that have pushed for good educators. In one of those schools, the push for better teachers was by the students themselves. There are plenty of good kids and good parents in many poor communities.
I'm not sure the opposite is true either, i.e. that expensive homes are a proxy for good schools. I've also worked in schools where the families were affluent, but the environment was toxic due to the behaviour of students and parents.
No, good schools are also a function of $ spend per pupil, which is correlated with school quality and opportunities for students. A really interesting place to study this is San Antonio v Rodriguez (1973) where in my opinion they laid the groundwork for such inequality in the US. The argument being made in that case (which the Supreme Court ruled against 5 4) is that funding schools via property taxes leads to this prolonged entrenched inequality.
The actual case is about whether the poor school system was allowed to have higher prop taxes than Texas allowed. In the details are the inequality argument (hence 4th amendment being at issue).
In my opinion state INCOME TAXES are the way to fund schools - lower prop taxes and make schools more equal - now everyone is happy (except those who want their 3M home to be in an exclusive school district).
Spend per pupil is a factor, but I have to agree with the parent poster, if you remove bad, disruptive, or underperforming kids from a school, and replaced them with disciplined, over-achieving students, the rest of the student body benefits. This is independent of school funding.
Private schools, even ones that receive less tuition per student than public schools of the same district prove this point because they can set a higher bar and more readily kick out disruptive students.
California spends more money on low-income school districts than the average.
Per student cost at Catholic parochial schools is roughly 1/2 of public schools. That's cost; tuition is even less. Special education programs eat up like 1/3 of public school budgets, so there's still a gap after accounting for that.
1973 was over 50 years ago. Even the poorest, most "backward" states have long ago largely remediated spending inequities. There's clearly much more going on.
I think the effect is twofold - spend/pupil tends to benefit poorer students more (diminishing returns), so a good school in a poor neighborhood needs more $$ to achieve equivalent outcomes. And then the lower property tax revenue in the poorer neighborhood makes it harder to sustain that higher spend
Even "bad" schools use this strategy to move some of the "good" kids into special programs, etc. to raise their average scores. Which makes the remaining classes even worse. It's an eternal struggle between raising the floor vs raising the ceiling
It's also a feedback loop, once you're known for "good schools" then the homes become more expensive. If you don't care about moving then it's often cheaper to buy a home to send your kid to a good public school vs. sending them to private school.
>The second order effect will be that rental properties are driven from places where this applies.
This is likely very intentional in some of these places.
Growing up in suburban TX decades ago, people FREAKED out at talk of potential apartment building development nearby. The duplexes a mile away were 'bad enough.'
Why did they freak out? What was their threat model, so to say? (I can imagine several lines of reasoning, but as a hardcore urbanite, can miss the mark entirely.)
Also grew up in suburban Texas, saw similar freak outs, and can tell you it's thinly veiled racism and distaste towards being forced to be around people who are part of perceived lower socioeconomic classes.
The threat model is "been indoctrinated by years of propaganda to be fearful of a vague nebulous threat of being around people who don't look and act like me"
The town near where my parents lived just had a subdivision kill a multi family apartment complex because it was too close to their subdivision. There was no thinly veiled racism. It was just racism. Poor and black people apparently bring your property values down. The protests were, quite literally, we don't want those people here, without defining what 'those' meant.
It was not great to watch, but it was great to let my parents know who exactly they should stop associating with.
Are pensions still an effective way to attract workers? I feel like there’ve been enough cases where workers get screwed out of them, that this isn’t much of an incentive. Similar to offering engineers equity in a startup.
Anything past the paycheck is a gamble.
They were for a substantial portion of time, such that today's pension obligations remain relevant.
In California, most cities are behind on funding pensions. There is a de facto assumption/delusion that there will be some large scale bailout at some point.
That really depends on the state. Some states have different public school district funding mechanisms that don't depend as much on local property tax collections.
Fire trucks are far more expensive to acquire and maintain than necessary due to monopolistic actions by manufacturers, plus local governments buying fancier apparatus than they really need. There's a lot of room to trim those particular expenses.
https://www.iaff.org/news/fire-apparatus-crisis-sparks-inves...
> Fire trucks are far more expensive to acquire and maintain than necessary due to monopolistic actions by manufacturers, plus local governments buying fancier apparatus than they really need. There's a lot of room to trim those particular expenses.
The real problem with fire equipment is that it will sit there in an emergency unless you have the staff on hand to operate it. Small, remote, or cheap towns get to burn while they wait for volunteer #2 to make it to the station.
I appreciate this knowledge tidbit. Firetrucks aren't the only relevant example, and perhaps it is less fit to purpose than I assessed originally.
theres also (3) those single family home neighborhoods require much more government maintained infrastructure for water and roads
> That sounds like shifting the property tax burden from homeowners to renters...
This is all obviously very specific to the locality where you live, but at least where I live, property values were recently reassessed to account for the large post-pandemic increases. Individual homeowners were generally stuck with these reassessments, while commercial properties, especially those managed by large property management groups, were organized and successfully petitioned to reduce those assessments in disproportionate numbers. So the balance of power was not equal to start with.
And, commercial activity tends see revenue follow inflation. And, a business offset expenses.
An individual, could go bankrupt just because the property tax follows its' property value which itself changes nothing with regards to that owner's income.
Not exactly.
The little town I live in is growing about 22,000 people per year. That's 64-67 people per day or about 16 new households populated with new residents every single day. The rental population is growing dramatically faster than the owner population.
That growth trend has very little to do with wealth and is almost exclusively a factor of availability. Most single family households in this growth area are rental properties, because the most urgent buyers are rental corporations who buy many of these houses the earliest moment they hit the market. Sometimes they are buying the houses before they hit the market by working directly with the home builders. Home renters tend to pay more to access the property than home owners even before taxes are considered.
So, its not just about houses versus apartments.
Also, the school systems and local municipalities attempt to sell their multi-billion bond proposals by taxing future residents at the benefit of current residents. That also disproportionately hurts renters compared to owners. The moment I see a bond proposal that will be paid for almost exclusively by residents who aren't living here yet I vote for it... because why not. We need a lot of shit to accommodate this growth and somebody has to pay for it. We need new high schools every couple of years. We need new roads. We need more plumbing, sewage, and electricity before the data centers eat it all up. Somebody has to pay for all this.
I think that's true but in some cases it's also about making home ownership, in the sense of having a home you can't lose short of a destructive disaster, even possible. In a lot of cities property taxes are enough to get in the way of secure housing for, e.g., disabled people. It seems reasonable to want owning the house you live in to be a possibility for planning to eventually live on a fixed or low income.
Someone I know is trying to plan such a thing right now. She has a decent paying job and a degenerative, disability-inflicting illness. She'd like to see the possibility of a secure future in the city where she's lived for the past 10 years, but property taxes and HOA fees alone in her city can be multiple thousands of dollars per month in neighborhoods that from the outside you wouldn't think seem particularly new or posh or luxurious. It seems that if she's forced into early retirement by disability, she'll have no choice but to relocate. So instead she feels trapped in a job she hates because she got it before she became disabled because she's reasonably afraid that employment discrimination, which is terrible at her job that nominally espouses inclusive values, will be even worse most other places. And while she's already disabled, her disability will only continue to get more profound for the rest of her life. And property taxes for sole and lived-in-by-the-owner homes is one of the reason that owning a condo or apartment is so much more expensive than renting one for her.
> property taxes and HOA fees alone
I feel like HOA fees have to be doing most of the damage there. AFAIK the highest property taxes in the US still top out around 2%, so for a "multiple thousands per month" property tax bill it has to be a house worth more than $1.2 million. I'm not sure what the line is for what level of housing expense is reasonable for society to subsidize housing security for, but I'm pretty sure $1.2 million is well past it.
True but imagine you're in the same home for 30 years. That home with somewhat affordable property taxes could double in value and now you owe double the tax. With no real increase in useable income unless you sell
I haven't researched national stats, but from the experience of having lived in two states, one blue and one red in case that's important to a counter-argument, both limited property tax to 3% annual growth, even if the valuation is higher, preventing that exact scenario. It only jumped to tax on the correct valuation when the property exchanges owners.
Sure this doesn't prevent issues if someone is stuck on savings/Social Security, etc., but it prevent surprises, such as a boom in your area causing sudden explosion of equity and taxes due.
The cap required it be your residency, i.e. you aren't renting it out and you are a citizen.
That's just property taxes in a nutshell, though. We periodically see discussions about land value taxes and it's a feature of those as well; proponents shrug and point out that you didn't do anything to earn that extra value so it doesn't belong to you anyway.
I'm not taking a position here other than to say I don't believe there is a universally acceptable tax. Every tax I've ever read about or experienced personally, someone has made a valid argument for why it leads to a bad outcome or is otherwise unfair. You have to decide what gets priority, pick the system that matches that, and then be honest about where you're making tradeoffs and why.
Property taxes are not that simple, usually. E.g caps on growth of total property tax receipts or on increase per year, rebates, other schemes.
The government should need to accept its 2% in kind. I guess by the time people cannot pay these taxes any more they are much closer than 50 years to their eventual death. Thus it only reduces eventual inheritance. Problem solved
Most of the problem solved, but does mean that generational wealth transfer stops being a way to climb out of instability. Just another chip in American class mobility.
you could rent out a room though?
but you also have a much improved quality of life as a result of that property value going up, because theres more desirable stuff around
Being stressed about finding the money to make your payments is probably not a much improved quality of life. And they probably picked the place cause they liked it as it was, so don't be so sure about appreciation of those new developments anyway...
Why should I get to have that sort of externality on others just because I have more money than them?
>I think that's true but in some cases it's also about making home ownership, in the sense of having a home you can't lose short of a destructive disaster, even possible.
You can also do this with combinations of renter protections + owner-occupier protections.
Currently the latter (whether the recent trend of red states lower property taxes, or Prop 13 in CA) is much more broadly-popular in the US than the former.
Property owners generally show pretty little empathy for anyone else wanting that security.
I go the other way: nobody should be forced out of their home because other people who have more money than them decide to increase the paper-value of their home. Something has to give between "I have a lot of money, I want this place" and "I was already here, I want to stay" and I think incumbency and stability is a better tiebreaker than "money wins."
"Forced out" meaning they choose to sell rather than spend their unearned windfall.
They could always borrow against their massively appreciated property, after all.
I'm not sure where your friend lives, but my county (perhaps state level, but county for sure) exempts property tax for those with a permanent disability. I read the requirements and it was really reasonable to prove eligobility.
I understand that this doesn't fully solve the issue in that your friend, if to take advantage of this has to move, but it might be worth seeing if there are similar options around where she lives.
> In a lot of cities property taxes are enough to get in the way of secure housing for, e.g., disabled people.
Nah, the market is supply constrained, if taxes go down the price of the real estate just goes up to fill the gap. People make purchase decisions based on income & total expenses, not on anything else, "can I afford this house?". The price stops rising when the answer switches from "yes" to "no". If your friend can't afford a house right now they don't have enough buying power to compete in the market with other house buyers. Reducing taxes won't give them any advantage in the market that other buyers don't get.
>>It seems reasonable to want owning the house you live in to be a possibility for planning to eventually live on a fixed or low income.
One idea here is deferral - if it's your primary residence the taxes are deferred until the property is sold to someone else. This way you won't get evicted but the locality/state can get the payment at some point. This is better than just charging a tax on sale as many countries do because it doesn't discourage transactions.
I would certainly be discouraged from purchasing a property if the price was inflated by having to pay back taxes.
> I think that's true but in some cases it's also about making home ownership, in the sense of having a home you can't lose short of a destructive disaster, even possible. In a lot of cities property taxes are enough to get in the way of secure housing for, e.g., disabled people. It seems reasonable to want owning the house you live in to be a possibility for planning to eventually live on a fixed or low income.
It seems to be equally straightforward an answer to just not expect homes to function as an investment.
I do not now nor have I ever understood why people expect homes to rise in value. If you live in an area for 20 years, and you enjoy that area, and it serves you well, and educates your kids, and the crime is low, and all that good stuff: why are you then owed money? Why is that a fair expectation? Like I could see it if you made the house bigger, or otherwise improved it? Maybe you put in a new shed, or a nice brick backyard area with a kitchen, sure. House being worth more makes complete sense. But if you just buy a house, and live in it, and maintain it over the years, and then go to sell it: why is it reasonable for you to expect money back out of that?
You've already received what you paid for: a place to live.
Like I just don't see how people go like "My house needs to sell for more than I bought it for years from now" and then complain about the housing market being out of control and houses being expensive. Of course they are. Each time a house changes hands by this logic, it must necessarily be worth more than it was before. So every subsequent buyer of that home is effectively required to tithe to the previous owner for... some fucking reason, that nobody has ever adequately explained to me.
>why are you then owed money? Why is that a fair expectation?
Essentially everybody in the US is continually trying to make their fortune by picking a winner instead of adding productivity and value.
Have your house appreciate.
Pick the right stocks.
Invest in the right company.
Become a landlord in the right neighborhoods.
Everyone wants to be a genius speculator instead of doing work.
Not only do they want the value of the house to go up, but they don't want anything around them to change. No new 5-story condo complex on that one corner. My neighbor shouldn't add a second floor and block my view.
I think it’s worth pointing out that you and your neighbors actually do have a voice in local government. You don’t just have to sit there and take it. NIMBYs have realized this and actually show up to be counted. You can too.
"No change" is usually the much stronger behavioral driver than "increased property value."
"Don't turn this into Manhattan" is such a common refrain yet turning it into Manhattan would wildly increase their land value.
> Why are you then owed money? Why is that a fair expectation?
Because getting the mortgage to buy the house involves parting with a large sum of money, after which some part of the mortgage payment goes towards something called principal. If it just goes towards interest, it may as well be rent.
Not to mention that when you try to sell the thing, there's some expectation by one or more third parties of some percentage of it.
But at the same time most people do the bare minimum to maintain their house, so the quality of the property continually decreases. I don't drive a car for 20 years and then expect to make a profit on selling it.
I’d expect property values to go up (or have gone up) as population rises; less space per person. I bet we could also put together some geometric argument about proximity to things like cities. But it’s the weekend, so let’s just halfheartedly gesture at the potential for rigor.
Anyway, nowadays population is barely increasing so I guess property values… maybe they’ll keep pace with inflation (for whatever reason)?
Another possibility is that property values tend to go up and down as some areas become more fashionable. Maybe, for whatever reason, there’s a selection bias where we tend to associate ourselves the trajectory of people who lived in those fashionable areas instead of the unfashionable ones?
My theory is that the "house" consists of two things: the land and the building.
The land goes up in value when other people spend money. More retail is constructed nearby, transportation is improved, schools improve, jobs are created, etc. My land captures some of that value even though I paid nothing. That to me explains some of the fairness of property tax: the owner should contribute to the government services, such as schools and police, that help make the land appreciate in the first place.
Then there's the building. It's a wood box that sits out in the rain and rots. Water soaks in from the outside and pipes burst on the inside. Termites eat it and insects and vermin invade. Carpet and walls slowly degrade. HVAC systems wear out. Appliances break. Concrete breaks apart. Even on the land portion, plants die and need maintenance. (Trees are the only thing on a property that get better with time.) This building needs constant maintenance and I'm always spending money and time on it.
So I figure the land might go up slowly in value over time. I figure I'm lucky if the building appreciates at all after I consider the money I sink into it.
On paper my house is worth a lot more than when I bought it. But I don't know how much of that is nominal price change due to inflation.
Is “inflation” not a valid answer? Or at least component of an answer?
You can restate all mentions of "value" in the parent post to "real value", and there entire point still holds: why should people expect the real value of a home to increase over time?
It's an answer to why the number is bigger but not to why the house is worth more. It is common to say "I want my house to appreciate in value" and inflation doesn't mean it's appreciating in value, it just means the number is bigger than it was before. That's not the same thing.
PP literally says “I just don't see how people go like "My house needs to sell for more than I bought it for years from now"” That is basically not understanding why people expect the number to be bigger.
> that nobody has ever adequately explained to me.
Jesus it’s not rocket surgery. People want to live in a nice area, as more people show up and want to live in a nice area prices rise with rising demand accordingly. For the counter example, there are very large houses basically for free in Detroit. No one wants them.
> For the counter example, there are very large houses basically for free in Detroit. No one wants them.
Is that true, or do they actually come with large tax liabilities?
Around here, many renters are pretty well-off. It's really difficult to own a home in the city.
Brooklyn, for example, has seen an explosion of high-rent apartment buildings, occupied by nerds like us.
If you are lucky enough to own a home/apartment in the city, you are either crazy rich, or, more likely, brought the home before it exploded in value, making you "paper rich."
Many of the apartment-dwellers in the city make a lot more than homeowners.
All that to say you agree with the GP: homeowners, as a class, are wealthier than renters. How owner occupiers choose to spend their wealth has nothing to do with the fact they have it.
Well, "paper rich" is dicey. It means that you may have the burdens of money, but few of the advantages (like actually being able to spend it).
Farmers, for example, are often multimillionaires "on paper," but don't have a pot to piss in.
They could choose a different lifestyle, but they value the one they have. That's fine, but that doesn't mean I'm obligated to subsidize their preferences.
Owner-occupiers can and do refinance to turn their wealth into cash. It's routine.
> they value the one they have
So do you. I assume that you like to eat? Farmers are how that happens.
> refinance
Are you familiar with the downsides of refinancing?
Landlords charge what the market will bear and generally have little if any price elasticity of supply, so they bear nearly 100% of the economic incidence of the tax. This is especially true where housing supply is constrained by zoning policy rather than the price of expanding supply.
It'll make it so new construction tends to be condos rather than apartments, since the first is heavily preferred by tax policy. This reduction in supply will mean higher rents.
New construction is like 1-2% of total housing stock annually. It'll take a relatively long period of time for these sorts of changes to hit prices because again, low price elasticity of supply.
edit: on slightly further thought, you'd also need this effect to either increase overall vacancy or reduce total construction, since any supply shift from occupied rental units to owner-occupied condos also implies a demand shift from renting to owning.
A lot of states have rent control laws though which would entirely shift the burden on the owner of the building.
Usually what they have is rent stabilization rather than control. It is tricky business to really estimate what is reasonable or not under that. For example, rents in my city are allegedly "decreasing," yet if you live in a rent stabilized unit, your landlord is probably incentivized to increase your rent to the limits of the ordinance, it could be 4 or 5% so not unsubstantial especially it being compounded by the year.
And what is more, when a tenant leaves and the landlord puts the unit up for rent again, there is no price limit for what they can ask for new rent. They are free to ask above market rent if they want.
So really I would not say the burden is shifted entirely on the owner of the building when they still possess two levers for ameliorating overhead increases: increasing to the limit of the RSO even when the market doesn't support any increase, and increasing rent on the next tenant. In high demand cities the market rate is not so much a wall, and landlord generally enjoys good success pricing above market rate and still leasing the unit out in a reasonable timeframe for them.
Wealth is not income.
You can be wealthy and still have poor cashflow, especially as a leveraged property owner
Wealth is easily converted to income. People can sell their properties and move to cheaper ones. If we’re gonna run our entire society on the whims of retirees who are taking up houses big enough to raise families, while also preventing all new construction, while also opposing paying their taxes, while also opposing moving to smaller houses, we are just fucked.
For multi-unit housing a cash-poor leveraged property owner sounds like a likely slumlord, so I'd be happy to discourage that situation. More, less-leveraged, property owners instead sounds good.
For owner-occupied, it sounds like someone who made a risky financial decision because of perverse incentives. Which also seems good to revisit.
Also in these cases cash-poor is not low-income. It's likely to be high-income+high-obligations the way you describe it. Hard to get all that leverage otherwise.
It's not just slumlords though.
Rental yields are so low in the UK compared to the cost of finance, tax and maintenance that being a landlord has become completely unprofitable, which means the rental sector is falling apart.
Pretty much no landlords in the south east of England are cashflow positive on a monthly basis, and if they are they are yielding less than government bonds
Yeah, it’s nasty politics.
What’s happening is income inequality manifesting on the market. The middle and upper middle of the market is seeing accelerated appreciation as incomes rise for the upper quartile. Some places see >10% annualized appreciation over the last 20 years.
The lower part of the market is very different, and are basically depreciating away. Property taxes are the most fair tax for the most part — you basically pay a prorated share of the levy based on the market value of your home. So if the poorer property is getting less valuable proportionally, your share of the tax pie increases. Some states share Medicaid expenses at the county level so there’s demand pressure for more tax levy.
The problem is old people generally cannot afford their homes, and are usually profoundly ignorant about everything except tax avoidance, even when tax avoidance hurts them. The tax knob is one that can be turned, which makes the problems worse. Senior exemptions, veterans exemptions, all increase the overall share for everyone else.
The new Republican platform is accelerating that — pushing property taxes to non-homestead property and driving up sales tax. In other words, it just a consumption tax, which pushes the tax burden to families and inflates retail costs, so grandma can sit in her big house and her kids get to inherit the place at the stepped up cost basis.
There's all sorts of factors at play. Uncle is a financial planner and advised grandma to sell her house to Grandma's House LLC for $1 and pass ownership of that LLC to the offspring, avoiding prop 13/prop 19 reassessment in california.
Part of it is honestly just people wanting a safe harbor preserving generational wealth. I think people who are generational wealthy understand what a damn advantage that is and obviously push hard to guarantee that for their family as much as they can. The alternatives are a bit terrifying given the direction of the economy, world, and climate. The only social safety net afterall in this country really beyond an abject poverty level of subsistence is reliance on well off family.
Maybe you can call it a sort of restart of feudalism, but there are no serfs in the mix really. Its not a productive estate in most cases (in some cases sure e.g. family business), but really often just a little lot with a house on it. People don't like the idea of the state coming in and carving that up and carting it off.
And really I think there are far more real things to set the tax burden upon. I mean grandmas home once again produces nothing, it is a box to sleep in; it's value is based on pure speculation. It is now worth 'more' because people say it is worth more and believe in that, not because it now actually does anything it didn't do thirty years ago. It is in far poorer shape than 30 years ago, even. Like, this is not where you find money flowing in this country. Tax where the flows actually are not the stagnant ponds, slowly being filled by the leaks off those profoundly vast flows of money and the speculative abilities those flows grant the flow controllers.
> Uncle is a financial planner and advised grandma to sell her house to Grandma's House LLC for $1 and pass ownership of that LLC to the offspring, avoiding prop 13/prop 19 reassessment in california.
Pretty unbelievable, really. They get a free house and tax bills from decades ago. The whole thing is made to screw over future generations, and act like it’s all hunky dory.
Wouldn't a European like VAT system help this ? Along with properly taxing the property of corporate and business owned properties.
How VAT could help? Unless you mean to dramatically increase sales tax to European VAT level? Like 23%
VAT requires invoicing, while the people railing against property taxes in the United States primarily want to avoid taxation for themselves.
The problem with this form of taxation is that it slows down consumption and impacts poor and middle class people more.
It would also place a higher burden on investment home owners so it's not all bad.
how would put burden if costs are simply passed down to renters
Lower demand for the product globally. If their asset has a higher vacancy rate, raising rent all the time can't solve the problem.
However, tax rates give perverse incentives. What you'll probably get is a lot of commercial slumlords as repairs are seen to increase the value, thus the tax.
If they could raise rents by the amount they would've been taxed, they would have. I'm happy to see more incentives against buying up houses for literal rent seeking.
>If they could raise rents by the amount they would've been taxed, they would have
They can’t raise rents higher because they are in competition with other rental properties. In equilibrium, if all commercial properties have taxes raised on them, (a) the majority of the market will raise rents to cover the cost of the tax and (b) those rental units that are no longer financially sustainable at the higher rate will exit the market (e.g. sell the homes to an owner occupant or redevelop the property if allowed to by zoning). Some fraction of property owners might take a haircut on their capital returns in the short run (the housing market is fairly illiquid) but the market will return to equilibrium in time.
Is the implication the only path is to design the economy around keeping landlords as happy as possible? Its similar to the fear of a wealth tax driving the rich to move, you can just say out loud who our true masters are.
> keeping landlords as happy as possible?
In this case, landlord is neither happy nor sad since it the tax is irrelevant to them.
A major problem with property taxes on owner-occupied housing is that the value the owner derives from the house is not dependent on the resale value of the house. An owner occupied house is not primarily a financial investment in most cases. Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living. Any gain in value cannot easily be realized since it’s not a liquid asset. This leads to a fear of being driven out just because the value of the surrounding neighborhood rises doesn’t mean that the owner’s income rises in lockstep.
One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
A major problem with decoupling property taxes on owner-occupied housing from market prices is that it removes the biggest incentive for a homeowner to vote for policies that keep the local real estate market in check. An owner occupied house in a desirable area where there is no disincentive to politically engineering a supply shortage becomes a financial investment. Any increase in housing value becomes profit for the owner (or their descendants). This leads to supply restrictions and escalating prices and an increasingly unhealthy society as the young and the poorer are pushed out of the city, county, or even state.
This is essentially what has happened in coastal California over the last 60 years.
Why shouldnt coastal property be crazy expensive? It's the most scarce land there is.
The land should be expensive, the housing doesn’t need to be.
With different policy, there could be more housing built on the same land. The most scarce land there is shouldn’t be predominantly zoned for only low density single family homes.
We could easily build apartments on the coast in CA and then non multi millionaires might be able to live there. We have decided that only multimillionaires deserve to own a coastal house by restricting zoning in the coast so heavily
It's funny because it happens at all levels.
The uber wealthy have their gated communities in the hills.
The very wealthy have their lock on places like Carmel.
The upper-middle class in Santa Cruz or Half Moon Bay try to prevent new condos (or student housing) from being built, because it "destroys the community character."
Everyone wants to pull the ladder up behind them.
This then means there is no real fix to anything since basic human greed always prevails. May explain why things move slowly if at all.
If those places became worse places to live as a result, wouldn't that drive property values down?
This conveniently ignores all the gains in property value which they can benefit from by refinancing, selling or renting. If they don’t want to pay property taxes on higher values, and don’t care about the value, then we have a simple solution:
Freeze the property taxes and let the government take the entire value gain in the house when its sold.
> value the owner derives from the house is not dependent on the resale value of the house
Value is always relative - even if the experience hasn't changed, the rising house price does mean that same experience is being value more highly relative to other opportunities. (In most cases this is because the experience actually has changed: if your neighborhood gets nicer, you are indeed benefitting!)
The bigger fallacy in rising property taxes is that civic services don't necessarily get better or more expensive just because property rates rise. And the bigger unfairness is that homeowners with rising values but not rising income don't always have efficient access to the equity of their homes.
A fair property tax regime would avoid presuming budget increases just due to rising value of housing stock, and might subsidize HELOCs or similar structures for folks who need to access property value to pay taxes.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home, which would offset some of the costs we currently pay in ad valorem property taxes.
The local real estate community had a meltdown and poured hundreds of thousands of dollars into defeating it, which my neighbors obliged and did.
I think many people would have a hard time believing that a new tax in one area would be offset by lowering taxes in another. Even if they did reduce property taxes shortly after passage, many people would assume they will raise them again later on.
If it wasn’t combined in the same bill, the people will just have two taxes going forward. Effectively every “temporary” tax becomes a permanent tax. During the last local election, our city council was asking people to vote to replace an expiring tax with one at a lower rate and trying to sell it as voting for this reduces your tax.
>> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
>My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home,
First comment suggests taxing the gain (income tax), while second comment suggests a tax on sale price (gross receipts tax). Two very different things.
While I grant you that they are two different things, two-thirds of the average sale price in my area is from gains in value accrued over the time the home was occupied prior to sale, almost all of which is currently untaxed.
I own a home in Berkeley which loves transfer taxes. They’re creative about it though they tax at different rates based on the home sales price. Starting 1/1/27 the transfer tax goes from 2.5% to 3.5% based on the selling price of the home.
It’s been attractive to voters since most homes sell in the first tier.
You can reclaim some of the transfer tax by performing seismic upgrades which is actually something I support in a town with some houses that can be 100 years old.
The problem with transfer taxes is they bolt you to the place.
That is true, but on the other hand if you had to pay a hefty yearly property or wealth tax you might not be able to afford it in the sense that your wealth is bound up in the house.
The counter is of course that when you buy a house you should make sure you have enough income and/or liquid wealth so that you can pay the taxes. And if not, move to a smaller house. Of course, opponents of such taxation will then roll out all kinds of grannies living in mansions on meager pensions. Then again, is it fair that this prices out younger people from the property market?
As difficult as they are, I do think we'll need some form of wealth taxation in order to put a brake on spiraling inequality. Yes, call me a fan of Piketty if you want.
A wealth tax is just a warning shot to your wealthy neighbors, if they can afford to flee, they'll flee.
If you're planning a peasant revolt you should really consider going all-in, bloody revolution, you give the kulaks less time & space to plan for contingencies.
The issue with that is the disincentive to sell (or buy), which leads a lot of people to stay put in their oversized home during retirement, for example.
In the UK, 'stamp duty' is something that buyers pay (as opposed to sellers), but sellers also have to buy, so everyone pays to move and everyone stays put to avoid paying.
(And of course no one builds, which is the biggest issue).
I'd say it's OK to defer your property taxes until you sell (or die), but it shouldn't be the default, only something you apply for if you're in a vulnerable position.
I think it's a great idea to let land taxes create the incentives to build efficiently.
In Austria it is even worse. The stamp duty is only for literally buying the house in your name. Thus all sufficiently expensive real estate is wrapped in shell companies where the transfer is untaxed.
The result - stamp duty is exclusively paid by middle class people actually buying homes, never by the rentier class. They already used the money up front to buy the votes for this law apparently
Except they don't, taxing single house owner is just cost of living increase any time area gets gentrified or more desirable
It's basically excuse to get rid of poor that made a mistake of buying a house in area that turned more expensive 2 decades after.
Tax anything after first house, sure, but taxing house by value is terrible idea that never actually worked in a way proponents are saying it would
the incentive is if they sell they realize their gains and are left much richer
"the value the owner derives from the house is not dependent on the resale value of the house"
An owner can derive value from the house in one of three ways:
A) Occupy the whole place.
B) Receive rent from a tenant.
C) Something in between (e.g. airbnb one room).
When property prices double, it's likely that rents roughly double. This may not increase the value the owner can derive from (A) but it will sure change the value they can derive from (B).
So they might decide to switch from living in the place to renting it out. If they don't decide to switch, then it indicates the value they derive from living in the property has either gone up, or it was always way higher than the market rent.
It seems like market rent is a reasonable benchmark to use to calculate property taxes, and property value is a reasonable proxy for market rent.
> A major problem with property taxes on owner-occupied housing is that the value the owner derives from the house is not dependent on the resale value of the house
Your better believe it is when it comes time to sell.
Or would owners not mind having 0% property taxes in return for the state taking all gains at sale time
> the value the owner derives from the house is not dependent on the resale value of the house
It often is, instead. Eg the resale value of my flat increased because the area where I live became a better place.
What they mean is the day-to-day "value" of having a roof over your head, in contrast to your ability to make money by selling.
If the area around you is improving substantially, then yes that day-to-day value could be improved by better local shops, maybe a closer office building, nicer parks, etc. Generally stuff like that does not happen quickly though, and really big changes like magically teleporting from boring middle of nowhere to a vibrant cultural downtown don't happen at all.
> Any gain in value cannot easily be realized since it’s not a liquid asset.
Reverse mortgage
"Oh no, someone's given me an extra $500k for doing nothing which I'll get when I (or my kids) sell my house, how terrible"
But they didn’t do nothing. They put up capital for a resource. Generally more capital than anything else until late in career.
And arguably, they already extracted the value of that house by having a place to live without having paid for it up front. They didn’t even put up the capital in most cases. In the US they will have been granted a loan that is backstopped, and therefore subsidized by the government. Don’t forget the mortgage interest deduction, that’s a massive homeowner subsidy.
So someone else put up the capital, the government made that capital cheap, and societal demand with artificial scarcity (in most places) pushed up the asset value.
I’m not saying it’s a bad thing, but let’s not pretend that making capital gains on a house in the US is anything like any other available investment.
They maintained the home and paid taxes on it. Have you ever had a failed septic system? A major water leak? A new roof? There's this whole anger around home ownership you get these days, oftentimes by people who have no experience in the matter.
Yes, mortgages are subsidized by our interest tax deduction system. That part is true. It doesn't turn home ownership into something with no risk, and it certainly doesn't turn it into this subsidized investment. It's a liability, not an investment.
They did not create the resource (the land), nor did the person they bought it from.
Exactly. Surely the finance industry can come up with a product that automates this so you automatically sell them a tiny slice of your home to make up the property taxes without it affecting your cash flows.
The private finance industry need not be involved.
Just have government allow taxes to be deferred until time of sale with interest pinned to the cost of borrowing for government. That already exists where I live for people over the age of 65. The government can still get the revenue for free via borrowing and the payback is more or less guaranteed.
This really seems like the most fair situation, if we don't want to a) let retired people stop contributing their fair share, b) kick old people out of their lifetime homes during their most vulnerable years.
I believe you can get a reverse mortgage line of credit that allows you to take out money as needed. That is, a reverse mortgage doesn't have to be a predetermined lump sum or monthly payout.
This doesn't totally automate it, but it takes away the need to manage the proceeds from a reverse mortgage between the time you receive a payout and the time you pay your taxes.
Or just loosen supply side restrictions so much that houses typically don’t go up in value.
It’s really hard to loosen supply side restrictions on “this somehow became a hip neighborhood.” You can in general make more housing available, but not prevent rising prices in specific neighborhoods.
You absolutely can prevent a "hip neighborhood" from becoming the equivalent of a short squeeze. Prices are not only signals of current scarcity, but also future scarcity. Once you've established that any increase in property value will lead to an influx of capital, followed by a swift increase of supply, every increase will partially suffocate itself.
Not everyone needs to live in a hip neighbourhood?
My intuition agrees with the supply side argument. Also higher interest rates to reduce demand? Isn't this how we got here, to these very high house prices worldwide, by a combination of the two? Taxes seem a second order effect here at best.
Of course, the people who already own land in the now-hip neighborhood either don't want it to change and grow at all, or they want the price to go up as much as possible so they can cash out. The existing owner class never have an incentive for ownership to be affordable...
The funny thing about land and population growth is that land doesn’t. It’s fixed.
Only in the most literal sense. In a far more accurate sense what we are talking about is land where people want to live and that does grow, more or less, with population growth. It's only a handful of cities with geography that makes desirable land fixed.
The premise of real estate (above survival) is living somewhere other people don’t.
That's basic Econ101: households optimize for (subjective) utility, not for profit on some balance sheet. Taxing households for non-realized gains doesn't take into account liquidity nor the (subjective) negative utility and opportunity cost of selling your home and moving away.
I disagree. In my country we are currently in a inheritance boom. Everyone who has parents is getting free money.
> One way out could be to tax the value gain at the time of sale
Stamp duty in the UK, horrendous tax. It's better than nothing at offsetting the unearned increase in house (land) value, but far worse than a regular tax.
If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move. This encourages people to live in less suitable houses for longer.
As to your worry about land values increasing -- the owner is deriving benefit. The higher the land value is, the more benefit the owner gets from the land.
> If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move.
This sounds like a problem with the way the particular tax is written, not with the idea of taxing housing gains at the time of sale.
> The higher the land value is, the more benefit the owner gets from the land.
What benefit does a homeowner derive from increased land value before selling?
Stamp duty doesn't tax gains. It's a tax on buyers, not sellers.
It's absolute insanity
The increased land value is because the land is more desirable. If I buy some land next to a rubbish dump, it's cheap because living there is terrible. If the dump is then closed my land improves in value, and I derive value from that.
Likewise if I buy somewhere cheap in a backwater town, and the town becomes more desirable because there are better employment opportunities, better shops, better amenities, all of which serve to mean people will pay more for the land, then I benefit from that immediately.
The value is subjective, if you lived in a quaint town and now it’s become a bustling place it may be a nightmare for you , despite the price increases. That is actually a win win situation, though, since you can now move to another quaint town elsewhere while taking a pile of cash with you, with the perhaps important caveat that you do lose your proximity to places and people you may consider more important than the money.
These imaginary scenarios do not align with typical real world experiences. Very few people live near a dump that closes or see their small town unexpectedly boom (and as brabel notes, that’s not necessarily a benefit).
Most people’s home values go up because of 1) increasing housing demand and 2) the collective delusion that home prices can continue to far outpace wage growth indefinitely. Neither of these things necessarily result in an increase in amenities or improved quality of life.
My own home value has gone up something like 70% in the last 10 years. Meanwhile, the amenities near me are essentially unchanged. Same schools. Same number and quality of restaurants and grocery stores. My net worth has jumped a fair bit but my immediate benefit seems pretty much flat.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
Forcing renters and buyers to pay for the local services instead of property owners seems extremely unfair.
> Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living.
So? If the property values go up then cost of living is going up for renters too. Why should property owners be shielded from this by imposing local service costs on renters who generally have even lower incomes than owners.
> One way out could be to tax the value gain at the time of sale
This is how it works for sales in Sweden, via the so called "reavinstskatt", or profit realisation tax. Funnily enough, it is mostly applied to individuals in practice. To avoid the taxation, companies package properties in subsidiaries, which can then be sold and traded like any other stock. The tax is then postponed until the de jure sale of the property, which never occurs. Individuals are not eligible because the loophole is closed if the legal owner also occupies the property they own.
This sounds like a plan to make rented properties a more liquid asset and make rent cheaper. Seems like a sound idea to me.
What I don't understand is (because I honestly haven't been afforded the time to sit down and think about it, also it's frustrating), why do taxes generally trend upwards for the average person? Doing napkin math it seems to have gone from ~10% to ~28% for average family. These are %-based, why does it need to change? Why can't cities/towns/counties work with the money their citizens can give?
Happening in Austin, Texas recently. City cites:
- Rising cost of core services
- Weak sales tax revenue. This is the city’s second-largest revenue source, and it has slowed or dipped.
- A shrinking property tax base. Officials point to falling property values, appraisal protests, more business tax exemptions, and little new construction adding value to the tax rolls.
- Disappearing one-time money. Pandemic relief funds have run out, and federal funding cuts were anticipated.
- Rising service costs. The new budget’s highlights include $6 million more for permanent supportive housing services, $6 million more for fire overtime to keep four-person staffing, and extra EMS overtime. Employee raises and social services were also major line items.
It is frustrating... if core services are costing more, cut extracurricular services? Why would you lean so much on sales tax, seems obvious this would revert to a mean? If your budget is reliant on infinite new construction it seems a bad budget? Why is pandemic relief cuts a shock to anyone? More housing services? I'm empathetic but there's more homeless than ever before. I know it's simplifying the problem but it just feels like people are punished with permanent tax increases for governments spending more than they should... we start with a new "floor" tax rate and repeat forever? Is it going to get to the point where we work 50% of our time just to pay taxes?
People, as a rule, do not want less service. Services generally function like a ratchet, where once one has been added it is incredibly difficult to get rid of.
So not only is the cost of service to be thought of, but the quantity of services.
The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
> People, as a rule, do not want less service. Services generally function like a ratchet, where once one has been added it is incredibly difficult to get rid of.
Makes sense, totally agree... however I don't think generally citizens want to pay _more_ taxes... or at least eventually there's a point where they say enough is enough.
https://www.kut.org/politics/2025-11-05/austin-tx-prop-q-fai...
> The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
This should be stopped. Creates exactly the sort of ratcheting effect you described. Mind boggling to me. I've been in-charge of small budgets and buying more stuff after making more money is a big decision, not taken lightly because we can't assume present returns will match future returns.
> we can't assume present returns will match future returns.
Funnily enough, after spending some time in public service albeit in another country, genereally budgeting for public agencies works almost inverse to this.
If you get allocated X budget but only spend 0.8 * X, then next time you will almost always get <X. This is in itself reasonable, you don't get more allocation than you need. In practice though this means you are incentivised to not save money from your allocation iff you expect to need more in the next period or do not want to lose your allocation (maybe a renovation or smth similiar has been pushed back due to external factors).
Yes, always felt this was ridiculous. There has to be a better way to solve this.
Its a very difficult problem. The exact same dynamic happened in the USSR (my Dad has stories that are basically word for word what is described). I have also seen it in large corporations and US state and federal governments. I would not be surprised if we had papyrii from ancient Egypt about the need to spend the pyramid budget this year or the pharaoh may not allocate enough next year.
I think this misses the important point of how governments tend to get less efficient at scale, and over time.
You could pay more and still get worse services.
Oh for sure, just ask the residents of Austin if they feel services have improved over the last 10, 20 years! I imagine there will be quite a bit of bias and "rose-tinted glasses" but generally speaking I don't think they feel the price tag is reflective of the services they're getting. On that note, not sure why people seem to think of governments as some sort of subscription they pay for and get services in return... but perhaps that is a discussion for another day :)
Percentage increases are the result of your money being worth less. That’s why every good government fights inflation. Stable values of money make it easier to plan budgets, estimate costs, lure investors, and collect taxes.
It’s when the value of money decreases that government has to choose among reducing spending (often by reducing services), increasing tax rates, and electoral losses. Most choose incremental tax rate increases because it’s easiest and the people likely to complain are unwilling to run for office to replace the people who raised the taxes.
Not arguing that sequence of thought doesn't occur, but it bothers me because the reasoning is faulty. If money's worth less, then the appraised value of my home measured in dollars should correspondingly increase. If the biggest taxes are assessed as rates on things that tend to scale with inflation, then it ought to be relatively indifferent to inflation. The only changes you should have to make to your tax system in response to inflation should be raising flat rate taxes.
I don't know about Austin, but where I am the single biggest source of rising costs for the city seems to be its pension fund. Which seems to have severely underperformed the market thanks to the efforts of hedge fund managers who were all hype about dotcoms in 1999, mortgage-backed securities in 2006, cryptocurrencies in 2018, and are probably pretty excited about AI right now.
Very frustrating. ATP the people in charge of that mismanagement are surely out of office...
This doesn't explain it all, but worth considering.
As the cost of living increases, so does the cost of providing public safety workers and their union-guaranteed pensions and benefits. In most cities, public safety eats up a large chunk of the operating/general fund budget (in Austin it's 71.2%)[1, pg. 30], and reducing public safety budgets kills your representative's clout. You yourself can advocate for lower hiring rates or pay and pensions if that's a concern.
Extracurricular services are highly visible and therefore highly defended by the advocates that claim they reduce crime (by providing structure to youth with nothing else to do). Representatives are typically replaced with those that defend those highly-visible services. They will instead reduce less-visible support services (like IT) that make public safety more efficient/effective.
Since you can't outlaw homelessness, citizens that complain about homeless activity motivate local governments to provide more services that make homelessness less visible/likely. Without those services, public safety budgets need to increase to address more desperation on the streets.
As the population ages and needs more medical care they can't afford, demand for EMS and senior services increases.
You can outlaw abortion for unfit parents, but that also likely creates more welfare service demand over time.
To me, private businesses not increasing wages to meet a standard cost of living means an increase for demand of welfare and public safety services. Local governments can attempt to hold private businesses to a higher tax burden, but are usually preempted by state law in Republican-led states. Your local government has no control over that and has to respond somehow.
To me, the frustration is best placed with private businesses that can afford to provide for their workforce, but instead rely on welfare services to give their workers what they need to survive. ~55% of households in the U.S. earn less than $100,000 per year (before taxes). [2]
[1] https://austin.widen.net/s/x8q5hmnwtw/fy-2026-27-city-of-aus...
In New York state half of property taxes is for county contributions to the state medicaid fund. This excludes the seperate schools tax which is property based. Health care costs drive up many costs in the US including all libality insurances. The second part of this tax mess comes from the excessive military budgets since the late 1970s most of our national debt as of the mid 1990s was from that waste of resources. I understand we shouldn't just cut abruptly but our spend on weapons needs to slowly decline while we fund the transfer of workers out of the military industrial complex. And there are a lot of structural accounting problems like how personal credit card and automobile financing isn't tax deductbable but leveraged buyout interest is. The tax exemption for share buybacks is another budget drain. My instinct is we need a universal national income tax along with a land tax that in some ways exempts housing up to some middle or upper middleclass level.
> In New York state half of property taxes is for county contributions to the state medicaid fund.
That is an insane statistic. Surely the state can throw some weight around to say enough is enough?
I just had my own insane encounter with healthcare. They "accidentally" billed us insurance rate which was about 4-5x more than self-pay. Why is there 4-5x overhead when dealing with insurance? (I know there's the negotiation stuff) but also seems to be quite a mess. I'm actually more mad at hospitals and clinics lately than insurance. Seems they have agreements with companies to "dispense" things at 4-5x the actual price, expecting insurance or taxpayers to pick up the tab. Seems like blatant fraud.
Sorry for the rant, I agree with everything else you mention :)
I seem to recall that NY state medicaid expenditures are completely out of line even when comparing other liberal states with Medicaid expansion, when you compare how much every resident pays.
The answer is almost certainly large scale fraud by organized criminal groups, but investigating and publicizing this is, currently, extremely politically inconvenient.
Not NY resident but recently had an experience that I think is basically fraud but also "legal."
Went to clinic for fractured arm. Was given a sling, told it was included with the visit, verbally by the staff.
Later get a bill for nearly $500 for the sling that costs $50 if you get it outside of the clinic. Was told they think they accidentally billed me the insurance price. I can understand "convenience" being baked into the price but not at a 10x markup. The more I talked with the clinic trying to get them to fix it, the more it sounded like they had a partnership with the stupid sling company where they put slings on people and bill the insurance 10x the cost of the sling.
>Surely the state can throw some weight around to say enough is enough?
How do you know that it's enough? Baby boomers are old now, which means demand for healthcare has skyrocketed. There's an odd thing I've noticed in political commentary where nobody really thinks that healthcare is expensive, but it absolutely costs a ton to keep people alive. America might have problems with too much overhead, but even here in Ontario, healthcare is by far the province's biggest expense.
> How do you know that it's enough?
Because that is 17% above the US average, at an average of $13k per year per patient. This is _after_ medicare handles the bulk of the cost. I'm not disagreeing that healthcare is expensive, just the costs are excessive.
Taxpayers are getting milked by providers and insurance. I was given an arm sling that cost almost $500. If I got it outside of the clinic it would have been $50.
> In New York state half of property taxes is for county contributions to the state medicaid fund.
Chicago..hold my beer. 80% of taxes here go to funding pensions for 2% of city population. Our parking meter money goes to gulf countries because we sold them to pay for city services back in 08.
I don't like taxes but I also like having roads, sewage treatment, 100+ psi water pressure, multi-gigabit internet access, and a reasonably constant flow of electricity. The cost of public education and the management of that system is the only serious concern I have with my local taxes.
I actually don't mind the cost of living in my neighborhood going up. The $2500/yr HOA fee is a feature for me. I picked this location precisely because of it. I've lived in many places with virtually no maintenance overhead or economic friction. You may eventually learn that there are two sides to this coin. Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
> Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
Whereas you take great care of your local community by even refusing to live around anyone not as well off as you ?
Imagine the horror of having to live within 10 miles of a low class smelly poor plebeian, you might have to lay your eyes on their 3 days overgrown lawn from time to time.
You should be concerned if you have 100+ psi water pressure. Anything above 70 is atypical for a residence.
This works in other areas of life. A courtesy charge creates a better environment by giving participants skin in the game and filtering out actors who wouldn’t mind abusing you but wont pay to do so.
Someone is pocketing a large fraction of that $2500 while paying 2-3 people a minimum wage to get things done.
In this country of oh-so-much freedom and journalism how can a layperson like myself check whether in the final degree my tax dollars are really paying for someone’s collection of vintage Ferraris, hidden behind an inconspicuous budget item?
I’ll rather know my taxes where used for a Ferrari in someone’s collection than in two or three javelin missiles thrown who knows where.
He's saying he likes to pay a $2500 HOA fee to keep the poors away. It doesn't matter where it goes, as long as it filters out undesirables.
Wait until you get a tyrannical HOA board and realize you have to make a choice between dealing with them or moving. Dealing with them typically involves lawsuits which come out of your HOA fees, which will go up along with all your neighbors who are now angry that their fees have gone up as well. (Ask me about open records my HOA hasn’t delivered for over 350 days.
I pay my city for sewer, water, and trash. I pay an ISP for fiber to the home, a power company for electricity. If you get all those things for $2500/year from your HOA, congratulations.
I have heard way too many horror stories about obnoxious neighbors in HOAs to ever want to live in one, personally
My friends lost a battle to paint their garage door a slightly different shade of white than the approved Pantone shade. No private entity should ever have that degree of power over one’s private life. Petty tyrants, I tell ya.
They read the contract before moving in though right?
Sure, I meant this more in the sense that my friends' experience trying to very gently and largely unmeaningfully deviate from the petty tyrants' decrees taught me I never want to live anywhere near this type of governance structure. (unfortunately HOA-less developments are becoming more and more difficult to find and so whether you read the contract or not is slowly ceasing to matter - do you want a house or don't you? John Oliver did a great video about this stuff if you're so inclined)
Don't have HOA, have everything you have, AMA
all of those services are ones that should be realized by the city, from taxes paid to the city. If they are not, the problem is that people vote for wrong people
The problem with having the city pick things like your trash pickup is that you end up bound to whatever choices they make.
In Canada for instance, I’ve seen towns where they have pick up once every two weeks and the canister is not even a full size one. It’s a “gentle” push to get people to recycle and compost.
No way that would fly in Freedom Town USA.
HOAs in general are nothing but classic American privatization of that which would otherwise be public, because counties and cities here either lack the tax base (rural), budgeting skills (urban), or both, to provide the services some subdevelopments are built with.
It’s dumb. Here in Washington it’s rather common, I’m finding, for rural land plots to be part of a “Road Maintenance Association”. Exact same legal construct as an HOA, but scoped only to road maintenance on roads the county didn’t want to deal with. It would make so much more sense for the county to socialize those roads and reuse the same maintenance crews and vehicles for these stretches of road! But instead, a private entity pays through the nose to duplicate all that maintenance infrastructure (or pay contractors).
You’re stilling paying taxes for nothing in addition to HOA fees. Another fee isn’t the answer.
I think land-value taxation, with a cap on properties based on income (and wealth) for your first home, is the way.
I do think there is something special about the idea of home, and that home ownership should be encouraged. It brings people stability. People shouldn't be pushed out just because others have more income than them.
At the same time, we do need property taxes. In California, rate increases are capped, so older owners often pay pennies compared to new homeowners. Harmonize the taxes, while capping it.
Why should there be a cap? If you're so rich as to own some property, why do you need protection from paying a reasonable rate of tax?
Consider my neighborhood in Chicago. It has gentrified rapidly over the past couple decades. But it wasn't always so wealthy. My retireee neighbor probably bought her house for no more than about $100,000, but now the market rate for a house like hers is more like $500,000. With that comes about $20,000 per year in property taxes.
That might be reasonable for the wealthier families who are moving into the neighborhood and driving up the land values. But it's pushing her into poverty.
> But it's pushing her into poverty.
No, its pushing her into a cash flow problem. Its not poverty; she has substantial wealth, but its all in the house.
There are mechanisms, of course, to access that wealth without moving, including ones specifically geared toward income-limited house-rich retirees.
Now, those end up creating a debt that must be resolved before transferring the house, including via estate, so living on the value of the home reduces its utility as a vehicle for generational wealth, but...unless you want to reproduce California’s system which makes it much harder for people to become homeowners while rewarding those who already have, eapecially the wealthiest, making the rich richer and what would be the comfirtable middle class anywhere else in the country poor, that’s the way it works (and your exact scenario was the major sales pitch that was used to sell the California system; its maybe understadable how people without 50 years of California’s example fell for it then, but...)
There are ways other than California's for addressing this. Washington's system works quite well: a disposable income based property tax exemption for people over 61.
It exempts you from "excess levies" (basically levies that are voted on) and some statewide levies and freezes your taxable assessed value. If your disposable income is low enough it also starts excluding part of your assessed value from taxation.
So your solution is to take the house away via a second mortgage?
Why are we trying to take houses away from homeowners? Many who have lived in their homes for twenty years or more. What services that the city has could be so important to push residents out of the homes they've lived in all their lives? Most of it is inefficient pork on admin and roles the people living there didn't choose to hire for.
Build more. Encourage building multifamily. Pay to buy these homeowners out of their single family and convert the land to multifamily. If you can't pay, don't try to make it up with tax increases. That forces people out.
Deregulate and build.
Maybe a city failing to stretch services will send new residents seeking other cities, which would be healthier anyway.
Or maybe property taxes should be based on the services rendered. If they increased from $1,000/year to $20,000/year and you subtract away the inflation here is the city government delivering more value or less?
In my city and others our city council delivers large grants to non-profits and other entities under various auspices. “Defending gay rights” is one, or maybe helping the homeless or something. Of course I support both causes in general, but if the city gives a million dollars away maybe we just have to have some people kicked out of their homes to pay for these programs?
You can say well we will just raise taxes on the wealthy. Sure yea, whatever but that isn’t a viable long term strategy for places outside of California or New York which have an ability to capture wealth better due to intrisinic location value. There are only so many “rich” people. Could I afford another $10,000 in city taxes? Yea. I won’t be able to go out to eat or shop at local business as much though. So then what happens? Do those businesses go under? Raise prices? What about their property tax? Maybe instead I sell and take a loss on the house and the market value goes down so now that home pays less in taxes (depending on how this stuff is measured in a given jurisdiction).
> Maybe a city failing to stretch services will send new residents seeking other cities, which would be healthier anyway.
Yea. Tell Google and Meta and whoever to stop putting more jobs in the “cool” cities and come to Ohio where I live instead of these data centers.
This stuff is rather complicated, unfortunately. Even the case of a city let’s say “building affordable housing” is arguably a benefit to the local homeowners, but if you do that yea sorry Granny McPension has to pay for it too - she has a house, she’s wealthy!
> If they increased from $1,000/year to $20,000/year and you subtract away the inflation here is the city government delivering more value or less?
Probably less.
And probably irrelevant to the people that already live there.
> Probably less.
So probably the taxes should be lowered then and then grandma doesn’t need to be kicked out. Everyone wins
> Pay to buy these homeowners out of their single family and convert the land to multifamily.
But that's what the market is already doing? In your example from above, you can take a $400,000 windfall and move somewhere else, or take out a mortgage against that $400,000 of new equity to pay your taxes and still come out waaaaay ahead. I don't understand your characterization of a second mortgage as "taking the house away" at all.
What poverty--she owns a house worth $500k. I think deferral schemes where certain individuals can pay taxes upon sale of the home (with fair interest) should be fine to avoid forcing anyone into a reverse mortgage.
Well she doesn't have the 500k. This is akin to saying we should force people out if market conditions make their house more expensive. That seems like a really strange consequence to all this, idk
It isn't because the comment had a second sentence suggesting tax deferrals were fair.
Either housing is an economic asset subject to market forces, or it's not.
If it's not, then I would also like to live in a nice neighborhood for $100k and zero property tax, please.
On the other hand, if it is, then this person has a substantial economic asset that she could reverse mortgage, rent out, or sell.
So people that keep buying low (because that's what they can afford) are constantly being forced to move.
Houses are not the same thing as cash or other fungible assets.
Especially not when you're getting older, have limited ability to manage a move for yourself, built a life and raised your kids in the building, and would have to consider unloading a lifetime's worth of objects and/or moving infeasibly far away from your friends and community to get into a living situation that's more financially tenable.
> Houses are not the same thing as cash or other fungible assets.
> Especially not when you're getting older
Houses are wealth. And the wealth in them can be accessed while retaining use of the house. Especially when you are getting older.
Why are we replaying the dishonest “think of the retirees” now? It was bullshit in California in 1978 to sell Prop 13, and its even bigger (and more transparent) bullshit now when, especially when it is used to sell the same basic idea.
How can someone be so out of touch? A person buys a house, spend a whole life there, and through no action of her own happens to live in an area that drastically appreciates in value over the decades, all she wants is to spend her last few years in the same house that she loves and would never consider selling, and now we ask them to kindly pay all their income or more in property taxes, otherwise fuck off??
And where would she move to? All decent areas probably also increased in price, her property went up 10x in value but so did all other properties she would contemplate to buy. That’s the fallacy of thinking property is wealth when talking about your only residence.
What a morally bankrupt viewpoint.
The suggestion is that this person can get a mortgage to pay their property taxes over the next 20 or 30 years as part of their retirement - or they can sell their property and live well in a cheaper location.
Claiming that the retiree has a right to both the home value and the ability to live there is the friction point. It reads as hollow in the face of rising homelessness and the inability for young people and families to access housing.
The comment you are responding to is saying the opposite. They are saying that the person can access the wealth of the house (eg via a reverse mortgage) in order to pay the taxes while staying in the house. That's what this meant:
> Houses are wealth. And the wealth in them can be accessed while retaining use of the house. Especially when you are getting older.
Simple example. I bought the house at $100k. It's now worth $500k. That means I owe $20k/yr in taxes, but it also means I have $400k of additional wealth. A bank will lend me money with that wealth as collateral. If you imagine that the interest on the loan is roughly equivalent to the rate of appreciation of the property going forward, that's 20 years of taxes paid for by the increase in home value. Seems like a pretty good deal for everyone!
All else equal, I can see why the ability to live in the same house until you die would be given a high moral value. But in practice, IMO, this culture causes a number of problems. For instance, where I live, there was a lot of growth in the 70s and 80s, and a lot of young families, so they built a bunch of schools. It's an attractive place to live, so a lot of those people who lived in those houses when they were new and raised those families and attended those schools have kept living in those houses. But those kids that they raised there can't live in those same neighborhoods as adults, because there's no turnover, so they can't raise their own kids there. So now the schools are all half (or less) full, because the neighborhoods they were built to serve no longer have a lot of families living in them. So then they have to close and consolidate schools and everybody hates that. I don't really have a strong view on the moral question of whether houses "should" be owned by older people who have lived there a long time or by young people families, but from a pragmatic standpoint, this situation seems quite bad to me.
I think if we had a totally different culture, with multigenerational families living in the same house, then this might work better. But this model where we build new family friendly neighborhoods with parks and schools, and then nearly everyone ages in place and all the family amenities become empty over time, and the families all end up in the next new neighborhood and then it repeats, this doesn't seem ideal to me.
Schools aren't forever. They're just buildings that get built, expanded, replaced, upgraded, mothballed, abandoned, sold and/or destroyed all the time as the needs of the community using them changes. Some may last for decades, and some for centuries. Some have already lasted far too long.
It's OK that they don't last forever; they're schools, not irreplaceable shrines.
And speaking of things that also don't last forever: Homeowners. Grandma Sally isn't going to live forever. The house winds up on the open market in order to seek satisfaction of Grandma's debts, and then some new family buys it at market price and is free to breed a whole new fleet of kids to raise there.
There's still eventually churn in the marketplace, and in the neighborhood. The churn didn't disappear just because Grandma Sally was able to choose to keep living in the same place until she died quietly of an agonizingly painful heart attack as she stood in the kitchen making tomato sauce after church on a Sunday morning before the family dinner that afternoon.
People die all the time. It's often tragic, but it's natural and ultimately unavoidable.
People also get forced out their forever-homes all the time, too. That's also often tragic, but it happens for artificial reasons that could be avoided if we bothered with trying to do so.