Sure, but durable goods aren't necessarily investment goods. Homes do depreciate in value- their quality declines and they become increasingly expensive to maintain, and they simply don't have the same amenities as newly-built homes without increasingly expensive remodeling.
What makes "homes" appreciate in value is almost never the building itself, it is the land.
Agreed. Whether there is rent control, the local authority should be obliged to offer to let houses at the controlled rent to people wanting them, building new houses if necessary.
I don't think there is any way to get a voting system to stop favoring people who vote in the current election over people who can't or don't, but the OP was talking about something different: local governments favoring a slight minority of voters (landlords, some of whom are nonresidents and can't vote at all) over the larger number of tennants. I say "slight minority" because quite a few "landlords" are not the Victorian aristocrats our cultural legacies from Marx's time make them out to be but rather individual people who saved up and now let one property.
We do want majority decision making, but Democracy, outside a theoretically extreme sense, is self-determination for all, not just the majority.
That's the reason for rule of law, human rights, and limited government - to protect those without power. The people with power always have had self-determination.
Totally agreed; nevertheless, any voting system capable of expressing the desires of voters should result in an outcome that better meets their desires than the desires of non-voters. If it didn’t, why would anyone vote?
Local governments are controlled by property owners. Rent control harms landlords but they are still property owners and the lack of competition makes selling apartments more lucrative.
Implement a land value tax by exempting buildings and improvements from paying a property tax, shift state income and sales taxes onto land value, and ease zoning regulations.
that's still going to have the effect of lowering property values though.
it's a catch-22. "lowering the cost of housing" and "lowering property values" are the exact same thing. there's no actual political appetite to lower the cost of housing, because all the people in charge of making those decisions are property owners who don't want to see their investment lose value.
It may lower property values some, but in the long run even homeowners will be better-off as other, more burdensome taxes decrease. Sure, increasing land taxes may not be that popular, but pair it with abolishing income taxes? That's a different political proposition.
It's also why my first step is not to sell it as the implementation of a new tax; rather, it is an exemption to buildings. People don't like new taxes, but everyone loves exemptions!
Political problems are often difficult to solve but that by no means makes them impossible.
Prop 13 was a direct result of a California court decision.
I forget the 1960s case, but the gist of it was it instituted equalization in school budgets out from property taxes in the name of equity.
In other words, high property taxes in 1 town were forced to be transfered to the neighboring town with a lower budget, so much so that the transfer had to be make payments by pupil within a $100 band.
That was instituted blind to school performance of course.
This actually took hold in many states not just California, however CA was the o ly one that forced transfer payments within a $100 band. There are different flavors of this all accross the country
Of course, homeowners are not idiots. They dont want their tax dollars wasted. So soon after this case forced these transfer payments, there was a swell of home owners pushing for prop 13.
Makes sense. Local taxes to local benefit. If my taxes are going elsewhere, why should i pay more?
And so here we are. Almost 50 years later.
Prop 13 is here to stay and is the only restraint that communities have against out of control state spending.
Prop 13 also has the great benefit of keeping anyone new out of the neighborhood, as they’ll be paying potentially an order of magnitude higher tax on the same property. Meanwhile, folks living on the edge of poverty already can stay in their 7-figure homes, unable to afford anything locally as everything else has moved on price-wise, so we get underfunded schools surrounded by de-facto millionaires. Businesses benefit even more, just look up what Disney’s Prop13 benefits are like. This is a great idea too, as it ensures that land owners who have owned in a place for decades are untouchable in terms of investment performance due to the massive tax benefit, so they can charge market-rate rent while paying a small fraction of the tax that anyone else trying to do the same today would. /s
Worth noting is that this whole scam is arguably illegal under the Fair Housing Act.
Prop 13 rewards long time landowning families. Who's that? White people. Even if the law wasn't explicitly racist originally it's impact has been. And only impact matters in the law.
Focusing on the beneficiaries misses the whole issue. No one voting for the law at the time was looking To benefit "whit people". The court case Serrano v priest, which eventually led to prop13 getting momentum... That Serrano case simply enforced a law that , as usual, with good intentions, created unintended winners and losers. Its just this time the incentives ended up going the wrong way towards prop13.
People that passed the law, 2/3 of Californians, simply wanted to control how their money was spent. They wanted to do away with the Serrano vs priest decision.
Serrano vs Priest decision broke the link between housing taxes and local government. That court case was directly related to a law passed by the same proponents of aboliahing prop13 now.
In other words, it is the same people that created the perverse incentives of prop13 who now want to get rid of it
Prop 13 is arguably illegal under federal law. Of course with the current court I wouldn't want to press it. After all Clarence Thomas loves Prop 13 so much that he refused to sign the majority opinion in Nordlinger v Hahn because it didn't go far enough in empowering landowners.
> No one voting for the law at the time was looking To benefit "whit people".
Again, the Fair Housing Act cares about "disparate impact". Intention is irrelevant.
(Though given that the 70s was the era of school bussing battles it's a bit of a stretch to say that people weren't thinking about race wrt Serrano and school funding)
50%+ of california decided for this. Have you pondered why? First, are we really talking a massive tax benefit? Prop 13 is about tax increases to be limited ? Is that insane? Or is it maybe housing prices that are insane? Something does not add up.
I dont control the price of my home. Why should I pay ever incessant amounts over something I dont control and is effectively, paper gains?
But, I'll tell you what does control prices. Whose fault it is that there is no property being built in all the farmland along 280 between SF and Palo alto or Menlo Park.. Sure it looks nice, but its 40% of available land. Just farms.
Worse...some of farming is almonds... which take so much (subsidized) water. Again, why?
Why are there no municipalities created in those areas? Why is there no competition in the bay area's overpriced land ? Look into who controls the creation of new municipalities. Thats where a key problem for CA.
65% of California voted to overturn the 1963 Rumford Fair Housing Act, thereby allowing property sellers, landlords and their agents to openly discriminate on ethnic grounds when selling or letting accommodations.
Direct democracy is an objectively horrible way to govern. The US realized this hundreds of years ago and The Federalist Papers explicitly called out the "problem of faction" which is why we have a representative democracy instead of US citizens voting on federal law directly.
Children, immigrants, future transplants and prisoners can't vote. Should we be okay to grind them into dirt if it'll enrich voting demographics?
Yet switzerland has the oldest continuing government in the world.
Meanwhile, we had at least 1 close brush with failure (civil war). And counting.
You need to take care of factions and you need big, heated arguments at the local level. So they dont end up scaled up at the federal level.
Otherwise those scaled up "solutions" ends up massive problems, such as the sudden reversal of abortion, foreign interventions, and housing/ credit meltdowns due to federal subsidies of mortgage insurance.
> Prop 13 also has the great benefit of keeping anyone new out of the neighborhood, as they’ll be paying potentially an order of magnitude higher tax on the same property.
Prop 13 is around 45 years old, which is much longer than the median homeowner tenure in California. That suggests that new people are moving into neighborhoods.
They mortgage their houses for huge sums and then buy cheaper homes elsewhere and then fill it with multifamily amounts of people who trash the area (bc it wasn’t engineered for this many people) all while blocking it’s redevelopment. This is why San Francisco is a disgusting mess.
San Francisco is a disgusting mess because of govt policies that directly incentiviE and subsizide fentanyl outdoor homelessness, and act such programs are magnet for others in the same situation .
> And so here we are. Almost 50 years later. Prop 13 is here to stay and is the only restraint that communities have against out of control state spending
Nope, prop 13 (and the resulting income taxes) is somewhere between feudalism and class warfare, transferring money from the young who work to old people who pay nothing and spend their days at city hall making sure nothing ever gets better.
If you owned your home and someone made it easy for you to rent at high price, wouldn't you do the same?
Im a renter, not a homeowner.
But I didn't choose to move to SF as a settler when it was a polluted mess of a city with days you couldnt go out, and high crime.
I wanted to move to opportunity.. When incomes are high and the city was better (it is not anymore)
Id like for prices to go down but I dont blame those that benefitted from just being there. Instead I look at the enablers, there is plenty of blame to go around, and the homeowner is last in that list. Prices are not High due to just prop13.
Miami, NY, Boise, Nashville and a bunch of other cities have housing prices that are going for the moon relative to what its been. They have no prop 13
40% of land on 280, between SF and Palo Alto is undeveloped farmland.
There's a difference, as an individual you wouldn't own a large percentage of the local real estate, just a small part.
Investors who buy up 40% of the market, blacklist tenants, and price fix to set a price floor or remove supply by taking rentals off the market. Those are the main issues.
The state governments need to re-implement taxes such that deductions and write-offs do not apply beyond a certain number of properties that are not owner occupied.
As for prices, Prices are high because the banking sector has not been held to account for their unlawful actions, and politician's can't balance their budget.
They have used that to enrich themselves through various frauds, and kickback schemes. The land on 280 has little to no natural water, that's largely why its undeveloped, and job centers are scarce.
Property taxes don't work because you inevitably price locals out of homes and setting a maximum on the tax simply ensures local government increases to that max every year. Long term residents are left in the lurch.
I have parents who have a home up there and their property tax has increased 2% of the value every year for at least the last 10 years. They are paying almost a full salary ($40,000) to keep the home. That's just in property taxes each year and that is just for a single modest home with both having to continue working just to get by.
It’s hard to have a ton of sympathy for people paying very little tax on their 7-figure property. Sell it and move anywhere else…but the real pro move is to just rent it out and live somewhere else. We have neighbors in our Silicon Valley suburb who live in RVs in their driveway so they can rent the entire house and still “live” there. Great retirement plan / grift that will never be available to younger generations.
Since 1977 (before Prop 13) we've had the California Tax Postponement Program. Low income seniors, the disabled and the blind can defer taxes indefinitely. They have zero pressure from the state to move.
Meanwhile, anyone who didn’t buy a house or property for a business 20+ years ago is priced out of the market, so we have tons of low-quality stores and businesses that are insulated from competition. It’s interesting how many free market advocates will throw their values out the window when it benefits them to do so.
As I don't live in CA, explain to me how this would work? As an outsider, it sounds on the surface a lot like those people who advocate for a flat income tax, IE: you and I both own a half-acre, but I have a single-wide trailer and you have the Hearst Mansion, but we are both taxed the same amount.
The idea is to tax land as a percentage of its value (notably, not its size). This is because land is a necessary good which is exclusionary: because there is a fixed supply of land, it can only be owned at the expense of someone else.
So, let's take the scenario you gave: it depends very much where the mansion and the trailer are. Generally, people build mansions on high-value land and trailers are on low-value land, so the mansion will be taxed more than the trailer (a half acre in LA has a much higher value than a half-acre in rural Nevada where I live). If they are on the exact same lot, though, then yes they would pay the same tax. The idea is that taxing this way incentivizes the best use of land. Imagine that you have identical plots in New York, one is a big apartment complex, and the other a parking lot. With a property tax, you take a huge tax penalty for building, and so the housing complex pays a lot of taxes and the parking lot almost nothing. With a land value tax, however, the parking lot and the housing complex pay the same amount in tax, so it incentivizes the owner of the lot to build a more profitable housing complex there as well, and they take no tax penalty.
Prop 13 in CA is a law that freezes property tax assessments at sale, so you have people who are paying taxes on a home currently worth $2 million as if it were only worth the $150k they bought it for in 1980. This means it is always better just to rent the house out than sell it, since you have a huge tax benefit, making housing almost impossible to buy. Worse, you can pass the frozen assessment on in your will. So it is almost literally creating a quasi-landed gentry class.
It also means that the moment you buy land yourself in CA, you have a strong financial incentive to maintain the status quo. And thus the cycle continues.
> Prop 13 in CA is a law that freezes property tax assessments at sale, so you have people who are paying taxes on a home currently worth $2 million as if it were only worth the $150k they bought it for in 1980.
This is absolutely not true. What prop 13 does is that it limits the yearly base property tax increase to 2%. It's not frozen, it still goes up every year, but only 2%. Note that this means it still goes up 2% even in years when the market is down. It's basically a damping fuction to absorb the wild fluctuations in market value.
I’m having a hard time imagining how this would work in my real estate market, given that there are shacks less than a quarter mile from gated neighborhoods in vineyards… maybe this one works effectively in urban areas?
That’s the point. If you own a valuable piece of land, the government needs to incentivize you to density so that the community has cheap housing. Putting a single wide on a in demand spot is wasteful and should be punished.
More generally, land value tax returns land to its rightful owner, the people in the community. No one created land so it doesn’t make sense to allow people to profit off it.
> returns land to its rightful owner, the people in the community.
if that was the case, why does somebody currently own it, and who did this current owner buy it from (ala, go up the purchase chain back to the first buyer).
Mistakes were made. They obtained it from someone who had no right to give it to them in my opinion, although of course rights are a tricky subject and many believe “might makes right”
Eventually going up the chain brings us to the government, which again, had no right to give that land away when it belongs to the people. Whether they did it because of corruption or ineptitude is irrelevant.
The banks decide what your house is worth and the gov then tax you based on that. Seems like a way to force people into a never ending grind and kicking out seniors. No thanks.
Er, an LVT doesn't tax the house at all, that's precisely the point. It only taxes the land... It's literally just a property tax that doesn't tax the house.
So if I've got 10 acres that I'm keeping as an undeveloped wilderness to provide habitat for migratory birds to use during migrations and you've got 10 acres next to mine with a 200 unit apartment building on it we pay the same amount of tax?
That doesn't seem fair since your 10 acres is using way more of nearly every government service property taxes fund and requires more of nearly every government infrastructure that property taxes pay for.
In that case, I'd imagine the solution would be to ask for a zoning change to the land (changing it's value), or put it in a non-profit which could have special tax treatment - or transfer ownership back to give under specific conditions.
My understanding is that in most places taxes would go down for homes. They would go up massively for those with vacant lots or a lot of land in prime areas that is being underutilized, which is why LVT is great.
My understanding is that people try to live their life and than tech bros and yuppies move in and somehow the taxes go through the roof and you gotta leave.
I mean, you sell your house with a lot of lot for a lot to some Facebook manager and move to Florida, but the whole scheme seems sinister to me.
Somehow "not getting my neighborhood ruined" is labeled NIMBY:ism nowadays?
To clarify, it's not a flat dollar amount per square foot, it's a flat percentage of value. An acre of land in Wyoming is not taxed the same $/sqft as an acre of land in NYC.
That would be a terrible idea, frankly, because it will cause gradients of overbuilding/land abandonment and underuse. Think about it this way: you have a city where land is worth $30/sqft/yr in the center, $10 at the edge and $20 in between. If you set the tax at $20/sqft/yr, you will not incentivize people to build enough in the center of the city. It will be just fine in the middle, but it would be impossible to earn enough money from land to pay the tax on the outside of the city, so people would just abandon the land or try to build way more than you would actually want there (in which case the supposed land tax is actually cutting in and taxing labor and property as well)
I didn't mean there would only be a sqft / yr based on the value. I meant there would be a sqft / yr + value. So the city center would still be a higher tax than the edge.
The edge would still be worth more to build on because of the lower base-dominant tax.
But it does make the edge less accessible to lower incomes due to the base tax.
It should probably be a max value or max sqft on a given entity than try to indirectly force that with tax values. There's a reason we have anti-trust laws.
The point of an LVT is to incentivize the efficient use of land and to compensate the public for the recognition of exclusionary title to use of a location. This doesn't change based on who it is that is using the land or what they are using it for. Take a $20 million plot of land in LA; it makes no sense to exempt a person with a mansion there from paying a tax and penalizing a developer who builds a huge apartment building that can house 50 families! By keeping the LVT flat and not exempting particular uses, you avoid distorting the market and- in the case of a homestead exemption- punishing people who build apartments over single family homes, etc.
A heavy, mostly-flat LVT should be the end goal, but would have to be phased in over a generation to be politically viable and not cause tremendous social disruption.
Nobody's going to get behind a law that kicks grandma out of the house she's been living in for 50 years.
You have to start with residential properties owned by investing companies first, then phase it into nonprimary residences owned by individuals, then primary residences over a certain dollar amount for people under 65, etc. Then you slowly ramp up land value taxes and dial back traditional property taxes until they're entirely replaced.
> The point of an LVT is to incentivize the efficient use of land and to compensate the public for the recognition of exclusionary title to use of a location.
I'd say an additional point should be to try and not make it so that the path of least resistance for the system of taxes being for a few corporations to accumulate all the available real estate. From what you say you're fine with one company owning all the land as long as they pay the tax. What I'm proposing is similar except the tax gets more and more prohibitive the more you own, instead of being a flat rate.
> Asking for cheap housing, today, is like asking for eating the cake and selling it too.
We don't want cheap housing that appreciates in value so that we can use it as an investment. We want cheap housing that we can live in, period. We are being screwed out of that because other people got cheap housing and then decided it should appreciate forever, and pulled the ladder up behind them.
You are right, though, that it is impossible to have housing be affordable and an investment good. That's why we want it to stop being an investment good.
I'd never get into a 30 year mortgage knowingly that after 30 years it'd be less valuable than what I paid.
Therefore, want it or not, mean it or not, the whole point of buying a property is to get something that appreciates in value. Otherwise it'd be cheaper or better to just keep renting.
In order to stop being an investment, we need more houses, both in quantity and diversity. Lower the barrier to entry for everyone, everywhere.
You got value. You have a roof over your head and that money isn’t being burned up completely in rent. The problem is people want to enjoy having a nice house and a large return as well. There is no good coming our way from current asset owners pulling up the ladder to new home owners. Salaries cannot keep up with homeowners investment expectations.
"Consumption" doesn't mean disposable, it means homes should be used to be used to fulfill needs and desires, and not used to increase wealth (as an investment good).
Easiest way to do that is a land value tax; the home itself is not what is appreciating in value anyways, the land is what is appreciating.
Please, taxing something doesn't mean the government owns it. Does the government own someone's home because they have to pay property taxes to the city for paving the streets and running the garbage service?
Good point. At the end of the day, men with guns will come and put you in a cage if you disobey. Drafts are pretty nightmarish too, if you think about it.
Land value tax is better, imo, it charges directly based on the value of the scarce factor of production (land) and encourages development (i.e. more housing). Pretty silly to tax someone who owns a bunch of apartments in the middle of nowhere tons more than someone who owns one megamansion in LA.
What makes "homes" appreciate in value is almost never the building itself, it is the land.