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”.
This is essentially what has happened in coastal California over the last 60 years.
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.
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.
Freeze the property taxes and let the government take the entire value gain in the house when its sold.
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.
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.
>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.
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 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.
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.
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.
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
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
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.
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
It often is, instead. Eg the resale value of my flat increased because the area where I live became a better place.
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.
Reverse mortgage
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.
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.
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 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.
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.
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.
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?
It's absolute insanity
Large sales tax on home purchases is probably a generally bad idea. Looks like Bay Area pricing would incur a 10-12% tax under the UK scheme which seems pretty crazy.
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.
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.
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.
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.
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.
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.
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.
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
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.
Miracle is garbage doesn’t stink if you don’t put food in it.
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).
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?
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.
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.
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).
You could pay more and still get worse services.
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.
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 :)
The answer is almost certainly large scale fraud by organized criminal groups, but investigating and publicizing this is, currently, extremely politically inconvenient.
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.
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.
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.
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.
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. Any new hire comes with long-term costs for your local government, even after they've left service.
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, for example). 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. I've seen arguments to freeze or eliminate property taxes for seniors, but balanced budgets mean non-seniors have to pay more to cover their service costs unless the local government finds additional revenue (fees, fines, more local sales tax that increases living costs, etc.)
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, so that executive officers can earn more and deliver more to their investors. ~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...
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.
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.
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...)
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.
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.
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!
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.
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.
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.
> 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.
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.
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.
> 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!
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.
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.
That seems a bit ironic?
> 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
Not always, grandma can pass the home down to whoever. IIRC there are ways to do it without triggering a reevaluation on the original purchase price.
I don’t want my country to force old people to either move from their home, or take out risky debt.
There are absolutely problems and prop 13 has been awful for California but it’s a red herring to worry about the primary residence exceptions.
Perhaps the retired person is living on a fixed income of $40k/year. Over time their proterty taxes on the home that they have lived in for decades can now be more than half of their total income? How is this fair at any level?
> How is this fair at any level?
How is it fair that working people have to pay 10x for housing than she did when she was young? How is it fair that the money goes to her inheritance while she made her working neighbors pay her share of taxes?
Where I live, we are looking at locking property taxes once you hit a specified age (65) and have under a specified income ($40k+/-). The current debates revolve around exactly what those numbers are and at what level the taxes get locked. The goal is to protect the elderly who have already contributed to the economy and society for 40+ years and not force them into a financial situation forcing them to sell their home just to pay even more property taxes that they have paid for the entire ownership.
Oregon has a deferral where the delayed property tax comes from the value of the house when it is sold or I guess when you die. https://grantsforseniors.org/property-tax-relief-for-seniors....
Washington has a similar thing.
"All Washington counties offer senior citizens and disabled households property tax exemptions. Eligibility is based on your age or disability status, home ownership, residency in Washington, and income level. Seniors who are at least age 61, or retired from regular gainful employment by reason of a disability, with an income of $64,000 or less are eligible."
The idea is to help people stay in their houses. This is really really important. And if you can afford it, you should be paying property taxes. I'm lucky I can afford mine, but I highly support this strategy.
In my state I occasionally see people in online discussions saying they can't afford their property taxes - I think a lot of people aren't aware of these programs, people are amazed when I post a few pointers and tell them about it.
Quite the opposite.
Telling people that the solution is to sell their home to an insurance company as a solution is most certainly a corporate land grab.
You seem to be arguing about people/corporations that own multiple homes or even entire portfolios of property. These are not the same argument.
If their asset is gaining in price so much that the tax burden is getting high, then tax deferement until a liquidity event both keeps them in their home, but also keeps them honest about how much they are taking away from the rest of society by taking that piece of land.
The premise does not warrant this conclusion.
People’s primary residences are more than just an economic asset. If you don’t understand that, it’s difficult to have a conversation as we have very different starting points about morality.
I also don’t buy 20K of property tax on a 500K home, that’s a 4% tax which seems unlikely in Chicago.
Something isn’t right. Poor financial planning maybe?
Sometimes it works out and it's fine. It's not all the scam. But there are no scams out there that I would not have any confidence in working out. And as a government (which as a voter I'm part of), I certainly would refuse because there are too many ways that I can lose.
Now, apartments can suck too. Especially in places like the USA where we have a landlord cartel actively pushing up prices, and a professional landlord president who shut down an antitrust investigation into said cartel shortly after entering office.
I certainly can't say I have all the answers here; right now housing sucks every way you look at it. But I do believe quite firmly that this idea that going very deeply into debt and securing it with the actual roof over your head is somehow good for a person's financial security is an idea that mostly serves the interests of people who earn a commission on convincing people to get into that situation.
Note that I'm very against cash out refinancing, which a lot of people are doing to get the cash that the house is worth. In my opinion the best reason to have a house is in 30 years it's paid off and now you can live there rent free for the rest of your life.
I am a fairly recent homeowner. Before that I lived in an apartment in the same neighborhood. I like owning the house and having control over the space. I like having a bit more space. But, after I add up home loan interest, taxes, homeowner's insurance, higher utility bills, maintenance, etc., the amount of money that I will definitely never see again adds up to quite a bit more than I was paying to live in an apartment that, square footage aside, was aesthetically much nicer and better situated than the house.
And then, yeah, some additional amount goes to equity in an "investment" that is less liquid and historically earns a lower rate than a decent index fund.
Every day, thousands of folks do emerge from that tunnel and gain the ability to make profound statements like "Well, at least the house is paid for."
This is in stark contrast to renting, wherein: There is absolute certainty that none of the money spent towards having a place to live will ever be returned. It doesn't matter how much is spent: Whether a little, a lot, or a lot more, that money is always just unilaterally gone. There's no chance at all of anything else happening. The odds of winning are nonexistent. There is no light at the end of the tunnel, and there never can be -- it's just inescapable darkness in there.
If you include opportunity cost into the decision, then your contrast can and often will disappear (i.e. renting is financially superior or "winning" in your terminology).
Also, is this an AI comment? Because it's surely poetic about something that doesn't call for it.
When I find these kinds of phrases to be directed my way, it is my most charitable interpretation that it is impossible for anything to be gained from the conversation.
Thanks for bringing this up! We're done here.
So your landlord was renting your apartment to you at a loss?
But it's also probable that the loan is fixed at a lower rate than you can get now, the maintenance costs less if you put a few people on salary vs hiring them for one off repairs, and the utility bills are lower because it's a smaller space.
As a general rule of thumb, the break-even comes out to be about seven years. It can be as bad as 15 years if you get unlucky and when you buy it what the economy does, but by 30 years it is almost guaranteed you are overall money head buying a house.
Although I do have to point out that I did not consider other investment options. If you take an apartment for cheap rent and then invest the difference between what a house payment would be including all that insurance and taxes versus your apartment and apartment insurance (less buy important) - and invest the difference in stocks, that is going to change your financial situation. All those equal that expect to be equal over in the long run. Since by investing, you are investing less money. However, just to make things tricky, in the U.S., we can invest up to a certain maximum in a 401k or IRA, both of which are going to be much better because of taxes, but it doesn't matter if you have an apartment or you have a house, you're at the same maximum. And so someone with a house can get that advantage of that and their future rent is paid for while someone with an apartment is still going to be pay for that apartment all their life.
There's a few other assumptions above. I'm assuming you're relatively young and you're going to live a relatively long life in the same area. Moving houses that's going to change things, apartments are much easier to move. Be the umlucky person who dies young: you won't get to take advantage of either investment.
Overall apartments and houses can both be good things and you need to examine the situation for your own life. Life includes your future, which is of course unknown. Good luck.
Anyone who claims there is a universal answer for everyone is categorically, utterly wrong.
'Tis better than to have owned and lost, than to have never owned at all.
> Now, apartments can suck too. Especially in places like the USA where we have a landlord cartel actively pushing up prices, and a professional landlord president who shut down an antitrust investigation into said cartel shortly after entering office.
So rather than ever own a home, just rent. It's about the same as taking a pile of money out into the middle of the street every month and setting it on fire, but what else can a person do?
Die?
While not all stories are like that, many are (in fact most are).
Except you have to live somewhere, it's not like buying a boat. All of these dangers apply equally to owners and renters. Yet the protection you get from owning in that situation is massively advantaged over renting. Lose your job and can't afford your mortgage? Oh no, guess I'll have to take out a HELOC, or apply for forbearance, then wait years to be foreclosed on and declare bankruptcy. Lose your job and can't afford your rent? Sheriff's knocking on the door in 90 days to throw you on the street.
That doesn’t seem too bad, until you see all of her other costs have gone up dramatically because inflation has been high post pandemic. She only has so much money to spend every month, and if her property taxes kept going up too, she’d eventually be unable to afford to live in her house. She only owns her home because she was worried about being secure later in life and prioritized it above things like vacations or cars.
For a lot of folks as they age, even if they’re frugal, it’s not easy to survive. If you live for 20-30 years after retirement you’re likely to have your buying power cut by half if not more.
With that said, if someone’s home is worth more than say 10x the average price in your area, or your assets are $10+ million[1], I think there’s room for increased taxation. My primary point was simply being a property isn’t necessarily the right measure to determine a reasonable tax rate.
[1] The number obviously depends on where someone lives. Living in New York or SF, $10 million dollars of assets would be an extremely comfortable life but most likely not a lavish lifestyle. But… $10 million dollars in rural Mississippi is going to have you living an extremely lavish lifestyle.
The only fair thing to do is to allow some portion of the taxes into a lien that is paid out when the he is sold.
It's extremely unfair to reward excess wealth to the wealthy people of a community, while everyone else is struggling just to find a place to live.
Not only is it unfair, but it skews financial incentives and results in very poor politics for improving the unfair housing situation.
By your logic anyone who is retired and has an asset appreciate should immediately sell it, and be forced to move somewhere else.
I cannot afford a home in Portland where I live. I could probably make the mortgage but it’s too risky in my opinion to have a 30 year debt obligation. None of my friends own their own home, not a single one. We’ve all just entered our 40s. The lack of somewhere to live won’t be fixed by a lien, nor will liens on an individuals actual home due at death fix it. It will absolutely incentivize investors who can exploit that, who will pay the liens and add to their portfolio.
If we want more housing at better prices we need to encourage development of more housing. That means making cities more dense and removing NIMBY policies which prevent it. Sure some of these homeowners may be voting for those policies, but they are the minority in larger cities.
Apart from the US, there aren't may other countries that allow fixed rate mortgages, and not a 30-year fixed.
1) the tax entity sets their budget (usually an increase)
2) the valuation group values all properties
3) the tax entity sets a tax rate to raise their budgeted amount. budgeted amount = tax rate * total value
Most people think if their value doubles, their tax doubles. This mostly isnt the case. If everyone's value doubles, the rate decreases so they raise the budgeted amount. Mostly property tax increases are due to ever increasing budgets not rising values.
1) If everyone's value stayed the same, and the budget increased, your tax would increase by the amount of the budget increase
2) if everyone's value doubled, but the budget stayed the same, your tax would not increase
3) if your value doubled, everyone else's stayed the same, and the budget stayed the same, your tax would double.
The worst part is that for all these taxes, the level of service has dropped since that home was bought.
In some countries and cultures the good of the many comes before the good of the individual, no matter the sacrifices required to get there. The US (and to a slightly lesser degree, Canada) generally does not subscribe to such a cultural mantra.
Edit to add: for the cases where the societal good really does outweigh the personal good, we have a tool for that: eminent domain, which is how we build train lines and so forth.
This line of logic doesn't follow. There's plenty of old people who need to move out for non-financial reasons (e.g. can't live independently anymore), and it doesn't really make sense to me that having to move out because you can't afford your mortgage is okay while not being able to afford your taxes isn't. In any case, we can have our cake and eat it too by building more housing. Homes become affordable for young people if supply increases and the tax base broadens enough that taxes go down for established homeowners.
Thus, you can budget around the mortgage payment in a predictable way, and if you have to move out because you can no longer afford it, that's a very different thing than if your property taxes magically change because a theoretical buyer may theoretically be willing to pay some astronomically higher cost for your house than you paid for it.
So, respectfully, I disagree with the framing that we have to take both or neither. They are separate budgeting concerns, and separate policy concerns.
Like another poster said, things like pensions and medicare might overall drain the entire economy, so the end result is the same, but that seems more diffuse than local tax bases, and wouldn't properly appear in local government budgets.
In Washington State, Puget Sound Energy is a for-profit utility owned by mostly pension plans! Their guaranteed ROI is sucked out of the productive economy. Everywhere you look rent is being extracted either by the 0.01% or the elderly, and the working class must slave to get 1/10 what they gave themselves.
Not an economist but I don't see how money can be anything other than an accounting tool at that level. If they had "paid for it" back in the day, young people would still be screwed.
The two big ways to increase prosperity that I see are for people to take care of their health so they need fewer medical services, and for fewer people to be devoted to administration (e.g. the medical billing quagmire, SaaS companies focused on how to better extract rent) or convincing people to buy stupid crap (c.f. the giant advertising industry that swallows up bright workers to build a surveillance and propaganda apparatus instead of e.g. industrial automation), fewer pointless wars, and more people devoted to actually doing things people need or building infrastructure (e.g. solar).
The problem isn't that there are old people, is that there's currently a glut of old people, which puts real strain on the system. Being old is expensive for governments. Not only do older people not typically pay nearly as much in taxes, they also require more resources to support.
So many of today's problems come down to the simple demographic fact: there's a lot of baby boomers, and they're getting old.
I don't think people really understand how bad it is out here. I imagine that if a dignified line on the base standard were held, there would be less of a need for this kind of middle-class pearl-clutching.
Y2K: buy an 1/8th of a million dollar house. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $1.25M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate is 0.8%, that is ... numerically correct but its mere numerology.
2026: house is now worth 1/2 of a million dollars. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $5M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate historically was 0.8%, then you'd have to pay $4K/yr, but it doesn't even remotely work that way, so it simply doesn't matter. Its just numerology. My fraction of total property ownership "value" times the annual village budget is what I'll be taxed, which in this case is the same old $1K.
In reality grandma gets kicked to the street because inflation raises the price of everything, including real estate, but real estate is not even remotely the problem or the solution. Grandma might have afforded a house and its taxes when a McDonalds Big Mac was 75 cents each but now that its $13.49 the village budget has gone up 10x, 20x what it was when she bought, so she better find a way to make 10x, 20x more money or not only is she not going to pay her fair share of the budget via taxes, she's not going to eat food either.
"Now that neighbourhood is unaffordable." Thats the real problem. No one can move in and pay the city budget, and the city budget explodes because now they have to pay the dog catcher at least $250K/yr to live there and nobody can afford to rob peter to pay paul quite that much...
That's why socialization is so important. You can't get voters to understand the difference between billions and trillions or put anything in context when the numbers get that big. All you can do is socialize them from an early age to have directionally correct gut feelings like, "there's no such thing as a free lunch" or "saving is good."
I was recently trying to understand Elon Musk's wealth, and come up with similar comparison: For example, he could make millionaire's of every single person in Seattle, and still have hundreds billions of dollars of wealth left over. Truly mind boggling.
So while fun thought experiments are excellent selling points, they aren't actually grounded in reality.
Schools are really expensive to operate. Most districts and schools make it easy to graduate to maximize their graduation rates. Standardized testing is suppose to catch local lowering of standards but state departments of education are also under pressure to maximize test pass rate. So resources flow into pulling the bottom quintile of students up to a minimum standard. This means teaching to the test on math and English, and de-prioritizing other subjects or dropping them entirely.
We could expand the breadth of educational basic standards. This would require a cultural shift in valuing formal education more, increasing teacher training/recruiting resources, making schools year round, more centralization of education budgets at the state or even Federal level.
Generally speaking public schools tend to be better in states like Massachusetts than Kansas.
LOL, no.
In the majority of states in the USA, districts in the state are not allowed to graduate students without taking both an econ class and a personal finance class. Kansas is one of the stricter states. I can only think of three off the top of my head that do not mandate econ/finance classes, Colorado, Massachusetts, and Washington. Pretty hilarious to claim MA has better education requirements than KS LOL when its the other way around. Also hilarious when the average SAT score in Kansas is 1256 vs a mere 1128 in Massachusetts, LOL. I can't immediately think of any way that the schools in MA are better than KS, which is pretty funny. Is there even one stat or requirement where MA beats KS? Maybe college sports scores...
That said, public schools are mandatory pass, and the kids know it.
I think the problem with education is the prepack solutions sold by politicians intentionally don't reflect reality, sometimes intentionally reflect the opposite, and are designed to be ineffective or even actively counterproductive.
MA did pass a personal finance requirement for schools earlier this year. Like many other states it doesn’t have to be, but can be a stand alone course. While it may seem like MA is lagging behind, the majority of those requirements have been put into place within the last 5 or 6 years, so this is pretty new in most places. And a lot of states have done things that seem counter productive, like allowing a personal finance course to replace core math requirements. MA typically lets schools figure out how to implement requirements, so as in most cases the wealthier areas will figure out a high quality way to do this, and the poor areas will do their best to meet the state requirements for the lowest cost, providing less benefits to the students than it should. (Yet another reason that relying so heavily on local resources for public education is a poor choice).
This makes me think an interesting metric would be total SAT points per 100k population.
If only 2% of Kansas students are taking the SAT, that's kind of shocking, actually. But maybe the state University there doesn't require it?
"One man gathers what another man spills."
I think it's far more ambiguous and less measured of a net negative, than it is a clear, measured net positive for the "powers that be" if we define them as the wealthy.
You can take a very clear, measured look at wealth distribution over the past 50 years.
On the other hand, you have a massive contingent of people who are constantly scoring own goals because their economic insight is purely an emotional surface level intuition.
A mainstream bank takes a longer term view. They offer financial literacy info for customers who are interested. If a customer overdrafts less frequently and is able to leave significant amounts of money deposited the interest spread is more profitable than collecting overdraft fees.
Don't confuse the existence of people who profit on inefficiencies as being a sign that the system works best with those inefficiencies, or that those inefficieces are even particularly profitable.
It would make a lot more sense to increase the carrying costs of homes so that people are inclined to sell them when they no longer need a particular configuration.
Like, yea, property taxes suck... but the point is you're wealthy even if you want to pretend you're not. Passing the tax burden onto others, just because you can, is exactly how we end up in a world where wealthy landowners live like literally nobility while the people renting their land pay the taxes for their infrastructure.
There’s a way to do this. Buy in a VHCOL area like San Francisco, wait for 3-10 years, then move to Texas, Florida, South Carolina, etc. Real estate is highly localized so you do not need to stay in the same area all the time.
The homelab guy at CloudFlare did this because the prices of real estate in Austin are actually falling.
How does this work? VHCOL does not mean that prices will appreciate or even sustain.
But they got rid of that tax while at the same time removing the ability to deduct mortgage interest. So now it makes most sense to pay off your loans.
Mortgages are different here - they are interest-only loans for usually 1 to 5 years. And when the loan expires you have the opportunity to pay off as much as possible and then renew the loan for the remainder.
We should expect this phenomenon to grow stronger as more high-earners hit retirement age, right? I'd guess we have another 20-30 years at least before this incentive starts to "level out", and that's only if we somehow see wealth distribution become less extremely correlated with age.
However, where I live local government is wildly inefficient. So in that case property taxes should go down while property taxes go up via the expedient of competent governance. Alas.
Also did your six neurons figured out that it would also cause rent to decrease yet ?
This is so much of a thing that there was even a federal investigation into it (particularly the SaaS service used to help feed the data driving this trend).
It’s a consumer good most people want and will pay for and it retains its use for a very long time. So naturally there are fairly liquid markets and loans for it.
On the other hand, property taxes seem to be a pretty flawed system that still result in inequalities. Individual homeowners hate them and will do anything to lower their burden. More wealthy and mobile people will move to different jurisdictions specifically to save on tax burden. There are extreme examples like The Villages in Florida where the heavy demographics skew toward older residents means that minimal funding reaches services that benefit younger families who work there as service industry workers. My understanding is that this is a particularly extreme arrangement in the villages: if you lose your employment within the jurisdiction you have to pull your kids out of the local schools immediately.
Then you have issues where you get poor jurisdictions and wealthy ones based on property values. Some states help mitigate this by pooling property taxes across the state for school funding.
I’ve heard that many condo buildings in my area have a standing arrangement with a law firm to submit appraisal appeals every single year and the law firm is paid on a percentage based on the savings they achieve.
This system can’t be efficient for anyone involved. When you really think about it this is like a siphon of money that could be going into public services into a private law firm.
The thing about property taxes especially those that have owner-occupier exceptions is that they sort of work okay because they’re a good approximation for wealth. They’re still regressive but you can pretty safely assume that someone who owns a second home is wealthy enough to pay a high tax rate.
On the other hand, that arrangement passes more costs on to the lower income renter. Their property owner landlord has higher property taxes than owner-occupiers and theoretically passes those costs on to the renter.
I think someone could devise a better system and do away with property taxes as they function today entirely. We need a system that makes all the stakeholders in our society feel like every dollar they invest is a positive investment with returns.
I understand how this would be infuriating to other locals. But it shows the power of community organization. They don’t win because America is systemically pro Hasidic, they simply turned out the vote (after years of non-participation.). This is an encouragement to be active in your own community. If you don’t, someone else may do it for you.
The cult leaders tell them how to vote and then bus them to the polling station. They also largely are unemployed or work for others in the cult, so there is no obstacle there.
It's a scientology level cult, not a "community", and while certainly impressive knowledge and coordination to hijack tax payer money, it's still nakedly fraudulent.
I've seen people completely change their attitudes about things once they own a home. I know a self-proclaimed liberal who claims to care about people suddenly go all NIMBY because they are buying a $2M house and now they don't want duplexes in their neighborhood and don't like the idea of more housing being built ("we're full"). They feel entitled to a high (and increasing) property value in a desirable area.
I hate it so much
If all of the sudden the neighborhood behind you gets rezoned to industrial and you get a datacenter nearby, everybody understands you're up in arms.
If at the same time the neighborhood behind you gets converted from 200 single-family homes to 200 8-plexes, complaining is NIMBY. Even though it has the same dramatic impact on the quality of life you bought into. Way more noise, way more street parking, cars racing late at night etc.
So absent of that, I think your personal incentives also lead you to your current housing policy preferences. Don’t you?
Taxation based on the theoretical monetary value you could extract if you sold your primary domicile is probably the dumbest possible policy, because it leads to people being pushed out of their homes (or our of retirement, or into higher-paying jobs they don't want, or whatever). Houses do not have to be viewed as investment vehicles, they can simply be residences.
As far as property taxation on non-owner-occupied units... up for debate, but I think fixing to most recent transfer time's FMV works reasonably well here, too.
This is absurd. There's absolutely no benefit to you if the value of your house increases if you have no intention of selling it. That's exactly the point of treating owner-occupied homes differently from commercially owned property. The author should be embarrassed that he, as a an economist, doesn't know that in economic theory, households do not optimize for profit on some balance sheet, but for personal (subjective) utility. That's econ 101.
But even if you were right for the majority of home owners: feel free to tax collateralized homes as commercial property based on the volume of the mortgage. Case solved.
I can take a loan against or collateralized my home value.
I can have greater operational flexibility if I know I have a deep financial backup.
There is something to it, even if overstated
Regime in charge: Enjoy these property tax reforms that will lead to higher housing costs and (further) transfer of wealth towards people who already own homes. Let us know what else we can do to keep people in lower classes trapped and vulnerable to exploitation.
"America, where you can spend your entire life paying off mortgage and then still be one missed tax payment from losing it all."
Is that true and how is this not perpetual serfdom if you can't ever really own a home?
https://phillipslytle.com/a-review-of-new-yorks-response-to-...
Until 2023, some (many?) would sell off your house and pocket the difference, even if it exceeded the tax liability!
Could someone go off the grid to some "commons" land and build a log cabin there or something?
What the heck are "property taxes" paying for?
The house is just sitting there, not consuming any finite resources (you already paid for the land) or requiring constant maintenance or upkeep from the government..
Whatever utilities you use you pay bills for.
You can look up a property tax bill and get an idea of what property taxes pay for. Mine is itemized and it breaks down exactly where my money is going.
And, sure, you could go off the grid and live in a shack in the boonies. That's always an option. If you feel like you don't need the services and amenities that property taxes pay for in a particular place, you can move, and many people do. In that case, yes, your property taxes on said shack-in-the-boonies will be low. But that's going to be in large part due to the lower value attached to this property and the land it sits on, in addition to fewer services and amenities available to it. That's a tradeoff that you can make. But at least in my case, I don't mind paying my property taxes because I can easily afford them, and I and others receive many benefits in return.
https://www.youtube.com/watch?v=-Em96NVxO9Q — So This is Progress (Terry Jones, BBC, 1991)
In the guise of 'paying your fair share to be a part of society', property tax is essentially the institution of serfdom to the royalty of state bureaucracy.
Property tax is effectively the same as rent, but the one collecting rent also has martial and lawfare capabilities. Not to mention effectively unlimited funds with which to crush anyone who doesn't fall in line.
If what you have can be taken by another if you don't meet some set of conditions, you don't really own that thing, do you? It's more like a loaner than it is 'I own this thing'.
---
I'll offer a blanket alternative for state and federal taxation: no taxes on individuals, their income, or their property. Instead we tax exchange. States levy a 10% VAT on all transactions. Federal government levies taxes on interstate commerce, imports, and exports only.
All other forms of taxation are barred. New taxes may not be levied. If the state needs additional funds it may issue short or long term bonds accordingly.
Money printing is shifted away from being owned by an international banker's consortium, re-pinned to durable goods or precious metals.
It makes me uncomfortable too actually but I can’t see any alternative that does not get back to a similar spot or violence. In addition if we shifted to a land value tax, it would push taxes onto the very dense developed areas encouraging better use.
1. No matter how high the value of your house, you still own one housing unit of wealth. If you sell it, you still need to live somewhere else. So the only way to "get ahead" is to buy "investment properties", which is hoarding housing;
2. Housing costs are an input into everything you do and buy. Food more expensive? Well, if housing is more expensive then the workers who produce your food need higher wages to survive. The place where your food is made or sold has a higher rent. So higher housing prices decrease real wages even if you own your own home; and
3. When land becomes the best investment, which it has been for years, then it destroys any productive use of capital. It's competing for the same dollars. Why invest in a factory that makes widgets? That might fail. But a housing estate? Banks give you good collaterization. Governments create policy to make sure you will never fail. Demand is inelastic.
Ever-increasing house prices is just stealing from the next generation. That's all it's doing. Yet so many government polices are designed to enshrine and protect increasing house prices as an explicit and implicit policy goal.
The problems with property taxes are:
1. They don't go up fast enough. So it acts as a tax break to market incumbents. If property taxes properly reflected market value, it would act as a brake on increasing house prices.
2. Property tax increases are often capped (eg Prop 13 in CA); and
3. On an investment property, higher rents should increase property values because you've increased the value of the housing and land. This too would act as a brake on ever-increasing rents.
It should be essentially impossible for non-residents to own housing somewhere they don't live. Owning more than one or two properties should be punitively taxed if not outright impossible.
https://nicholasdecker.substack.com/p/the-median-voter-is-a-...
Miss on two points: there are exemptions for retired that freeze prop tax and equity is wealth that’s rare to access before death
I'm a multi-homeowner and I'd love it if house prices fell, or at least stopped rising.
> The proposition adjusted the property tax rate, pegging it at 1% of the purchase price of the property.
That sent me down a rabbit hole of trying to understand why property taxes go down while home values go up, and why raising property taxes is so damn hard in so many states (it’s largely because of caps etched into law by Boomers in the 70s and 80s). It’s also why I have the strong opinions on the issue I hold today.
Tax displacement is a very real issue, but one that theoretically should be solved by a liquid property market where you can sell your home at FMV and downsize to another one you can afford. Americans, special creatures that we are, instead demanded we get the McMansions without the property tax valuations, while also deciding what housing gets built regardless of demand, while also keeping the distorted value of the home should we sell it for a retirement nest egg.
In other words: homeowners keep all the money, while paying decreasing to no taxes on it. This has been a significant contributor to the housing crisis of today, with shitbox properties in major cities selling for upwards of a million dollars but families pulling in not even a tenth of that in yearly income. The typical soundbite responses of “we need more housing” and “we need to reform or loosen regulations”, while technically correct, ignore the root incentive structure crafted back in the 70s with these sorts of inverse taxation schemes, and therefore leave the problem intact. We’d have to build so much housing, so quickly, that property values halve nationally for there to be any long-term fix to this problem, and nobody seems inclined to do this given the ponzi scheme we’ve discovered suburbia to be (just look at new developments in CA with dirt roads as an example of homeowners having to foot the bill and realizing it ain’t worth it given the thin density of suburbs).
And thus we arrive back at the beginning: we need to raise taxes on homes to reflect their high assessment values, which would displace existing homeowners who couldn’t afford said bill, which is leading to the same demographics as before demanding the same solutions as they enacted in the 70s and 80s: caps, limits, or shifting costs onto less-advantaged demographics (like renters via commercial real estate). As perverse as it sounds to most Americans, the actual solution is to finally let property taxes “float” with valuations in their entirety, no caps or cuts, and let the market sort it out. Will that lead to some folks becoming homeless? Yeah, and that’s a whole other ball of wax we’ve ignored dealing with precisely because we catered to homeowners as a political group, but that’s infinitely more solvable than trying to build our way out of a housing crisis engineered by lower taxes and controls on builds.
We gotta eat the pain up front to find a better collective tomorrow for everyone.
And by “we” you mean not you.
For one thing, in the 1970's lots of true "baby boomers" were still too young to vote.
Maybe what you mean is old folks in general, they were the ones in California who were desperate enough to support the proposition which might be able to save their homes.
They should know, lots of them had been through The Great Depression, and were so much older than boomers they could be their grandparents, well they actually were if you do the math.
And they did the math, getting by just by the skin of their teeth while those just a little bit older who had been on a fixed income earlier had already been taxed out beyond recovery before the proposition.
They already ate the pain, I guess it's difficult to remember how up-front it was if you never spent that many years among Depression survivors.
Nobody ever wanted a depression again, and losing your home through no fault of your own was one of the most visible outcomes that ordinary people could do something about before it got out of hand.
This was supposed to be big, and it is bigger than ever, this is by design.
The problem comes from trying to work against it when the entire economic system surrounding "real estate" was supposed to evolve by now to where nobody pays more tax by now than the most proposition-protected properties.
The idea was for it not to end up making any difference as the years went by, nothing could be more fair than that.
The pearl-clutching comes from the failure of following generations to evolve away from taxing properties or wealth, with all levies eventually falling exclusively onto commerce instead so that only those who are actively making big transactions at the time are logically expected to be able to afford anything at all at the time.
Otherwise things are going to stay as medieval as they can, and the torture will continue until the attitude improves.
Well at least your property value will go up endlessly. No bubble there. Totally not based on speculation.
Actually that often is how local governments see it in many places.
Local bond issues, which are paid for by property taxes, are often not a fixed rate. They are often a fixed amount (e.g., $2 million/year for 5 years) or a fixed initial amount with some growth allowed (e.g., $2 million/year for 5 years with inflation adjustments, often capped at some maximum adjustment).
With these each year the rate changes to keep the amount collected on target. If aggregate property values go up the rate goes down and if aggregate property values go down the rate goes up. If everyone's property values went up or down by the same percentage the amount of tax each person paid would stay the same.
Your share of the tax is proportional to your share of the aggregate property value, so our individual taxes can change regardless of any changes in aggregate value. For example if aggregate value goes up 5%, but your assessed value us up 10% and mine is up 3% your tax for a fixed amount bond will go up and mine will go down.
But I agree that pinning all hopes of class mobility or comfortable retirement on perpetually increasing housing costs cannot work for very much longer.
Also, economies can grow rather than just inflate
The government should face a punishment for targeting constant inflation.
Government is not a borg. We elected the dumbest motherfucker in the country, he consolidated power, and we got incredibly inflationary (among other things...) policies. Local government is just along for the ride.
Fix is not complicated. Tax land not buildings, flat exemption under the primary residence off the local median so nobody proves income, defer the rest as a lien till sale for the cash poor
Piece of cake really, compared to getting lucky trying to lower taxes.
not my downvote btw
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.
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.
"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.
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.
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).
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.
Nationally, per student cost at Catholic parochial schools is roughly 1/2 of public schools. (Couldn't find California specific numbers, but it tracks what I've seen.) That's cost/spending; tuition is even less. Special education programs eat up 1/4-1/3 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. What you hear today to support claims of inequity are cherry-picked esoteric cases to drive outrage, just like every other topic today. In reality there's clearly much more going on than what advocates for this or that would ever admit.
In any event, "picking your customers" is exactly the point of the previous poster(s). Money doesn't really explain what we're seeing. Once upon a time there was a very strong correlation, and people presumed causation, but now it's quite clear that the causation wasn't there. Certainly not directly, which is why throwing more money at the schools isn't helping.
Public schools have to take children that do not want to be there and make it everyone's problem, and their classmates suffer for it. Maybe this public school policy is the issue that should concern you.
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.
Anything past the paycheck is a gamble.
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.'
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"
It was not great to watch, but it was great to let my parents know who exactly they should stop associating with.
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...
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.
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.
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.
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.
The property was purchased with "after tax" money. So at purchase date the value was already taxed.
If one sells, and make a profit, we tax that profit. Why ask for a tax on the value of the property, each year.
There should be local taxes, and there are. To fund services and whatnot of course. But taxing a percent of the current value of a property is unfair as the owner may live in there with no intention to sell and potentially no revenue whatsoever.
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.
So even with the cap, it's more than likely the property tax costs a typical owner more than double what it did 30y ago.
Not a big deal if you bought at age 20 (unlikely) and still receive some work income. But if you are retired, it stings harder each year.
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
Why should I get to have that sort of externality on others just because I have more money than them?
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."
They could always borrow against their massively appreciated property, after all.
And why is being a Google Programmer "earning" that money, but a construction worker who spent 30 years paying off their house is an "unearned" windfall?
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.
The taxman says not enough. I should borrow money I don't have or sell for a cheaper place just to cover for the state's inability to do with sales tax
If yes, then that means replacing their entire income once they’re no longer able to work.
If no, then something must diminish. That may include needing to relocate to a less expensive living situation. If we accept that disability means reduced means, then I don’t see why housing should be exempt from that as long as they’re not on the streets.
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 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.
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.
"Don't turn this into Manhattan" is such a common refrain yet turning it into Manhattan would wildly increase their land value.
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.
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?
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.
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.
Is that true, or do they actually come with large tax liabilities?
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.
If you see that as inflated due to payback, then it's already inflated due to the yearly tax currently in place. Plus interest.
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.
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.
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.
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.
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.
Farmers, for example, are often multimillionaires "on paper," but don't have a pot to piss in.
Owner-occupiers can and do refinance to turn their wealth into cash. It's routine.
So do you. I assume that you like to eat? Farmers are how that happens.
> refinance
Are you familiar with the downsides of refinancing?
Same thing for farmers.
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.
You can be wealthy and still have poor cashflow, especially as a leveraged property owner
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.
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
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.
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.
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.
The problem with this form of taxation is that it slows down consumption and impacts poor and middle class people more.
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.
oh shoot why didnt anyone think of this. genius.
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.
In this case, landlord is neither happy nor sad since it the tax is irrelevant to them.