I think land-value taxation, with a cap on properties based on income (and wealth) for your first home, is the way.
I do think there is something special about the idea of home, and that home ownership should be encouraged. It brings people stability. People shouldn't be pushed out just because others have more income than them.
At the same time, we do need property taxes. In California, rate increases are capped, so older owners often pay pennies compared to new homeowners. Harmonize the taxes, while capping it.
You don’t need to be rich to own. Some people are lucky to buy a home where/when it’s cheap. Imagine the value (and taxes) outpacing your income. Like an elderly person with fixed income.
Either it's really valuable, and they can borrow money to pay taxes, or it's not and taxes are low. But people shouldn't be allowed to freeload on the work others do to make the property valuable.
Borrow money needs to be paid back. It's entirely possible and it wouldn't be a surprise someone retired lives for 30 or 40 years, accruing all that back taxes have to be paid up until eventually the taxes are worth more than the house.
The boatman doesn't charge money, so what's the problem with that? They got to live somewhere other people invested to make nice without extra money out of their pocket.
Well you might need to if the property taxes can spike like crazy, which is the point some people may be making. You could budget a mortgage but with taxes as a substantial wild card, it can blow up your budget.
Because a cap or exclusion or credit for your primary home lets people who can just barely afford it to purchase their own home. And that's a good thing.
I'm not sure it is. If you can just barely afford a home, that also suggests that you don't have enough financial cushion to deal with all the little surprises that come with homeownership. Worse, you might be ill-positioned to weather a something like a recession. Recessions are nasty things and have a tendency to cause people to lose their jobs and become underwater on their home loans in rapid succession.
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.
Even assuming things just increase at the rate of inflation, a house you can just barely afford today is a good investment because in 20 or 30 years that house is going to be worth far more while your payments have stayed the same and your income has increased.
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'm not sure it is. If you can just barely afford a home, that also suggests that you don't have enough financial cushion to deal with all the little surprises that come with homeownership. Worse, you might be ill-positioned to weather a something like a recession. Recessions are nasty things and have a tendency to cause people to lose their jobs and become underwater on their home loans in rapid succession.
'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 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?
That's looking at the ability to buy ONLY as a numbers game, but it says nothing of the emotional effect it has on actual buyers. I bought a house. I can ask for a raise I'm worth it. I am doing well now... I'll get a better job next. Now I have a wife and kid and they want me to do better. etc...
While not all stories are like that, many are (in fact most are).
Consider my neighborhood in Chicago. It has gentrified rapidly over the past couple decades. But it wasn't always so wealthy. My retireee neighbor probably bought her house for no more than about $100,000, but now the market rate for a house like hers is more like $500,000. With that comes about $20,000 per year in property taxes.
That might be reasonable for the wealthier families who are moving into the neighborhood and driving up the land values. But it's pushing her into poverty.
What poverty--she owns a house worth $500k.
I think deferral schemes where certain individuals can pay taxes upon sale of the home (with fair interest) should be fine to avoid forcing anyone into a reverse mortgage.
Well she doesn't have the 500k. This is akin to saying we should force people out if market conditions make their house more expensive. That seems like a really strange consequence to all this, idk
So your solution is to force her to sell her home and move? Move where? I've seen this in so many areas of the country where property taxes on your property are tied to market value rather than purchase price. It drives retired and lower income people out of neighborhoods that they have lived in for decades, forcing them to move down the scale of home ownership.
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 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?
Houses are not the same thing as cash or other fungible assets.
Especially not when you're getting older, have limited ability to manage a move for yourself, built a life and raised your kids in the building, and would have to consider unloading a lifetime's worth of objects and/or moving infeasibly far away from your friends to get into a living situation that's more financially tenable.
Maybe you’re referring to someone who owns multiple properties… But I think if someone owns the house they live in, there should be a cap once they reach a certain age. My Mom is retired and owns her home, but she still effectively pays rent on the property. She has a fixed income and the property tax comes in around 16% of her monthly income.
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.
What I don't understand is (because I honestly haven't been afforded the time to sit down and think about it, also it's frustrating), why do taxes generally trend upwards for the average person? Doing napkin math it seems to have gone from ~10% to ~28% for average family. These are %-based, why does it need to change? Why can't cities/towns/counties work with the money their citizens can give?
Happening in Austin, Texas recently. City cites:
- Rising cost of core services
- Weak sales tax revenue. This is the city’s second-largest revenue source, and it has slowed or dipped.
- A shrinking property tax base. Officials point to falling property values, appraisal protests, more business tax exemptions, and little new construction adding value to the tax rolls.
- Disappearing one-time money. Pandemic relief funds have run out, and federal funding cuts were anticipated.
- Rising service costs. The new budget’s highlights include $6 million more for permanent supportive housing services, $6 million more for fire overtime to keep four-person staffing, and extra EMS overtime. Employee raises and social services were also major line items.
It is frustrating... if core services are costing more, cut extracurricular services? Why would you lean so much on sales tax, seems obvious this would revert to a mean? If your budget is reliant on infinite new construction it seems a bad budget? Why is pandemic relief cuts a shock to anyone? More housing services? I'm empathetic but there's more homeless than ever before. I know it's simplifying the problem but it just feels like people are punished with permanent tax increases for governments spending more than they should... we start with a new "floor" tax rate and repeat forever? Is it going to get to the point where we work 50% of our time just to pay taxes?
People, as a rule, do not want less service. Services generally function like a ratchet, where once one has been added it is incredibly difficult to get rid of.
So not only is the cost of service to be thought of, but the quantity of services.
The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
> People, as a rule, do not want less service. Services generally function like a ratchet, where once one has been added it is incredibly difficult to get rid of.
Makes sense, totally agree... however I don't think generally citizens want to pay _more_ taxes... or at least eventually there's a point where they say enough is enough.
> 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.
A major problem with property taxes on owner-occupied housing is that the value the owner derives from the house is not dependent on the resale value of the house. An owner occupied house is not primarily a financial investment in most cases. Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living. Any gain in value cannot easily be realized since it’s not a liquid asset. This leads to a fear of being driven out just because the value of the surrounding neighborhood rises doesn’t mean that the owner’s income rises in lockstep.
One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
It’s really hard to loosen supply side restrictions on “this somehow became a hip neighborhood.” You can in general make more housing available, but not prevent rising prices in specific neighborhoods.
You absolutely can prevent a "hip neighborhood" from becoming the equivalent of a short squeeze. Prices are not only signals of current scarcity, but also future scarcity. Once you've established that any increase in property value will lead to an influx of capital, followed by a swift increase of supply, every increase will partially suffocate itself.
And arguably, they already extracted the value of that house by having a place to live without having paid for it up front. They didn’t even put up the capital in most cases. In the US they will have been granted a loan that is backstopped, and therefore subsidized by the government. Don’t forget the mortgage interest deduction, that’s a massive homeowner subsidy.
So someone else put up the capital, the government made that capital cheap, and societal demand with artificial scarcity (in most places) pushed up the asset value.
I’m not saying it’s a bad thing, but let’s not pretend that making capital gains on a house in the US is anything like any other available investment.
Exactly. Surely the finance industry can come up with a product that automates this so you automatically sell them a tiny slice of your home to make up the property taxes without it affecting your cash flows.
The private finance industry need not be involved.
Just have government allow taxes to be deferred until time of sale with interest pinned to the cost of borrowing for government. That already exists where I live for people over the age of 65. The government can still get the revenue for free via borrowing and the payback is more or less guaranteed.
That's basic Econ101: households optimize for (subjective) utility, not for profit on some balance sheet. Taxing households for non-realized gains doesn't take into account liquidity nor the (subjective) negative utility and opportunity cost of selling your home and moving away.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home, which would offset some of the costs we currently pay in ad valorem property taxes.
The local real estate community had a meltdown and poured hundreds of thousands of dollars into defeating it, which my neighbors obliged and did.
That is true, but on the other hand if you had to pay a hefty yearly property or wealth tax you might not be able to afford it in the sense that your wealth is bound up in the house.
The counter is of course that when you buy a house you should make sure you have enough income and/or liquid wealth so that you can pay the taxes. And if not, move to a smaller house. Of course, opponents of such taxation will then roll out all kinds of grannies living in mansions on meager pensions. Then again, is it fair that this prices out younger people from the property market?
As difficult as they are, I do think we'll need some form of wealth taxation in order to put a brake on spiraling inequality. Yes, call me a fan of Piketty if you want.
I think many people would have a hard time believing that a new tax in one area would be offset by lowering taxes in another. Even if they did reduce property taxes shortly after passage, many people would assume they will raise them again later on.
If it wasn’t combined in the same bill, the people will just have two taxes going forward. Effectively every “temporary” tax becomes a permanent tax. During the last local election, our city council was asking people to vote to replace an expiring tax with one at a lower rate and trying to sell it as voting for this reduces your tax.
>> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
>My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home,
First comment suggests taxing the gain (income tax), while second comment suggests a tax on sale price (gross receipts tax). Two very different things.
While I grant you that they are two different things, two-thirds of the average sale price in my area is from gains in value accrued over the time the home was occupied prior to sale, almost all of which is currently untaxed.
> One way out could be to tax the value gain at the time of sale
Stamp duty in the UK, horrendous tax. It's better than nothing at offsetting the unearned increase in house (land) value, but far worse than a regular tax.
If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move. This encourages people to live in less suitable houses for longer.
As to your worry about land values increasing -- the owner is deriving benefit. The higher the land value is, the more benefit the owner gets from the land.
The issue with that is the disincentive to sell (or buy), which leads a lot of people to stay put in their oversized home during retirement, for example.
In the UK, 'stamp duty' is something that buyers pay (as opposed to sellers), but sellers also have to buy, so everyone pays to move and everyone stays put to avoid paying.
(And of course no one builds, which is the biggest issue).
I'd say it's OK to defer your property taxes until you sell (or die), but it shouldn't be the default, only something you apply for if you're in a vulnerable position.
I think it's a great idea to let land taxes create the incentives to build efficiently.
A major problem with decoupling property taxes on owner-occupied housing from market prices is that it removes the biggest incentive for a homeowner to vote for policies that keep the local real estate market in check. An owner occupied house in a desirable area where there is no disincentive to politically engineering a supply shortage becomes a financial investment. Any increase in housing value becomes profit for the owner (or their descendants). This leads to supply restrictions and escalating prices and an increasingly unhealthy society as the young and the poorer are pushed out of the city, county, or even state.
This is essentially what has happened in coastal California over the last 60 years.
> One way out could be to tax the value gain at the time of sale
This is how it works for sales in Sweden, via the so called "reavinstskatt", or profit realisation tax. Funnily enough, it is mostly applied to individuals in practice. To avoid the taxation, companies package properties in subsidiaries, which can then be sold and traded like any other stock. The tax is then postponed until the de jure sale of the property, which never occurs. Individuals are not eligible because the loophole is closed if the legal owner also occupies the property they own.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
Forcing renters and buyers to pay for the local services instead of property owners seems extremely unfair.
> Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living.
So? If the property values go up then cost of living is going up for renters too. Why should property owners be shielded from this by imposing local service costs on renters who generally have even lower incomes than owners.
I don't like taxes but I also like having roads, sewage treatment, 100+ psi water pressure, multi-gigabit internet access, and a reasonably constant flow of electricity. The cost of public education and the management of that system is the only serious concern I have with my local taxes.
I actually don't mind the cost of living in my neighborhood going up. The $2500/yr HOA fee is a feature for me. I picked this location precisely because of it. I've lived in many places with virtually no maintenance overhead or economic friction. You may eventually learn that there are two sides to this coin. Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
My friends lost a battle to paint their garage door a slightly different shade of white than the approved Pantone shade. No private entity should ever have that degree of power over one’s private life. Petty tyrants, I tell ya.
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
HOAs in general are nothing but classic American privatization of that which would otherwise be public, because counties and cities here either lack the tax base (rural), budgeting skills (urban), or both, to provide the services some subdevelopments are built with.
It’s dumb. Here in Washington it’s rather common, I’m finding, for rural land plots to be part of a “Road Maintenance Association”. Exact same legal construct as an HOA, but scoped only to road maintenance on roads the county didn’t want to deal with. It would make so much more sense for the county to socialize those roads and reuse the same maintenance crews and vehicles for these stretches of road! But instead, a private entity pays through the nose to duplicate all that maintenance infrastructure (or pay contractors).
This works in other areas of life. A courtesy charge creates a better environment by giving participants skin in the game and filtering out actors who wouldn’t mind abusing you but wont pay to do so.
Wait until you get a tyrannical HOA board and realize you have to make a choice between dealing with them or moving. Dealing with them typically involves lawsuits which come out of your HOA fees, which will go up along with all your neighbors who are now angry that their fees have gone up as well. (Ask me about open records my HOA hasn’t delivered for over 350 days.
I pay my city for sewer, water, and trash. I pay an ISP for fiber to the home, a power company for electricity. If you get all those things for $2500/year from your HOA, congratulations.
In this country of oh-so-much freedom and journalism how can a layperson like myself check whether in the final degree my tax dollars are really paying for someone’s collection of vintage Ferraris, hidden behind an inconspicuous budget item?
> 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.
In most jurisdictions (not califoria) property tax increases are somewhat unlinked from your actual property value
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.
Let’s say you wee solid middle class and bought your forever home, in what was at the time, the near suburbs. Now that neighbourhood is unaffordable. The city might set a percentage of the home value as their target but now your well placed forever home is beyond your what your pension can afford. This happened a lot in Canada.
The worst part is that for all these taxes, the level of service has dropped since that home was bought.
Isn't it better for society if retirees downsize to a retirement community and allow young families to move in to the neighborhood with schools and amenities?
If we're going for a "better for society" angle, I have so many other things that are far more impactful for society and less damaging to the individuals that we will never get around to messing with evicting pensioners so younger families can use their spot to get to school.
While that may be useful, there should never be a necessity to move out of a house you’ve paid off, and quite well may have built up to support your own aging in place. Some people want a “forever home”, and that’s okay.
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.
A point against: if someone was an early adopter in a community that urbanized over 30 years, in effect the increased value means their future ownership at present rates requires the collective subsidy of their neighbors. Young families subsidizing the elderly in this way is a huge issue in tax burden disparity where I live.
I live in a municipality that taxes like OP and you don't understand how OP described it. Lets try with easy numbers:
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...
Because boomers voted to defer fully funding pensions until later. Now it's later. We're paying for past work and current work.
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.
This is but one of the ways well-meaning people get displaced. And, frankly, th the is hypothetical family is the most fortunate of that class. They have equity and a pension. Playing my tiny Monoprice violin, from the 4th apartment I've lived in over the past 10 years (not including couch-surfing). And even I'm still on the "fortunate" side of the line, if just barely.
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.
Depends on the jurisdiction. I've lived in both, budget based rates like you describe (Minnesota), and fixed rates with market based assessments (D.C.). I wonder which is more common.
I don't know how economics escaped basic elementary/middle school curriculum. There is so much confusion in people's lives around money, and so much destruction that results from it, yet we still don't teach the basics of what is going on in school. It's totally perplexing to me.
I know cynics would run to say this, but on the whole the lack of knowledge is an unambiguous net negative even to the powers that be. And they even know this, but somehow it's still expected for people to just innately understand what's going on, but they don't. And everyone else who does have the insight just ends up perpetually frustrated.
The "lack of knowledge is an unambiguous net negative even to the powers that be".
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.
I have never worked with anyone in business who wished their customers had less economic/financial literacy. Just endless frustration.
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.
It depends. Predatory salesmen are happy to oblige a customer's desire for a $299 monthly payment, while glossing over the 84 month schedule and 12% interest. They have a very short term view. Uninformed customers are like shooting fish in a barrel.
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.
The predatory loan market is a fringe market though, and it's not even that lucrative because delayed payments and default rates are so high (and bankruptcy rinses the lender).
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.
If calculators had never been invented then perhaps arithmetic and economic literacy would be required of citizens. A big problem is that we invented a tool for something that's most powerful when you can do it easily and constantly in your head. People are not pulling out the tool to use it constantly because there's friction to that.
Most people aren't capable of understanding numbers: https://politifact.com/factchecks/2020/mar/06/msnbc/bad-math.... You can't educate them to do it, any more than you can educate your average person to be able to reliably hit three pointers. It's a physical limitation.
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."
Economics class is usually in high school and it's optional.
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.
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.
> I would like the price of my home to rise, because it increases my wealth, but I would also like the prices of all other homes to fall, so that I could sell my house and buy an even nicer house.
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.
I wouldn’t count somewhere I don’t want to live being cheaper as the prices of all other homes falling… ;) Nor as lack of need to stay either - if real estate prices were the only thing keeping people around, cities might not exist.
I mean yes it’s a bet, but real estate in SF has historically done very well. The progressives/NIMBYs have a strong presence to thwart new housing so that existing properties increase in value.
I can see how, conceptually, shifting tax burden to companies rather than individuals puts public services at risk. Companies don’t really have a lot of incentive to want things like quality schools, parks, and other non-profit public services.
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.
No property tax where I live, which is true for about half of the Swiss Kantons. There used to be a system where they would calculate how much you would be paid if you rented out your property and then charged you tax on that value. So basically a property tax.
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.
Interestingly enough, it’s the opposite in NH. Our taxes just increase 1,000 each year to pay for horrible public schools while also giving state school budget funds to everyone that wants to homeschool or sent their kids to one of the many alternative schools we have. I would love to know how much of the US this actually reads as true for, because my friends in various other states also feel very similarly about their taxes going up and the housing prices not so much.
I was encouraged by a story I heard from NPR about a Hasidic community turning out the vote and using official powers to take private a school building that had been underfunded under municipal control. It was genuinely impressive how much they changed their local community.
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.
School system and taxation for schools in NH is very specific to NH « low/no taxes » mantra.
I am a resident of a neighbor state with several co-workers living in NH and I recall 15 years ago that there were massive school funding differences between towns. So there was an attempt at redistributing taxes to help pay for other schools from other towns, which was extended to all schools (freedom!) - so home schooling etc.
Is NH state funding local schools in some form ?
Typically it’s a mix of local, state and federal funds…
There’s no reason the local government budget should increase at the same rate as the property values in the taxed area. Property taxes should generally increase at the rate of inflation not because property values increase.
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.
Yeah, I view my house as a consumer good and I don't want the value of my home to increase relative to inflation - ignoring taxes if I have to sell it I'd just have to buy another house at an increased price which will take up any realized gains from the transaction. Plus the fees involved in the cost of buying/selling are higher now b/c they are usually a percentage of the transaction.
It's nice that you would like the world to be this way but it's time to put this tired old canard to bed. It's not individuals but the financial system that treats houses as assets. They do so by extending mortgages. Try getting one for your car.
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.
If the value of a house doesn't increase, then the property taxes, upkeep, mortgage interest, and selling fees would make home ownership untenable and worse than renting. And then if you rent the problem gets pushed up to the landlords anyway.
Besides the fact that your hostility is unnecessary, rent prices very rarely decrease. There’s been a good deal of journalism investigating this in recent years, especially in my metro area of Seattle. Landlords would rather leave something sitting empty, potentially even off market, waiting for market rents to increase back to their target, than ever let the rent prices fall. This is especially true for landlords who own multiple units: they’ll often trickle those units out one or two at a time to avoid flooding the market, to artificially keep prices high.
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).
I swear so many societal problems have their roots in the attitude of "I've got mine, screw everybody else"
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.
But isn't it understandable? You work your whole life to buy a piece of property. But not just a piece of property anywhere. It's a specific one, in a specific neighborhood, in a specific zone. All of these things tie into the $ that you paid for that property. Regardless of the change in value, a change there impacts how you perceive living there.
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.
Why should society value stability of your quality of life (which is a pretty nebulous bundle of your preferences and environment—neither of which we can bet on being stable in any event) over the interests of all those people who want to live on land that can readily support them—and without putting any true undue burden on your ability to do the same on your land?
You need extremely high levels of trust and community to incentive the kind of behavior you are asking for. That is not reinforced or taught at any of our schools or government institutions. It only exists in small family or religious communities.
So absent of that, I think your personal incentives also lead you to your current housing policy preferences. Don’t you?
> One might think that homeowners would be happy that their largest asset has appreciated substantially in value, as homes did,...
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.
Yes there is. You own a more valuable asset, so now even if you want to keep it you could take out a loan against it for a greater amount than if it hadn't appreciated.
You mean take out a loan to pay for the increased taxes? The banks win with that one. Some people, especially as they age, are seeking out simplicity with their finances amongst everything else.
Your statement is based on assumptions that just don't hold for many people. First and foremost, you imply a subjective utility of receiving a loan. For many people, having loans - especially collateralized against your home - has negative utility, not positive. Case in point: someone who'd need to take our a loan to pay the property tax.
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.
You're making a valid point, but not in favor of taxing owner-occupied homes, but in favor of treating collateralized homes as commercial property. I'd be okay with that as long as the basis for taxation is the volume of the mortgage.
I think most normal people, including me, don't like it when housing costs are so out of step with everything else. The "value" in your primary residence isn't very useful, unless you sell and move to a more depressed area.
I'm a multi-homeowner and I'd love it if house prices fell, or at least stopped rising.
Surely one missed tax payment is not enough for the government to evict and assume ownership? I see these cases in SF occasionally and it takes years of non-payment.
Fine, you win. We're all serfs. You've redefined "serfdom" to mean living in a modern civilization with public infrastructure, and the property tax tradeoff that comes with it. I'll choose this serfdom until a better viable option presents itself.
> Thus, older voters who tend to have higher accumulated wealth, partly in the form of home equity, but also lower current income, are a politically powerful and sympathetic group in the push to reduce or eliminate property taxes.
Miss on two points: there are exemptions for retired that freeze prop tax and equity is wealth that’s rare to access before death
This has been a sticking point for me for the better part of my adult life (~20 years now), and it all started with wondering who that dude in the taxi in “Airplane!” was: Howard Jarvis, one of the major proponents of California’s Proposition 13. From Wikipedia:
> 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.
In so many ways it helps to focus more deeply on the fundamentals.
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 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 good news! Because taxes are there to pay for services, there's absolutely no reason why they should increase just because the value of your property... Oh that's not how local governments see it?
Well at least your property value will go up endlessly. No bubble there. Totally not based on speculation.
Thurston county WA collects my property tax. Thurston county should not have attacked Iran and caused a surge in energy prices. The county should have hiked rates earlier and more aggressively. Thurston county is out of control!
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.
Most of local and state gov expenditure is salaries (subject to inflation, particularly local housing) and financial support for low income residents (also tied to inflation and housing).
If the price of housing the rises, the cost of living will rise, employees will demand raises, and the cost of providing services will increase. Even if housing prices remain flat, there will be inflation leading to the same result.
But I agree that pinning all hopes of class mobility or comfortable retirement on perpetually increasing housing costs cannot work for very much longer.
> Because taxes are there to pay for services, there's absolutely no reason why they should increase just because the value of your property... Oh that's not how local governments see it?
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.
Having sat on a county assessment appeal board, this is basically every hearing. People want the comps high when they sell and low when the notice arrives.
Of course. Everyone wants the money they have to increase, the amount of services they receive increase or stay the same, and the money they pay to decrease or stay the same.
I think land-value taxation, with a cap on properties based on income (and wealth) for your first home, is the way.
I do think there is something special about the idea of home, and that home ownership should be encouraged. It brings people stability. People shouldn't be pushed out just because others have more income than them.
At the same time, we do need property taxes. In California, rate increases are capped, so older owners often pay pennies compared to new homeowners. Harmonize the taxes, while capping it.
Why should there be a cap? If you're so rich as to own some property, why do you need protection from paying a reasonable rate of tax?
You don’t need to be rich to own. Some people are lucky to buy a home where/when it’s cheap. Imagine the value (and taxes) outpacing your income. Like an elderly person with fixed income.
Either it's really valuable, and they can borrow money to pay taxes, or it's not and taxes are low. But people shouldn't be allowed to freeload on the work others do to make the property valuable.
Borrow money needs to be paid back. It's entirely possible and it wouldn't be a surprise someone retired lives for 30 or 40 years, accruing all that back taxes have to be paid up until eventually the taxes are worth more than the house.
The boatman doesn't charge money, so what's the problem with that? They got to live somewhere other people invested to make nice without extra money out of their pocket.
Well you might need to if the property taxes can spike like crazy, which is the point some people may be making. You could budget a mortgage but with taxes as a substantial wild card, it can blow up your budget.
Because a cap or exclusion or credit for your primary home lets people who can just barely afford it to purchase their own home. And that's a good thing.
Why not just subsidize this directly then?
I'm not sure it is. If you can just barely afford a home, that also suggests that you don't have enough financial cushion to deal with all the little surprises that come with homeownership. Worse, you might be ill-positioned to weather a something like a recession. Recessions are nasty things and have a tendency to cause people to lose their jobs and become underwater on their home loans in rapid succession.
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.
Even assuming things just increase at the rate of inflation, a house you can just barely afford today is a good investment because in 20 or 30 years that house is going to be worth far more while your payments have stayed the same and your income has increased.
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'm not sure it is. If you can just barely afford a home, that also suggests that you don't have enough financial cushion to deal with all the little surprises that come with homeownership. Worse, you might be ill-positioned to weather a something like a recession. Recessions are nasty things and have a tendency to cause people to lose their jobs and become underwater on their home loans in rapid succession.
'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 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?
That's looking at the ability to buy ONLY as a numbers game, but it says nothing of the emotional effect it has on actual buyers. I bought a house. I can ask for a raise I'm worth it. I am doing well now... I'll get a better job next. Now I have a wife and kid and they want me to do better. etc...
While not all stories are like that, many are (in fact most are).
You may not always be that rich, and having to liquidate your only house to pay the taxes is and should be an unpopular opinion.
Consider my neighborhood in Chicago. It has gentrified rapidly over the past couple decades. But it wasn't always so wealthy. My retireee neighbor probably bought her house for no more than about $100,000, but now the market rate for a house like hers is more like $500,000. With that comes about $20,000 per year in property taxes.
That might be reasonable for the wealthier families who are moving into the neighborhood and driving up the land values. But it's pushing her into poverty.
What poverty--she owns a house worth $500k. I think deferral schemes where certain individuals can pay taxes upon sale of the home (with fair interest) should be fine to avoid forcing anyone into a reverse mortgage.
Well she doesn't have the 500k. This is akin to saying we should force people out if market conditions make their house more expensive. That seems like a really strange consequence to all this, idk
So people that keep buying low (because that's what they can afford) are constantly being forced to move.
So your solution is to force her to sell her home and move? Move where? I've seen this in so many areas of the country where property taxes on your property are tied to market value rather than purchase price. It drives retired and lower income people out of neighborhoods that they have lived in for decades, forcing them to move down the scale of home ownership.
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?
Reverse mortgage.
> 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?
Houses are not the same thing as cash or other fungible assets.
Especially not when you're getting older, have limited ability to manage a move for yourself, built a life and raised your kids in the building, and would have to consider unloading a lifetime's worth of objects and/or moving infeasibly far away from your friends to get into a living situation that's more financially tenable.
lol caps prevent "unreasonable" rates of tax
Maybe you’re referring to someone who owns multiple properties… But I think if someone owns the house they live in, there should be a cap once they reach a certain age. My Mom is retired and owns her home, but she still effectively pays rent on the property. She has a fixed income and the property tax comes in around 16% of her monthly income.
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.
What I don't understand is (because I honestly haven't been afforded the time to sit down and think about it, also it's frustrating), why do taxes generally trend upwards for the average person? Doing napkin math it seems to have gone from ~10% to ~28% for average family. These are %-based, why does it need to change? Why can't cities/towns/counties work with the money their citizens can give?
Happening in Austin, Texas recently. City cites:
- Rising cost of core services
- Weak sales tax revenue. This is the city’s second-largest revenue source, and it has slowed or dipped.
- A shrinking property tax base. Officials point to falling property values, appraisal protests, more business tax exemptions, and little new construction adding value to the tax rolls.
- Disappearing one-time money. Pandemic relief funds have run out, and federal funding cuts were anticipated.
- Rising service costs. The new budget’s highlights include $6 million more for permanent supportive housing services, $6 million more for fire overtime to keep four-person staffing, and extra EMS overtime. Employee raises and social services were also major line items.
It is frustrating... if core services are costing more, cut extracurricular services? Why would you lean so much on sales tax, seems obvious this would revert to a mean? If your budget is reliant on infinite new construction it seems a bad budget? Why is pandemic relief cuts a shock to anyone? More housing services? I'm empathetic but there's more homeless than ever before. I know it's simplifying the problem but it just feels like people are punished with permanent tax increases for governments spending more than they should... we start with a new "floor" tax rate and repeat forever? Is it going to get to the point where we work 50% of our time just to pay taxes?
People, as a rule, do not want less service. Services generally function like a ratchet, where once one has been added it is incredibly difficult to get rid of.
So not only is the cost of service to be thought of, but the quantity of services.
The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
> People, as a rule, do not want less service. Services generally function like a ratchet, where once one has been added it is incredibly difficult to get rid of.
Makes sense, totally agree... however I don't think generally citizens want to pay _more_ taxes... or at least eventually there's a point where they say enough is enough.
https://www.kut.org/politics/2025-11-05/austin-tx-prop-q-fai...
> The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
This should be stopped. Creates exactly the sort of ratcheting effect you described. Mind boggling to me. I've been in-charge of small budgets and buying more stuff after making more money is a big decision, not taken lightly because we can't assume present returns will match future returns.
A major problem with property taxes on owner-occupied housing is that the value the owner derives from the house is not dependent on the resale value of the house. An owner occupied house is not primarily a financial investment in most cases. Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living. Any gain in value cannot easily be realized since it’s not a liquid asset. This leads to a fear of being driven out just because the value of the surrounding neighborhood rises doesn’t mean that the owner’s income rises in lockstep.
One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
Or just loosen supply side restrictions so much that houses typically don’t go up in value.
It’s really hard to loosen supply side restrictions on “this somehow became a hip neighborhood.” You can in general make more housing available, but not prevent rising prices in specific neighborhoods.
You absolutely can prevent a "hip neighborhood" from becoming the equivalent of a short squeeze. Prices are not only signals of current scarcity, but also future scarcity. Once you've established that any increase in property value will lead to an influx of capital, followed by a swift increase of supply, every increase will partially suffocate itself.
The premise of real estate (above survival) is living somewhere other people don’t.
The funny thing about land and population growth is that land doesn’t. It’s fixed.
and population in developed world is also no longer growing
Immigration means that population will grow in first tier countries.
> Any gain in value cannot easily be realized since it’s not a liquid asset.
Reverse mortgage
"Oh no, someone's given me an extra $500k for doing nothing which I'll get when I (or my kids) sell my house, how terrible"
But they didn’t do nothing. They put up capital for a resource. Generally more capital than anything else until late in career.
And arguably, they already extracted the value of that house by having a place to live without having paid for it up front. They didn’t even put up the capital in most cases. In the US they will have been granted a loan that is backstopped, and therefore subsidized by the government. Don’t forget the mortgage interest deduction, that’s a massive homeowner subsidy.
So someone else put up the capital, the government made that capital cheap, and societal demand with artificial scarcity (in most places) pushed up the asset value.
I’m not saying it’s a bad thing, but let’s not pretend that making capital gains on a house in the US is anything like any other available investment.
Exactly. Surely the finance industry can come up with a product that automates this so you automatically sell them a tiny slice of your home to make up the property taxes without it affecting your cash flows.
The private finance industry need not be involved.
Just have government allow taxes to be deferred until time of sale with interest pinned to the cost of borrowing for government. That already exists where I live for people over the age of 65. The government can still get the revenue for free via borrowing and the payback is more or less guaranteed.
That's basic Econ101: households optimize for (subjective) utility, not for profit on some balance sheet. Taxing households for non-realized gains doesn't take into account liquidity nor the (subjective) negative utility and opportunity cost of selling your home and moving away.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home, which would offset some of the costs we currently pay in ad valorem property taxes.
The local real estate community had a meltdown and poured hundreds of thousands of dollars into defeating it, which my neighbors obliged and did.
The problem with transfer taxes is they bolt you to the place.
That is true, but on the other hand if you had to pay a hefty yearly property or wealth tax you might not be able to afford it in the sense that your wealth is bound up in the house.
The counter is of course that when you buy a house you should make sure you have enough income and/or liquid wealth so that you can pay the taxes. And if not, move to a smaller house. Of course, opponents of such taxation will then roll out all kinds of grannies living in mansions on meager pensions. Then again, is it fair that this prices out younger people from the property market?
As difficult as they are, I do think we'll need some form of wealth taxation in order to put a brake on spiraling inequality. Yes, call me a fan of Piketty if you want.
I think many people would have a hard time believing that a new tax in one area would be offset by lowering taxes in another. Even if they did reduce property taxes shortly after passage, many people would assume they will raise them again later on.
If it wasn’t combined in the same bill, the people will just have two taxes going forward. Effectively every “temporary” tax becomes a permanent tax. During the last local election, our city council was asking people to vote to replace an expiring tax with one at a lower rate and trying to sell it as voting for this reduces your tax.
>> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
>My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home,
First comment suggests taxing the gain (income tax), while second comment suggests a tax on sale price (gross receipts tax). Two very different things.
While I grant you that they are two different things, two-thirds of the average sale price in my area is from gains in value accrued over the time the home was occupied prior to sale, almost all of which is currently untaxed.
This will drive rent up, punishing people who lack the credit to purchase.
> One way out could be to tax the value gain at the time of sale
Stamp duty in the UK, horrendous tax. It's better than nothing at offsetting the unearned increase in house (land) value, but far worse than a regular tax.
If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move. This encourages people to live in less suitable houses for longer.
As to your worry about land values increasing -- the owner is deriving benefit. The higher the land value is, the more benefit the owner gets from the land.
> If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move.
This sounds like a problem with the way the particular tax is written, not with the idea of taxing housing gains at the time of sale.
> The higher the land value is, the more benefit the owner gets from the land.
What benefit does a homeowner derive from increased land value before selling?
The issue with that is the disincentive to sell (or buy), which leads a lot of people to stay put in their oversized home during retirement, for example.
In the UK, 'stamp duty' is something that buyers pay (as opposed to sellers), but sellers also have to buy, so everyone pays to move and everyone stays put to avoid paying.
(And of course no one builds, which is the biggest issue).
I'd say it's OK to defer your property taxes until you sell (or die), but it shouldn't be the default, only something you apply for if you're in a vulnerable position.
I think it's a great idea to let land taxes create the incentives to build efficiently.
Except they don't, taxing single house owner is just cost of living increase any time area gets gentrified or more desirable
It's basically excuse to get rid of poor that made a mistake of buying a house in area that turned more expensive 2 decades after.
Tax anything after first house, sure, but taxing house by value is terrible idea that never actually worked in a way proponents are saying it would
the incentive is if they sell they realize their gains and are left much richer
A major problem with decoupling property taxes on owner-occupied housing from market prices is that it removes the biggest incentive for a homeowner to vote for policies that keep the local real estate market in check. An owner occupied house in a desirable area where there is no disincentive to politically engineering a supply shortage becomes a financial investment. Any increase in housing value becomes profit for the owner (or their descendants). This leads to supply restrictions and escalating prices and an increasingly unhealthy society as the young and the poorer are pushed out of the city, county, or even state.
This is essentially what has happened in coastal California over the last 60 years.
> One way out could be to tax the value gain at the time of sale
This is how it works for sales in Sweden, via the so called "reavinstskatt", or profit realisation tax. Funnily enough, it is mostly applied to individuals in practice. To avoid the taxation, companies package properties in subsidiaries, which can then be sold and traded like any other stock. The tax is then postponed until the de jure sale of the property, which never occurs. Individuals are not eligible because the loophole is closed if the legal owner also occupies the property they own.
I disagree. In my country we are currently in a inheritance boom. Everyone who has parents is getting free money.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
Forcing renters and buyers to pay for the local services instead of property owners seems extremely unfair.
> Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living.
So? If the property values go up then cost of living is going up for renters too. Why should property owners be shielded from this by imposing local service costs on renters who generally have even lower incomes than owners.
I don't like taxes but I also like having roads, sewage treatment, 100+ psi water pressure, multi-gigabit internet access, and a reasonably constant flow of electricity. The cost of public education and the management of that system is the only serious concern I have with my local taxes.
I actually don't mind the cost of living in my neighborhood going up. The $2500/yr HOA fee is a feature for me. I picked this location precisely because of it. I've lived in many places with virtually no maintenance overhead or economic friction. You may eventually learn that there are two sides to this coin. Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
I have heard way too many horror stories about obnoxious neighbors in HOAs to ever want to live in one, personally
My friends lost a battle to paint their garage door a slightly different shade of white than the approved Pantone shade. No private entity should ever have that degree of power over one’s private life. Petty tyrants, I tell ya.
Don't have HOA, have everything you have, AMA
all of those services are ones that should be realized by the city, from taxes paid to the city. If they are not, the problem is that people vote for wrong people
HOAs in general are nothing but classic American privatization of that which would otherwise be public, because counties and cities here either lack the tax base (rural), budgeting skills (urban), or both, to provide the services some subdevelopments are built with.
It’s dumb. Here in Washington it’s rather common, I’m finding, for rural land plots to be part of a “Road Maintenance Association”. Exact same legal construct as an HOA, but scoped only to road maintenance on roads the county didn’t want to deal with. It would make so much more sense for the county to socialize those roads and reuse the same maintenance crews and vehicles for these stretches of road! But instead, a private entity pays through the nose to duplicate all that maintenance infrastructure (or pay contractors).
This works in other areas of life. A courtesy charge creates a better environment by giving participants skin in the game and filtering out actors who wouldn’t mind abusing you but wont pay to do so.
Wait until you get a tyrannical HOA board and realize you have to make a choice between dealing with them or moving. Dealing with them typically involves lawsuits which come out of your HOA fees, which will go up along with all your neighbors who are now angry that their fees have gone up as well. (Ask me about open records my HOA hasn’t delivered for over 350 days.
I pay my city for sewer, water, and trash. I pay an ISP for fiber to the home, a power company for electricity. If you get all those things for $2500/year from your HOA, congratulations.
Someone is pocketing a large fraction of that $2500 while paying 2-3 people a minimum wage to get things done.
He's saying he likes to pay a $2500 HOA fee to keep the poors away. It doesn't matter where it goes, as long as it filters out undesirables.
In this country of oh-so-much freedom and journalism how can a layperson like myself check whether in the final degree my tax dollars are really paying for someone’s collection of vintage Ferraris, hidden behind an inconspicuous budget item?
You should be concerned if you have 100+ psi water pressure. Anything above 70 is atypical for a residence.
> 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.
In most jurisdictions (not califoria) property tax increases are somewhat unlinked from your actual property value
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.
Let’s say you wee solid middle class and bought your forever home, in what was at the time, the near suburbs. Now that neighbourhood is unaffordable. The city might set a percentage of the home value as their target but now your well placed forever home is beyond your what your pension can afford. This happened a lot in Canada.
The worst part is that for all these taxes, the level of service has dropped since that home was bought.
Isn't it better for society if retirees downsize to a retirement community and allow young families to move in to the neighborhood with schools and amenities?
If we're going for a "better for society" angle, I have so many other things that are far more impactful for society and less damaging to the individuals that we will never get around to messing with evicting pensioners so younger families can use their spot to get to school.
While that may be useful, there should never be a necessity to move out of a house you’ve paid off, and quite well may have built up to support your own aging in place. Some people want a “forever home”, and that’s okay.
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.
A point against: if someone was an early adopter in a community that urbanized over 30 years, in effect the increased value means their future ownership at present rates requires the collective subsidy of their neighbors. Young families subsidizing the elderly in this way is a huge issue in tax burden disparity where I live.
Given the enrollment collapse we're not running out of space in our schools LOL such that we have to kick seniors out of their houses to make space.
They're also economically and socially viable participants in the community.
I live in a municipality that taxes like OP and you don't understand how OP described it. Lets try with easy numbers:
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...
Because boomers voted to defer fully funding pensions until later. Now it's later. We're paying for past work and current work.
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.
This is but one of the ways well-meaning people get displaced. And, frankly, th the is hypothetical family is the most fortunate of that class. They have equity and a pension. Playing my tiny Monoprice violin, from the 4th apartment I've lived in over the past 10 years (not including couch-surfing). And even I'm still on the "fortunate" side of the line, if just barely.
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.
Depends on the jurisdiction. I've lived in both, budget based rates like you describe (Minnesota), and fixed rates with market based assessments (D.C.). I wonder which is more common.
I don't know how economics escaped basic elementary/middle school curriculum. There is so much confusion in people's lives around money, and so much destruction that results from it, yet we still don't teach the basics of what is going on in school. It's totally perplexing to me.
Destruction? It's by design:
"One man gathers what another man spills."
I know cynics would run to say this, but on the whole the lack of knowledge is an unambiguous net negative even to the powers that be. And they even know this, but somehow it's still expected for people to just innately understand what's going on, but they don't. And everyone else who does have the insight just ends up perpetually frustrated.
The "lack of knowledge is an unambiguous net negative even to the powers that be".
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.
I have never worked with anyone in business who wished their customers had less economic/financial literacy. Just endless frustration.
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.
It depends. Predatory salesmen are happy to oblige a customer's desire for a $299 monthly payment, while glossing over the 84 month schedule and 12% interest. They have a very short term view. Uninformed customers are like shooting fish in a barrel.
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.
The predatory loan market is a fringe market though, and it's not even that lucrative because delayed payments and default rates are so high (and bankruptcy rinses the lender).
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 is my impression that predatory car loans are basically ubiquitous
If calculators had never been invented then perhaps arithmetic and economic literacy would be required of citizens. A big problem is that we invented a tool for something that's most powerful when you can do it easily and constantly in your head. People are not pulling out the tool to use it constantly because there's friction to that.
Most people aren't capable of understanding numbers: https://politifact.com/factchecks/2020/mar/06/msnbc/bad-math.... You can't educate them to do it, any more than you can educate your average person to be able to reliably hit three pointers. It's a physical limitation.
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."
Scarcity of instructors competent to teach such subjects? Followed by the natural bureaucratic response: Pretend no such need exists.
Economics class is usually in high school and it's optional.
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.
"it's optional."
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.
> I would like the price of my home to rise, because it increases my wealth, but I would also like the prices of all other homes to fall, so that I could sell my house and buy an even nicer house.
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.
https://news.ycombinator.com/item?id=42156977
ATX real estate is still in free fall. You can win making a move within the state at this point.
I wouldn’t count somewhere I don’t want to live being cheaper as the prices of all other homes falling… ;) Nor as lack of need to stay either - if real estate prices were the only thing keeping people around, cities might not exist.
> Buy in a VHCOL area like San Francisco
How does this work? VHCOL does not mean that prices will appreciate or even sustain.
I mean yes it’s a bet, but real estate in SF has historically done very well. The progressives/NIMBYs have a strong presence to thwart new housing so that existing properties increase in value.
Just dont complain about loss of relationships and community while also advocating for policies that make lasting community ties impossible.
I can see how, conceptually, shifting tax burden to companies rather than individuals puts public services at risk. Companies don’t really have a lot of incentive to want things like quality schools, parks, and other non-profit public services.
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.
No property tax where I live, which is true for about half of the Swiss Kantons. There used to be a system where they would calculate how much you would be paid if you rented out your property and then charged you tax on that value. So basically a property tax.
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.
True it's not a direct property tax, but house value is included in total wealth and is thus taxed through the general wealth tax.
I think it's a great idea to let land taxes create incentives for efficient building.
Interestingly enough, it’s the opposite in NH. Our taxes just increase 1,000 each year to pay for horrible public schools while also giving state school budget funds to everyone that wants to homeschool or sent their kids to one of the many alternative schools we have. I would love to know how much of the US this actually reads as true for, because my friends in various other states also feel very similarly about their taxes going up and the housing prices not so much.
If you really want to rage, read about Hasidic cults in NY/NJ gaming government funds.
I was encouraged by a story I heard from NPR about a Hasidic community turning out the vote and using official powers to take private a school building that had been underfunded under municipal control. It was genuinely impressive how much they changed their local community.
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.
Demographics matter. Organized religions encouraging big families means high population growth. Democracy lets the majority rule.
They don't "turn out and vote"
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.
School system and taxation for schools in NH is very specific to NH « low/no taxes » mantra. I am a resident of a neighbor state with several co-workers living in NH and I recall 15 years ago that there were massive school funding differences between towns. So there was an attempt at redistributing taxes to help pay for other schools from other towns, which was extended to all schools (freedom!) - so home schooling etc. Is NH state funding local schools in some form ? Typically it’s a mix of local, state and federal funds…
There’s no reason the local government budget should increase at the same rate as the property values in the taxed area. Property taxes should generally increase at the rate of inflation not because property values increase.
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.
> There’s no reason the local government budget should increase at the same rate as the property values in the taxed area.
There's some reason. City workers may need to live in the area. If housing becomes more expensive, the city may need to pay higher wages.
Sure. But that’s why schools in California are underfunded.
California doesn’t have a property tax system. They have a tax on newcomers. It’s entirely corrupt.
I pay property tax twice a year in SF, not sure what you mean
If you view homes as consumer goods rather than financial assets, the tension disappears.
Yeah, I view my house as a consumer good and I don't want the value of my home to increase relative to inflation - ignoring taxes if I have to sell it I'd just have to buy another house at an increased price which will take up any realized gains from the transaction. Plus the fees involved in the cost of buying/selling are higher now b/c they are usually a percentage of the transaction.
It's nice that you would like the world to be this way but it's time to put this tired old canard to bed. It's not individuals but the financial system that treats houses as assets. They do so by extending mortgages. Try getting one for your car.
Assets != investments.
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.
I'm pretty sure people buy cars on finance all the time.
If the value of a house doesn't increase, then the property taxes, upkeep, mortgage interest, and selling fees would make home ownership untenable and worse than renting. And then if you rent the problem gets pushed up to the landlords anyway.
So you are saying that somehow landlord can pay all the same taxes and offer cheaper rent than buying it ?
Also did your six neurons figured out that it would also cause rent to decrease yet ?
Besides the fact that your hostility is unnecessary, rent prices very rarely decrease. There’s been a good deal of journalism investigating this in recent years, especially in my metro area of Seattle. Landlords would rather leave something sitting empty, potentially even off market, waiting for market rents to increase back to their target, than ever let the rent prices fall. This is especially true for landlords who own multiple units: they’ll often trickle those units out one or two at a time to avoid flooding the market, to artificially keep prices high.
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).
I swear so many societal problems have their roots in the attitude of "I've got mine, screw everybody else"
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
But isn't it understandable? You work your whole life to buy a piece of property. But not just a piece of property anywhere. It's a specific one, in a specific neighborhood, in a specific zone. All of these things tie into the $ that you paid for that property. Regardless of the change in value, a change there impacts how you perceive living there.
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.
Why should society value stability of your quality of life (which is a pretty nebulous bundle of your preferences and environment—neither of which we can bet on being stable in any event) over the interests of all those people who want to live on land that can readily support them—and without putting any true undue burden on your ability to do the same on your land?
You need extremely high levels of trust and community to incentive the kind of behavior you are asking for. That is not reinforced or taught at any of our schools or government institutions. It only exists in small family or religious communities.
So absent of that, I think your personal incentives also lead you to your current housing policy preferences. Don’t you?
> One might think that homeowners would be happy that their largest asset has appreciated substantially in value, as homes did,...
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.
Yes there is. You own a more valuable asset, so now even if you want to keep it you could take out a loan against it for a greater amount than if it hadn't appreciated.
You mean take out a loan to pay for the increased taxes? The banks win with that one. Some people, especially as they age, are seeking out simplicity with their finances amongst everything else.
Your statement is based on assumptions that just don't hold for many people. First and foremost, you imply a subjective utility of receiving a loan. For many people, having loans - especially collateralized against your home - has negative utility, not positive. Case in point: someone who'd need to take our a loan to pay the property tax.
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.
It is basically the billionaire/ unrealized gains argument.
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
You're making a valid point, but not in favor of taxing owner-occupied homes, but in favor of treating collateralized homes as commercial property. I'd be okay with that as long as the basis for taxation is the volume of the mortgage.
I think most normal people, including me, don't like it when housing costs are so out of step with everything else. The "value" in your primary residence isn't very useful, unless you sell and move to a more depressed area.
I'm a multi-homeowner and I'd love it if house prices fell, or at least stopped rising.
I saw a post on YouTube about how someone's dad was struggling to pay their property taxes. One of the comments went like this:
"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?
Because Serfs didnt own the land. Lords did but had taxes.
Surely one missed tax payment is not enough for the government to evict and assume ownership? I see these cases in SF occasionally and it takes years of non-payment.
> 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!
Fine, you win. We're all serfs. You've redefined "serfdom" to mean living in a modern civilization with public infrastructure, and the property tax tradeoff that comes with it. I'll choose this serfdom until a better viable option presents itself.
> Thus, older voters who tend to have higher accumulated wealth, partly in the form of home equity, but also lower current income, are a politically powerful and sympathetic group in the push to reduce or eliminate property taxes.
Miss on two points: there are exemptions for retired that freeze prop tax and equity is wealth that’s rare to access before death
This has been a sticking point for me for the better part of my adult life (~20 years now), and it all started with wondering who that dude in the taxi in “Airplane!” was: Howard Jarvis, one of the major proponents of California’s Proposition 13. From Wikipedia:
> 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.
In so many ways it helps to focus more deeply on the fundamentals.
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 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 good news! Because taxes are there to pay for services, there's absolutely no reason why they should increase just because the value of your property... Oh that's not how local governments see it?
Well at least your property value will go up endlessly. No bubble there. Totally not based on speculation.
Why would government services not be subject to the same cost pressures due to inflation as the rest of society?
Because government is the reason for inflation.
The government should face a punishment for targeting constant inflation.
Thurston county WA collects my property tax. Thurston county should not have attacked Iran and caused a surge in energy prices. The county should have hiked rates earlier and more aggressively. Thurston county is out of control!
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.
Most of local and state gov expenditure is salaries (subject to inflation, particularly local housing) and financial support for low income residents (also tied to inflation and housing).
If the price of housing the rises, the cost of living will rise, employees will demand raises, and the cost of providing services will increase. Even if housing prices remain flat, there will be inflation leading to the same result.
But I agree that pinning all hopes of class mobility or comfortable retirement on perpetually increasing housing costs cannot work for very much longer.
Sounds like a reason to peg to CPI, but not home value.
Also, economies can grow rather than just inflate
> Because taxes are there to pay for services, there's absolutely no reason why they should increase just because the value of your property... Oh that's not how local governments see it?
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.
Having sat on a county assessment appeal board, this is basically every hearing. People want the comps high when they sell and low when the notice arrives.
Of course. Everyone wants the money they have to increase, the amount of services they receive increase or stay the same, and the money they pay to decrease or stay the same.
This isn't something special with taxes.
I would like to work less hard, make more money, and date prettier girls than I currently do.
Would highly recommend, will be doing it again soon :)
Piece of cake really, compared to getting lucky trying to lower taxes.
not my downvote btw