In spite of healthy property-tax increases on every property sold these days, the attack on Prop 13 continues. If we have such a problem with affordable housing, can we re-purpose or sell old government properties and use them instead? H/T daytrip:
http://www.ocregister.com/articles/prop-747850-housing-property.html
A state policy expert offered an unexpected solution to California’s housing affordability crisis: Amend Prop. 13.
Chris Hoene, executive director of the California Budget and Policy Center in Sacramento, said at a California Association of Realtors conference in Los Angeles Tuesday that local governments need to boost local property taxes to gain flexibility to address housing costs in their areas.
Because of Prop. 13, the voter-backed measure that limits tax hikes on properties until they’re sold, local governments have to raise money from development fees, which discourages homebuilding, Hoene said.
Prop. 13 also limits the local government’s ability to finance affordable housing projects while discouraging existing homeowners from making improvements such as building more units on their properties, he said.
Without saying specifically how to change the property tax measure, Hoene nonetheless said it needs to be addressed to increase local revenue.
“The obvious place to do something is on the property tax,” Hoene said. “ … It doesn’t mean that Prop. 13 isn’t the third rail of politics. It still can be the third rail of politics. But it doesn’t make sense for people to scream and yell about an affordability crisis and not take on the single biggest financing mechanism problem in the state.”
Tuesday’s conference was the second in a series the state Realtor association held to address the growing bite that housing takes out of California household budgets.
California is rapidly becoming a renter majority state, with 54 percent of households owning their own homes, the second-lowest homeownership rate in the nation. Because fewer renters can afford to buy a home, they are trapped in housing with rapidly escalating rents.
Panelists in Tuesday’s forum addressed a number of possible solutions to the housing shortage that’s driving up home prices: Reduced local regulation of homebuilders, limiting environmental lawsuits that hold up development and building livable, attractive high-density developments that increase the housing supply.
But Prop. 13 reform stirred the most debate.
Business leader Rob Lapsley, president of the California Business Roundtable, opposed any reform of Prop. 13 without taking a comprehensive look at the state’s tax structure. In particular, he opposed measures that would create a split-level tax roll with differing rules for residential and commercial properties.
But Lapsley said his group has vigorously backed a bill to close a loophole in Prop. 13 that allows commercial property owners to avoid a reassessment to current market values when a property is sold.
Since properties don’t technically change owners under Prop. 13 unless a single individual acquires more than a 50 percent stake, some commercial property buyers have masked their purchases by dividing ownership stakes among several people.
The most notorious example occurred when billionaire Michael Dell bought a beachfront Santa Monica hotel for $200 million in 2006, but kept the 1999 taxable value of $86 million, saving $1 million in property taxes annually, according to a Los Angeles Times report.
Versions of a bill seeking to fix that loophole – drafted in consultation with tax attorneys, the Board of Equalization, Realtors and the Howard Jarvis Taxpayers Association – have failed twice to win passage in recent years. But backers plan to reintroduce it again, probably next January, Lapsley said.
“If the tax laws are being abused, we are the first ones to want to fix it,” he said.
Los Angeles City Controller Ron Galperin, a former journalist and a real estate attorney, noted that since Prop. 13 took effect in the late 1970s, the property tax burden has shifted in the state from commercial to residential properties.
The CAR discussion, streamed on FaceBook, drew jeers from some commenting on the site.
“More people will flood out of California if they touch Prop. 13,” Mechelle Reasoner said in one post.
“Leave Prop. 13 alone,” added Cherryl Weaver.
Galperin noted, however, that solutions to galloping rents and home prices require a multifaceted approach.
“There is so much more than just looking at density issues,” he said. “The question is how do we get more quality communities? How do we get better construction? How do we get more walkable communities?
“ … We have to create communities that are nourishing to people, that give you a sense of beauty, that give you a sense of wonder, that give you a sense of whimsy. That’s what people really want.”
I think you can replace the word “expert” with “shill” and have a more accurate report. Cut the government waste could also solve many problems in this state. But who would buy all those homes in Sacramento?
One other mod that could be adopted is that when a non spouse inherits a property the assessed value steps up to the current value. If I am not mistaken is it the case that an assessed value could stay the same over several generations if inherited?
Yes
My general experience has learned me that you cannot rationally argue people out of an idea that they have not been rationally argued into. Actually voting to raise taxes on yourself in the state of California isn’t rational.
In my opinion, anyone arguing in favor of charging themselves new taxes should confer with a professional regarding proper diagnosis of your malady, followed by proper dosage and application of serotonin reuptake inhibitors, or if you haven’t got the means for this, try lying down, or massaging your cat until the urge passes.
No new taxes. Leave your neighbor alone.
The cracks are starting to show. The problem CA faces is that without addressing the supply and cost of housing, CA businesses will struggle to hire, and they’ll eventually relocate to cheaper states.
Even highly educated duel income families are priced out of most coastal towns. The result will be less and less tax revenue, forcing the CA to address the budget and pension shortfalls in other means, likely via raising property tax.
Of all the “amend prop 13” proposals, I think that closing the commercial property loophole should be top priority.
Residential property gets reassessed when sold to new owners, so should commercial property.
Any claim that Prop 13 is somehow excessively limiting on property tax revenue is complete hogwash. Property resales and new construction generate growth far in excess of the Prop 13 limit of 2% annually. For example:
“Since the passage of Proposition 13 in 1978, Santa Clara County’s annual roll growth has ranged from over 17 percent to -2.43 percent. Property sales and new construction were the primary source of increases in the assessment roll.”
https://www.sccassessor.org/DocLib/Annual%20Report15.pdf
Graphs included in the report (bottom of page 7) show tax revenue growth exceeded 6% in six of the last 10 years.
I actually think a very strong case can be made to amend prop 13 to remove the commercial property loopholes. There is no reason we should allow phony structured shell transfers using multiple fake entities to avoid reassessment – your average residential buyer can’t and so neither should wall street. That is not a shill talking – it’s a loophole to close.
Beyond that, I see nothing to fix.
“Even highly educated duel income families are priced out of most coastal towns.”
Unless they are highly educated in the liberal arts, I’m not sure if that’s true.
@Daytrip
“Unless they are highly educated in the liberal arts, I’m not sure if that’s true.”
Au contraire…
The Mrs and I are both college educated with in demand degrees (Science and Business/Econ), and we can’t afford the house we live in currently.
Thanks to JtR, we bought our house 3 years ago in Coastal N. County, but the run up in prices since then has far outpaced the rise in our incomes.
I have seen 1-2% increase annually in my salary over those 3 years. That is better than a poke in the eye, but my health care premiums, groceries, utlities, etc. have gone up waaaay more than that during that time.
Agree about fixing the loophole in Prop 13 eliminating the benefit to businesses.
Yep! We’re in the same boat as well!
“The Mrs and I are both college educated with in demand degrees (Science and Business/Econ), and we can’t afford the house we live in currently.”
What is the price range of a typical 3 bed home in your neighborhood going for, currently? Also, when you say you can’t afford it, are you implying you’ll be selling it soon?
I think he meant he couldn’t afford to buy it again at today’s retail price, which is probably the case for 90% of those in the county? Or more?
Ahh! Now I see.
I guess for people like me, when you’re reading the comments section, get good help! ; )