Calpundit noted that yesterday was the 25th anniversary of Proposition 13 passing in California. I remembered hearing about Proposition 13 when I was in school, but I did not realize that it still has so much impact today. That changed when I read some of the comments.
Squiddy started off with this comment:
Prop 13 is why California public schools suck...
And all the oldsters who bought in the 70's are getting a huge free ride. And gee, those same people are getting the free ride on Soc Sec, too.
Suck suck suck...
Squiddy posted this immediately afterward:
btw, not only do long-time owners reap the advantages of having their prop tax frozen, they also benefit from the rising equity by withdrawing new (tax advantaged) home equity loans.
That's having cake AND eating it, I say.
And where did the Renter's Credit go? Huh? Hello? Anyone?
This was my response to those comments:
Squiddy's comments are right on the money. I live in San Francisco (with its sky high real estate prices) in my fiancée's mother's house.
"And all the oldsters who bought in the 70's are getting a huge free ride."
"And gee, those same people are getting the free ride on Soc Sec, too."
My fiancée's grandparents purchased this house in the late 1950's. After their death in the 1990's, the house passed to my fiancée's mother, and was not re-assessed due to an exemption in the law. The market price for this house is estimated to be at least 20 times its 1950's assessed value (and could actually be closer to 30).
My fiancée's mother is in her late 70s, so yes, she does collect Social Security too. She gets perhaps 25% of her income from Social Security. The rest comes from renters. The house is a 3 story house - we live on the first floor, and my fiancée's mother rents out rooms on the second and third floors.
I think her property taxes are absurdly low, but she cannot afford to pay 20 to 30 times more in property taxes just on the re-assessed value. If the tax rate is increased too, the property tax bill would be even worse. She would be forced to move out and sell the house, which has been in the family for almost 50 years.
One thing to her credit is that she does gives back to the community (at least to her renters). She charges only about 30% of the market rental rate for rooms.
This is where my fiancée's mother got herself into trouble. If this house was re-assessed, due to San Francisco's rent control laws, she cannot raise rents to cover the taxes.
"btw, not only do long-time owners reap the advantages of having their prop tax frozen, they also benefit from the rising equity by withdrawing new (tax advantaged) home equity loans."
This house was built shortly after the 1906 earthquake, so it needs a lot of maintenance, repair, and upkeep. My fiancée's mother opened a home equity line of credit for less than 10% of the what the bank thought the house was worth to do various improvements to the house. With rock bottom interest rates, it was a very good deal for her.
Because of the low rents she charges, 10% seemed to be the safest amount to borrow. Most (if not all) of what needs to be done around here are not capital improvements, so those costs cannot be passed on to tenants.
I do think that my fiancée's mother should be paying her fair share of property taxes. But I don't think that she should have to give up her house because of it - and that's what rent control would force her to do.
Any discussion about property taxes and Prop. 13 needs to address rent control too. With Prop. 13 being a state issue and rent control a city one, that discussion should be really interesting (or frustrating).
I had hoped that someone else would weigh in on Prop. 13 vs. Rent Control, but as of this morning, no one else had. Oh well.