Eliminate Prop 13 tax breaks for Real Estate Investors (Oakland, Empire: section 8, sales)

[GoldenZephyr]

Prop 13 should have NEVER covered Real Estate investors. There should be no tax breaks for RE investors that are available for individual owner occupied residences.

With the huge influx of investor money (usually backed by large private equity firms borrowing money at near zero) there is a crowding out of families and individuals who actually plan to live in the home they are borrowing.

Prop 13 was designed to protect people who own and live in their home. It should not be used to subsidize Blackstone's profit margin.

[jkanderson521]

What Prop 13 did was limit all property taxes to 1% of the property's value, and only allow that amount to increase by 2% a year, no matter what inflation is (which was then soaring). Made sense at the time when people were being pushed out of their homes due to astronomical tax increases.

In the long run it created unfairness in that it favored those who stayed put in their homes while their neighbors sold and created a new higher assessment for that neighbor and resulting tax.

The big problem was it also favored business property where changes in ownership or shares did not prompt an actual property sale and resulting higher property value and tax. This is the biggest travesty to the state. These loopholes cause a huge amount of property to stay underassessed and gives a giant tax break to corporations using a law that was essentially designed to allow grandma to stay in her home.

The tax break should only apply to individuals, not corporations, and there needs to be an adjustment in the law to change that statewide. Not sure if it will happen, but it would benefit most of the people in the state. This huge subsidy for the profits of large companies that restricts inventory and keeps families and individuals from being able to fairly compete all while using taxpayer money is really a travesty.

[jw2]

Originally Posted by GoldenZephyr

Prop 13 should have NEVER covered Real Estate investors. There should be no tax breaks for RE investors that are available for individual owner occupied residences.

With the huge influx of investor money (usually backed by large private equity firms borrowing money at near zero) there is a crowding out of families and individuals who actually plan to live in the home they are borrowing.

Prop 13 was designed to protect people who own and live in their home. It should not be used to subsidize Blackstone's profit margin.

I agree with you to a certain extent, however....

1. When new fees/taxes are imposed, affordable housing, rent control, and Section 8 amounts are generally raised. This largely represents the floor. When the floor is raised, the other levels also rise.
2. Real estate investors in the rental market expect a certain profit. If the profit is not there, the investors with SFR and condos rentals will sell leaving fewer rentals available. That will cause prices to rise.

There are many parts to Prop 13. The big things it was correcting was the wild assessment jumps and the ad hoc tax rate imposed by counties. Paying tax on unrealized gain doesn't work. Allowing the county determine the assessed amount + the tax rate doesn't work.

There is some work that can be done on how commercial real estate changes ownership but circumvents the automatic reassessment that would occur. But I don't think going after all investors will help the rental market.
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[Electrician4you]

The problem is that investors were never in the market to be rental conglomerates. ( the investor market was about 10%) its more like 30-40% now. They are most of the reason houses were selling. It sure as hell wasn't joe average buying. The ONLY reason groups like Blackstone are even in the rental market is because they want to park a few billion in something tangible and get some ROI. And some of that. Billions is borrowed or other investors investing in them. They don't give a f if that ROI comes from rental income or market shares from some company selling bats**t juice.. I guarantee you that the houses they bought are NOT under prop 13. If they do their rent cost/profit analysis and it comes up as not profitable they will start slowly selling.


Let me guess? Newport Coast? You're probably paying some insane property taxes on your 850k + house

[Ultrarunner]

Originally Posted by GoldenZephyr

Prop 13 should have NEVER covered Real Estate investors. There should be no tax breaks for RE investors that are available for individual owner occupied residences.

With the huge influx of investor money (usually backed by large private equity firms borrowing money at near zero) there is a crowding out of families and individuals who actually plan to live in the home they are borrowing.

Prop 13 was designed to protect people who own and live in their home. It should not be used to subsidize Blackstone's profit margin.

Could not agree with you more...

Unfortunately the California Legislature stood firm and refused to simply index the Homeowner tax exemption for inflation...

Way back when... a $7,500 Homeowner Tax Exemption carried real weight when a modest home could be bought in much of the State for $12,000... it means almost nothing with the cost of property today.

If the legislature had not refused to index... Prop 13 would have been stopped cold.

The California State Constitution prohibits a Split Tax Roll... therefore... Prop 13 must apply to all assessable parcels...

One thing is certain... I'm thankful those that came before me had the sense to send a clear message and sweep Prop 13 into law and that it has withstood challenges all the way to the US Supreme Court...

Prop 13 does not prohibit additional assessments... I live in Oakland and have 27 additional items on my tax bill with a rate 60% higher than Prop 13 base.

What it does is require voter approval and I think this is a good thing even when the voters of my city and county have a long history of approving extra taxes... at least the people decide.

[Ultrarunner]

Originally Posted by Electrician4you

The problem is that investors were never in the market to be rental conglomerates. ( the investor market was about 10%) its more like 30-40% now. They are most of the reason houses were selling. It sure as hell wasn't joe average buying. The ONLY reason groups like Blackstone are even in the rental market is because they want to park a few billion in something tangible and get some ROI. And some of that. Billions is borrowed or other investors investing in them. They don't give a f if that ROI comes from rental income or market shares from some company selling bats**t juice.. I guarantee you that the houses they bought are NOT under prop 13. If they do their rent cost/profit analysis and it comes up as not profitable they will start slowly selling.


Let me guess? Newport Coast? You're probably paying some insane property taxes on your 850k + house

Every assessed property in California is under Prop 13... no exceptions.

Does not matter if you bought in 1978 or 2013.

[Heidi60]

I totally agree.

The investors are setting all of us up for some really big problems in the future when corporations like Blackstone attempt to buy up all the housing stock for rental purposes. In my opinion, this is really dangerous and they should be taxed, or better yet, put out of business.

TomDispatch: Laura Gottesdiener, Wall Street's Rental Empire | TomDispatch

[Galaxie Girl]

First of all, if you raise taxes on landlords, they will pass those costs onto their tenants. It is an investment, not a charity.

Second, all these comments about major investors sweeping up properties, and how that must be bad, must be born of ignorance of history. The same thing happened in previous real estate cycles, investors bought up all the cheap properties that were not selling, followed by normal home buyers jumping into the market. Happens every time. It is simply part of the cycle.

[Ultrarunner]

Originally Posted by Heidi60

I totally agree.

The investors are setting all of us up for some really big problems in the future when corporations like Blackstone attempt to buy up all the housing stock for rental purposes. In my opinion, this is really dangerous and they should be taxed, or better yet, put out of business.

TomDispatch: Laura Gottesdiener, Wall Street's Rental Empire | TomDispatch

Tax is due on yearly profit and capital gains at time of sale...

[Electrician4you]

I stand corrected. I must of misread a article about reforming or eliminatingP13 and thought I read it did not cover new sales anymore.