California Collapsing (San Francisco, Arnold: crimes, houses, income)

[texdav]

Originally Posted by Stac2007

I did not know that. New York has both income and property taxes. They are both high and really doing a job on people up here. I have had to raise my rents to compensate for the increase in taxes. Some of my tenants have seen salary cuts and they are lower middle class persons who are barely making it. Even I have made cuts this year to try to keep my rents down. We canceled our yearly cruise which comes out of my teaching salary so we would not have to hit my tenants for a huge increase.

Its the evil circle of wanting more benefits while not wanting to pay more taxes. What bothers me tho is the trend to more and more rely on federal funds to local governments . It really often is not efficent because local government will apply if they think they can get the money even if they really don't need what it has to be used for. It requires more employees to do the paperwork and manage the reporting to the feds.But the money still comes from someone who pays taxes. The feds love it because it gives them control politically over local activitist ;in other words votes.As a example I remmeber how the paving of neigborhood streets use to work in Texas.The city and later the developer built the roads to local codes; then the city agreed to maintain it. If you wanted the road to be resurface entirely you applied . The city then sent out estimates of what the resdiences in that block or street would have to pay per frontage foot. If the majoprity agred the city paid like half and the residents paid half. They were assessed their share per frontage footage. How days its often CDBG (federal block grants) that are used for paving whole streets. That passes the politcal pull from the seantors and congressamn to the local officals who get the votes from the individual becuase of what they got them. Almost like the god father system of loyality in voting. Its become what we know of as bring home the PORK.Its full of waste;corruption and is very inefficent to say the least.It has replaced the machine system really that was so dominate until the 50's.

[Teak]

Originally Posted by jdrtx

Here's a list of "Sanctuary Cities". How that working out for you?

What is a Sanctuary City?

[user_id]

Originally Posted by chuck22b

There's more than just Mello-Roos, developer fees, Real Estate transfer fees, which are mostly on developing properties or Real Estate exchanges.

None of these have the same sort of effects and they mostly apply to new McMansion communities that were built during the housing bubble.

Originally Posted by chuck22b

....levied on numerous communities. This could add close to an extra half point to a full point to property tax assessments.

This is mostly new communities, but the money is going directly into the community. What I'm talking about is shifting the state revenue more towards property taxes rather than income taxes.

What exactly is your point? That some communities pay extra things? Sure, and?

Originally Posted by chuck22b

Los Angeles County Special Assessments totaled: 96.2 million in special assessments, a close to 5% of all property tax assessed: 1.96 billion....

Exactly, 5%. The areas with newer development have more (just as I was saying). But this is small fish. I'm not talking about raising the property tax 5%. I'm talking about raising it 100~200%. That is so property tax is between 2~3% assessed value. This would allow the state to almost eliminate the state income tax and reduce the state corporate tax.

Originally Posted by chuck22b

As far as rabid RE speculation? I think they would speculate regardless if property taxes were higher. It's a matter of financing and amount of skin in the game.

This depends how high the property tax is. A state property tax of 2~3% would reduce speculation (not eliminate it) because it would become more expensive to hold property for speculative reasons. It would force real estate that is sitting empty to be used for productive means.

Anyhow, I would purpose the federal government similarly shift revenue towards property taxes (and passive capital gains) instead of almost only taxing productivity.

Originally Posted by chuck22b

If you are able to buy properties with zero down, interest only, no doc loans, regardless of the property taxes speculators will speculate on RE price appreciation.

Why was the real estate bubble only seen in particular areas of the country? The lax lending was national, the rapid appreciation was only in particular areas.

[chuck22b]

Originally Posted by user_id

Exactly, 5%. The areas with newer development have more (just as I was saying). But this is small fish. I'm not talking about raising the property tax 5%. I'm talking about raising it 100~200%. That is so property tax is between 2~3% assessed value. This would allow the state to almost eliminate the state income tax and reduce the state corporate tax.

I don't know man, but this would disporpotionately effect newer areas vs. older areas and older homes that have Prop 13 protection. This would also greatly favor renters vs. property owners... but in turn, may result in increased rents as landlords cover additional costs (since now you would effectively have more pocketed income). Retirees, or other property owners that don't have an income would also be disporportionately effected.

What about those areas that have large special assessments already? They're fully paying for local improvements already? Should they now be forced to pay to subsidize the improvements elsewhere or will the extra property tax go towards paying for the special assessments?

In the most part, I don't really see that big of a difference. Mainly, it would let businesses, renters, and owners retain more income, but have to pay more in rent and property taxes. Perhaps it would even give more "incentive" to own, as property taxes are deductable, vs. income tax.

Basically, the costs and burdens are still there... just shifted. Whether it is more "stable" remains to be seen.

This depends how high the property tax is. A state property tax of 2~3% would reduce speculation (not eliminate it) because it would become more expensive to hold property for speculative reason . It would force real estate that is sitting empty to be used for productive means.

Anyhow, I would purpose the federal government similarly shift revenue towards property taxes (and passive capital gains) instead of almost only taxing productivity.

Why was the real estate bubble only seen in particular areas of the country? The lax lending was national, the rapid appreciation was only in particular areas.

I'm still not really convinced that higher property taxes translates to lower speculation. Speculators, move into markets that are seeing rapid appreciation. The States that saw faster appreciation were States that had influxes of population or perceived "growth" (California, Florida, Arizona, Colorado, Nevada, etc.). Furthermore, IMO, speculators don't necessarily "hold" the properties that long (flip), so property taxes aren't as big of a factor. Higher taxes may weigh on investors though... as rents would have to cover the higher holding costs.

Nevada has on upwards of 3% property tax rates:
Tax Rate - How is it Determined?

Arizona is kind of complicated, but I think the average effective tax rate is around 1.5%

The Tax Foundation - Property Tax on Owner-Occupied Housing, by County, Ranked by Property Taxes as a Percentage of Home Value*, 2005-2007 Average

Higher taxes doesn't necessarily mean lower speculation. New York has some of the highest property tax rates on upward of 3%, but they also had a speculative RE market over the last decade. I think speculation is more influenced by "volume"... ie, the Southwest, Florida, etc. was perceived as the destinations where people were migrating.

The Inland Empire was the fastest growing metropolitan area in the Country for several years before it became red hot. More volume, easy money, equals more speculation. Property taxes, in a "normal" market would be a barrier, but not in a speculative market. Just my opinion as to why certain areas had more speculation than not. Lousiana, Michigan, had some of the lowest property taxes, but they also had very low speculation... ie low volume.




Case-Shiller: New York Price Declines Gain Steam | Just another blog.redfin.com weblog

As far as California's budget.... not enough revenues, too many programs and excessive spending. I wouldn't mind increasing property taxes... but it would have to address issues as fore mentioned (Special assessments that in effect increases the total tax liability over 3+% and the double payment for services, improvements, and the increased burden on retirees that don't have an income but would have to pay higher property taxes).

Regardless, the State still spends more than it takes in even if it had a more "stable" revenue source.

-chuck22b

[nightbird47]

Originally Posted by texdav

But in the edn those properties in California is much higher.In fact claifornia desn't actaully alow but so much land to be developed; thus the drawning in new housing additions in the 80-90's.It isn't just having land its the number of permit processes that are required and then being truned down because of such things as water limits and the availablity of sewer to plants that are concerned. I know in some areas of texas it takes goign theru like 500 sate agncies to get permission to develop land inot housing additions;and have heard its alot worse in California. Wtare connectio0ns alone can be a major problem.But Califpornia has had revenue problemns related to spending for decades tehy juts were able to borrow easier. The spending is their problem not so much revenue as its out of line and has been even when revenues were high.

There is a very good reason to turn down building in an area where the water supply is stretched to the limit already with overbuilding. And sewage plants need to exist for the safety of everyone, or the groundwater and any streams are contaminated. Southern California if it lost the acquduct from Nocal and the Colorado river water would be a very very thirsty place. There were reccomendations way back when the desert was being developed that no area could be developed past the available water supply, but the rush to make money squashed that. Some of these areas are already putting on severe water restriction and if they do it right these restriction should stay forever. Its a DESERT people. You don't have lawns and plants that suck up tons of water. And if you want to live there you should expect to be very economical with water.

Should anything happen to the watersupply, socal will become something like the empty ruins of the Anastasi. They abandoned their cities when the lost their water supply too.

[floridasandy]

Originally Posted by user_id

None of these have the same sort of effects and they mostly apply to new McMansion communities that were built during the housing bubble.


This is mostly new communities, but the money is going directly into the community. What I'm talking about is shifting the state revenue more towards property taxes rather than income taxes.

What exactly is your point? That some communities pay extra things? Sure, and?


Exactly, 5%. The areas with newer development have more (just as I was saying). But this is small fish. I'm not talking about raising the property tax 5%. I'm talking about raising it 100~200%. That is so property tax is between 2~3% assessed value. This would allow the state to almost eliminate the state income tax and reduce the state corporate tax.


This depends how high the property tax is. A state property tax of 2~3% would reduce speculation (not eliminate it) because it would become more expensive to hold property for speculative reasons. It would force real estate that is sitting empty to be used for productive means.

Anyhow, I would purpose the federal government similarly shift revenue towards property taxes (and passive capital gains) instead of almost only taxing productivity.


Why was the real estate bubble only seen in particular areas of the country? The lax lending was national, the rapid appreciation was only in particular areas.

the areas with the highest illegal immigration had the biggest bubbles. it makes sense that their influx created the false housing demand.

i would propose that the federal government stop their reckless spending or it won't matter how high you raise the property taxes. if you raise the property taxes higher in california, even more people will leave the state. (like this):


California Losing Population
"They said, "Go west," but many Californians are going north and east. For the 4th year in a row, more residents left the Golden State than moved here from other states, according to the California Dept. of Finance. "I just gave up," said Grace Bryant, a former Glendora resident who fled to Texas after 18 months without consistent employment as a residential appraiser. 'California is too much of a struggle'...[said] Bryant, 51, whose sister and former husband also left So. California for Frisco, a suburb of Dallas. "But what else am I going to miss? The traffic? Graffiti?" Like Bryant, many of those who left California went to Texas, according to truck rental company U-Haul. California was the epicenter of the housing meltdown and now has the highest unemployment rate.

[user_id]

Originally Posted by chuck22b

I don't know man, but this would disporpotionately effect newer areas vs. older areas and older homes that have Prop 13 protection. This would also greatly favor renters vs. property owners...

This would not favor renters vs property owners. Renters pay property tax via their landlord. For most people they would be paying the same of state taxes each year.

It would increase the taxes for lower/mid income long term property owners though. But so what? These people are currently not paying enough taxes, that's just the point. Prop 13 forces the younger to pay more taxes while the older pay less.

Originally Posted by chuck22b

What about those areas that have large special assessments already? They're fully paying for local improvements already?

A lot of this stuff is not long term, they are often 10 year bonds. Anyhow, you could just add a deduction for special assessments that started before the change in the tax laws become effective.

Originally Posted by chuck22b

In the most part, I don't really see that big of a difference. Mainly, it would let businesses, renters, and owners retain more income, but have to pay more in rent and property taxes. Perhaps it would even give more "incentive" to own, as property taxes are deductable, vs. income tax.

There is a huge difference. Property tax revenue is not nearly as volatile as income tax revenue. Also, taxing productivity creates disincentives to produce, where as taxing property creates disincentives to speculate. The former is negative, where as the latter is position. Its a win-win.

Not sure why you think having more property owners would be a bad thing....

Originally Posted by chuck22b

I'm still not really convinced that higher property taxes translates to lower speculation. Speculators, move into markets that are seeing rapid appreciation. The States that saw faster appreciation were States that had influxes of population or perceived "growth" (California, Florida, Arizona, Colorado, Nevada, etc.). Furthermore, IMO, speculators don't necessarily "hold" the properties that long (flip), so property taxes aren't as big of a factor.

Again, the claim is not that higher property taxes will eliminate speculation, but rather reduce it. If you look around the country, you'll see that the states with high property taxes have a less speculative real estate market. There are exceptions on both ends, but this is the general tendency. Also, Colorado did not really see a speculative bubble and in Nevada it was really only Vegas that saw it.

And yes, speculators often hold properties long. What speculators did in California with residential properties during the bubble is just a small part of what happens. I'm not just talking about residential property.

Originally Posted by chuck22b

Higher taxes doesn't necessarily mean lower speculation. New York has some of the highest property tax rates on upward of 3%, but they also had a speculative RE market over the last decade.

You are equating NYC with New York. Outside of NYC real estate is pretty stable in New York. Also, large cities that are built out have a number of other issues that contribute to speculation. I don't think increasing state property tax to 2~3% will dramatically reduce speculation in the major cities, rather outside of the cities. Although, A higher increase could do the trick (i.e., starting to replace federal income tax with a federal property tax).

Originally Posted by chuck22b

Property taxes, in a "normal" market would be a barrier, but not in a speculative market.

Think about what you are saying, obviously a speculative market was once a normal market. The point is that the property taxes help prevent the market from becoming speculative. You keep stating that "once its a speculative market higher property taxes don't matter", but that misses the point.

Anyhow, as I said before changes need to be made in zoning, permitting, etc. too.

Originally Posted by chuck22b

As far as California's budget.... not enough revenues, too many programs and excessive spending. I wouldn't mind increasing property taxes...

The cliff dive in state revenue is directly related to the state over relying on volatile tax sources.

[user_id]

Originally Posted by floridasandy

the areas with the highest illegal immigration had the biggest bubbles. it makes sense that their influx created the false housing demand.

This is not true, Texas has the same illegal issues as California, yet saw no real estate bubble.

A increase in population should not by itself create a housing bubble. In a free market the increase in demand would soon be met with supply.

[BennyPhoenix]

Texas land is dirt cheap compared to calif, that is a huge reason for the bubble in calif.

[floridasandy]

Originally Posted by user_id

This is not true, Texas has the same illegal issues as California, yet saw no real estate bubble.

A increase in population should not by itself create a housing bubble. In a free market the increase in demand would soon be met with supply.

supply met demand, however the people purchasing could not actually afford it and that is why we have foreclosures. here is a foreclosure map with foreclosure increases. i think it is pretty hard to deny that influx in illegal immigration did not play a factor in this:
The Top 10 Foreclosure States as of February - The Home Front (usnews.com)