Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Thanks for the response. I think bonds are a better choice than transfer fees, that's for sure. But I personally don't think they're the best choice.
First, I should clarify that, though I *am* personally a fan of old urban neighborhoods in denser areas, my suggestion for exemption of in-fill projects/teardowns/rehabs wasn't borne by that fandom. I'd want the same exemption to apply to someone tearing down and rebuilding a farmhouse in a rural area, or tearing down a home in a subdivision and building a new one on its site (if you can get it past the HOA, that is! To my mind, the question is simple: is what you're doing on your property affecting just you, or is it affecting the community? If the former: hey, it's your property, why should you pay a tax for it? If the latter: well, I feel differently about that.
One reason I prefer bonds over impact fees is, the bonds bring a pretty big share of the financial responsibility to existing homeowners, who are having to pay for growth. Let's look at the fact that Wake County is going to double in population in twenty years. Looking at this year's $1b Wake school bond, the principal and interest on repaying that bond starts (let's assume) this year.
If Wake's housing stock grows by 5% this year (I don't know the actual number), then 5% of the property tax base is new construction. But the increase in property taxes to cover the bonds impacts every homeowner. So, 95% of the new-school-bond cost this year will be paid by existing homeowners who aren't (currently) "causing" new growth. Looking out twenty years, when Wake is twice today's size -- the P&I on the bonds will still, mathematically, impact 50% of Wake houses already here in 2007, and 50% that were built new between 2007-2027.
Now, this is simplified math; and some could argue that new houses have higher immediate assessments so they pay a wee bit more. But I think the big picture still holds.
I'm not saying impact fees should cover 100% of the cost of new schools, new roads, etc. That's not fair, either, especially since growth increases existing residents' home values too. But having *no* impact fee isn't fair.
Now, I'll admit that I lean more to port than starboard. So I called up my dear dad to get his opinion. He leans much more to starboard than port -- heck, he had VIP seats to Reagan's inauguration as chair of Orlando's Republican party back in '81. He's retiring as a bank president this year, having originated about $150m in annual residential, commercial, and hotel/timeshare starts in Orlando over the past few years... so he's got a few thoughts about R/E, needless to say.
Now, Orlando charges $7,000+ per unit in impact fees. When I told him what Wake charges (about... 1/14 that amount?) he laughed out loud. His argument was, in a nutshell, you're screwing existing residents. Mind you, Florida's used impact fees in conjunction with a cap on property value assessments -- they can only rise a certain percentage per year for owner-occupied housing. That's actually a real boon to seniors who can age in place, though the sticker-shock when you sell and buy back into the market stinks.
Good points about burdens on builders. That said, I think Wake'rs already pay an impact fee and have to track that, right? It's just incredibly small. Dialing that number up higher shouldn't make the burden on record-keeping or accountancy costs any worse, as long as (and I agree with you here) TPTB don't try to make such a fee all crazy-complex.
Ultimately, I think that homebuilders and new residents are profiting from growth without having to contribute back a fair share of the impact of their growth. No one's asking for impact fees to 'pay back' communities for *past* investments in roads or schools. Those are sunk costs already borne by them that's here. All I'm saying is if you represent "net new" growth, you pay your share.
["Don't tax me to pay for your lifestyle." Wow, my mom says that all the time about welfare recipients. Now here I'm saying it about homebuyers/builders. I find that a bit ironic. ]
I have a problem with real estate transfer fees... because they continually tax the same property over and over again, to pay for growth. The $90,000 townhouse you're talking about, if it sells (say) 6 or 7 times over its life, is going to pay the same tax over and over again. I don't like that one bit; that property has already contributed over time to its share of new infrastructure and shouldn't be penalized for just being sold.
Keep in mind exsisting infrastructure needs support and money too. In your townhome example the money collected can go to maintain roads and schools. Both always need repairs.
Here in Portland the idea of RE transfer fee has been kicked around. In the city the vast majority of houses sold are resale not new. Here it would be a benefit to repair older schools, maintain roads, etc.
I personally like the idea of this tax and would happily pay it moving to NC. However, I do think that 1st time home owners should be exempt from this tax. Or maybe they could get it as a tax write off.
Personally, I find a RE transfer fee less offensive than PMI. The buyer gets NOTHING for PMI. But they do get something in return for a RE transfer fee.
I'm curious why you think first-time buyers should be exempted from a transfer tax.
Also, what is offensive about PMI? I don't pay it, but not everyone has an adequate down payment.
It seems preferable to have the option rather than demand 20%, or more, down, from all buyers.
Yes, there are other mortgage programs available, but sometimes PMI can be the less expensive solution.
I don't know if I find PMI "offensive" but I do think it's a bit of a ripoff. It adds quite a bit to your monthly payment, and I'd bet the companies are making a pretty penny of it.
The ripoff part is when your house appreciates and you have more than 20% equity - just try to get it cancelled without having to jump through a bunch of hoops. I believe you usually have to wait 3 years as well.
Having a 20% downpayment is the best option of course - you can also look into a 80/15 setup.
I don't know if I find PMI "offensive" but I do think it's a bit of a ripoff. It adds quite a bit to your monthly payment, and I'd bet the companies are making a pretty penny of it.
The ripoff part is when your house appreciates and you have more than 20% equity - just try to get it cancelled without having to jump through a bunch of hoops. I believe you usually have to wait 3 years as well.
Having a 20% downpayment is the best option of course - you can also look into a 80/15 setup.
Aren't 2nd mortgage costs and the PMI costs similar? And the only way to cancel the 2nd is to pay it off.
Also, with a 2nd, one may not get the best rate/term on the 1st.
I wonder how the private mortgage insurance companies are doing with the current wave of foreclosures and the huge amount of mortgage fraud that has occurred. It would seem that their exposure is huge. That risk acceptance come with a cost to the consumer.
I found that the payment on an 80/15 was lower than a 95% mortgage with PMI. I think it's pretty comparable for most people - and more of your payment is deductible on your taxes since PMI isn't deductible. As for the rates - it all depends on credit and whatnot anyhow.
As for the current problems - I think the mortgage companies went way overboard with all the 'creative financing' they've done in the past few years. I'd never get an interest only mortgage, or a balloon payment, or whatever just to afford a more expensive house than I really could afford. Unfortunately, a lot of people just got sucked into all the hype, and yeah.. foreclosures are happening at a record pace. Of course this has little to do with transfer taxes.
1. I moved to Cary in 1997. Population was about 78,000. I consider myself part of Cary's growth. If I call myself a native, I will be corrected very quickly.
2. In 1970, Cary population was less than 4,000.
I assume that, like me, the vast majority of the current population is "new" and never paid a large impact fee.
This makes the bond burden very fair for a boom town like this. Lay a burden in arrears while spreading it into the future.
Cary natives likely have benefited from tremendous appreciation that easily offsets their bond burden.
Apex population has more than tripled in 10 years and is still growing.
Holly Springs touts itself as the "Fastest growing town in NC."
Fuquay Varina has astonishing growth, and is among "the next big things."
Ditto Knightdale and Wendell with 540 open.
Raleigh has a similar story, though maybe not quite as dramatic.
The past growth performance and future predictions support bonds as a great alternative for spreading costs among those who have brought growth and new arrivals, with the benefit of ongoing appreciation helping native residents.
The real issue with bonds is that they not be used frivolously and create resentment.
Quite frankly, I am a proponent of simplification of the tax revenue stream. We are living in an ever more bizarre world of taxes and fees at all levels of government.
Government needs a certain amount of revenue to function. That amount will come from individuals. All of it. The assessment and collection function should be transparent and easy to understand.
We have been unable to discuss transfer taxes without introducing subjective favors, subsidies, and exemptions. Ergo, I see complexity and corruption and political buffoonery on the transfer tax horizon.
Last edited by MikeJaquish; 03-29-2007 at 07:36 AM..
Real estate is inanimate. It can't benefit. And all monetary value is consumer based. Without retail consumers our money has zero value. You can't tax a business without the cost, and overhead passing to individuals
I have a ton of money into public schools, universities, parks, and destructive socialistic programs that no offspring will tap. Ever. Not a penny. And now I need to be taxed on buying a home for schools, etc?
See, the problem with government worship is that the idol is never satisfied. The idol is a severe lord that always finds a reason to demand more. Insatiably.
Mike, very well stated. I find your posts always to be insighful and intelligent and I look forward to reading them.
I'm glad to see people wanting to fight tax increases that take money out of their pockets(Let's remember that the government doesn't generate income. The money that is has, it has taken from people who have earned that money!). Unlike the government, individuals don't have the ability to go and "tax"(i.e. take a portion of someone's money) in order to pay their bills in their monthly budget. Historically, if government can't "pay its monthly bills" unfortunately the easy answer has always been to raise taxes. And the general public has abounded with complacency.
I guess little boys and girls grow up to be men and women who when they put their hands in the "unsupervised cookie jar", then it is a lot easier to take a lot more than "one's fair share" of cookies!!
If we are serious about saying "no" to government that increases taxes then why not also question and change a system where government officials who have created their own retirement fund that tax payers pay for(not social security but thier own private pension fund)?
Why not also question and change a system where government officials can hold more than one job(and subsequently get more than one pension etc.)?
I would think that if the system was changed so that is wasn't so easy for government officials to make unethical decisions with OUR money, then that would free up more money in the "government budget" to go toward funding things like schools, roads, parks etc!!??
If I can't pay my monthly expenses then I can either make more money, or cut back my expenses. Let's cut back all the "excesses" in government FIRST, then if we still don't have enough money for worthwhile projects like roads, schools, parks etc, then let's talk about tax increases.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
To my mind, the question is simple: is what you're doing on your property affecting just you, or is it affecting the community? If the former: hey, it's your property, why should you pay a tax for it? If the latter: well, I feel differently about that.
]
