Consider my neighborhood in Chicago. It has gentrified rapidly over the past couple decades. But it wasn't always so wealthy. My retireee neighbor probably bought her house for no more than about $100,000, but now the market rate for a house like hers is more like $500,000. With that comes about $20,000 per year in property taxes.
That might be reasonable for the wealthier families who are moving into the neighborhood and driving up the land values. But it's pushing her into poverty.
> But it's pushing her into poverty.
No, its pushing her into a cash flow problem. Its not poverty; she has substantial wealth, but its all in the house.
There are mechanisms, of course, to access that wealth without moving, including ones specifically geared toward income-limited house-rich retirees.
Now, those end up creating a debt that must be resolved before transferring the house, including via estate, so living on the value of the home reduces its utility as a vehicle for generational wealth, but...unless you want to reproduce California’s system which makes it much harder for people to become homeowners while rewarding those who already have, eapecially the wealthiest, making the rich richer and what would be the comfirtable middle class anywhere else in the country poor, that’s the way it works (and your exact scenario was the major sales pitch that was used to sell the California system; its maybe understadable how people without 50 years of California’s example fell for it then, but...)
There are ways other than California's for addressing this. Washington's system works quite well: a disposable income based property tax exemption for people over 61.
It exempts you from "excess levies" (basically levies that are voted on) and some statewide levies and freezes your taxable assessed value. If your disposable income is low enough it also starts excluding part of your assessed value from taxation.
So your solution is to take the house away via a second mortgage?
Why are we trying to take houses away from homeowners? Many who have lived in their homes for twenty years or more. What services that the city has could be so important to push residents out of the homes they've lived in all their lives? Most of it is inefficient pork on admin and roles the people living there didn't choose to hire for.
Build more. Encourage building multifamily. Pay to buy these homeowners out of their single family and convert the land to multifamily. If you can't pay, don't try to make it up with tax increases. That forces people out.
Deregulate and build.
Maybe a city failing to stretch services will send new residents seeking other cities, which would be healthier anyway.
Or maybe property taxes should be based on the services rendered. If they increased from $1,000/year to $20,000/year and you subtract away the inflation here is the city government delivering more value or less?
In my city and others our city council delivers large grants to non-profits and other entities under various auspices. “Defending gay rights” is one, or maybe helping the homeless or something. Of course I support both causes in general, but if the city gives a million dollars away maybe we just have to have some people kicked out of their homes to pay for these programs?
You can say well we will just raise taxes on the wealthy. Sure yea, whatever but that isn’t a viable long term strategy for places outside of California or New York which have an ability to capture wealth better due to intrisinic location value. There are only so many “rich” people. Could I afford another $10,000 in city taxes? Yea. I won’t be able to go out to eat or shop at local business as much though. So then what happens? Do those businesses go under? Raise prices? What about their property tax? Maybe instead I sell and take a loss on the house and the market value goes down so now that home pays less in taxes (depending on how this stuff is measured in a given jurisdiction).
> Maybe a city failing to stretch services will send new residents seeking other cities, which would be healthier anyway.
Yea. Tell Google and Meta and whoever to stop putting more jobs in the “cool” cities and come to Ohio where I live instead of these data centers.
This stuff is rather complicated, unfortunately. Even the case of a city let’s say “building affordable housing” is arguably a benefit to the local homeowners, but if you do that yea sorry Granny McPension has to pay for it too - she has a house, she’s wealthy!
> If they increased from $1,000/year to $20,000/year and you subtract away the inflation here is the city government delivering more value or less?
Probably less.
And probably irrelevant to the people that already live there.
> Probably less.
So probably the taxes should be lowered then and then grandma doesn’t need to be kicked out. Everyone wins
> Pay to buy these homeowners out of their single family and convert the land to multifamily.
But that's what the market is already doing? In your example from above, you can take a $400,000 windfall and move somewhere else, or take out a mortgage against that $400,000 of new equity to pay your taxes and still come out waaaaay ahead. I don't understand your characterization of a second mortgage as "taking the house away" at all.
What poverty--she owns a house worth $500k. I think deferral schemes where certain individuals can pay taxes upon sale of the home (with fair interest) should be fine to avoid forcing anyone into a reverse mortgage.
Well she doesn't have the 500k. This is akin to saying we should force people out if market conditions make their house more expensive. That seems like a really strange consequence to all this, idk
It isn't because the comment had a second sentence suggesting tax deferrals were fair.
Either housing is an economic asset subject to market forces, or it's not.
If it's not, then I would also like to live in a nice neighborhood for $100k and zero property tax, please.
On the other hand, if it is, then this person has a substantial economic asset that she could reverse mortgage, rent out, or sell.
So people that keep buying low (because that's what they can afford) are constantly being forced to move.
Houses are not the same thing as cash or other fungible assets.
Especially not when you're getting older, have limited ability to manage a move for yourself, built a life and raised your kids in the building, and would have to consider unloading a lifetime's worth of objects and/or moving infeasibly far away from your friends and community to get into a living situation that's more financially tenable.
> Houses are not the same thing as cash or other fungible assets.
> Especially not when you're getting older
Houses are wealth. And the wealth in them can be accessed while retaining use of the house. Especially when you are getting older.
Why are we replaying the dishonest “think of the retirees” now? It was bullshit in California in 1978 to sell Prop 13, and its even bigger (and more transparent) bullshit now when, especially when it is used to sell the same basic idea.
How can someone be so out of touch? A person buys a house, spend a whole life there, and through no action of her own happens to live in an area that drastically appreciates in value over the decades, all she wants is to spend her last few years in the same house that she loves and would never consider selling, and now we ask them to kindly pay all their income or more in property taxes, otherwise fuck off??
And where would she move to? All decent areas probably also increased in price, her property went up 10x in value but so did all other properties she would contemplate to buy. That’s the fallacy of thinking property is wealth when talking about your only residence.
What a morally bankrupt viewpoint.
The suggestion is that this person can get a mortgage to pay their property taxes over the next 20 or 30 years as part of their retirement - or they can sell their property and live well in a cheaper location.
Claiming that the retiree has a right to both the home value and the ability to live there is the friction point. It reads as hollow in the face of rising homelessness and the inability for young people and families to access housing.
All else equal, I can see why the ability to live in the same house until you die would be given a high moral value. But in practice, IMO, this culture causes a number of problems. For instance, where I live, there was a lot of growth in the 70s and 80s, and a lot of young families, so they built a bunch of schools. It's an attractive place to live, so a lot of those people who lived in those houses when they were new and raised those families and attended those schools have kept living in those houses. But those kids that they raised there can't live in those same neighborhoods as adults, because there's no turnover, so they can't raise their own kids there. So now the schools are all half (or less) full, because the neighborhoods they were built to serve no longer have a lot of families living in them. So then they have to close and consolidate schools and everybody hates that. I don't really have a strong view on the moral question of whether houses "should" be owned by older people who have lived there a long time or by young people families, but from a pragmatic standpoint, this situation seems quite bad to me.
I think if we had a totally different culture, with multigenerational families living in the same house, then this might work better. But this model where we build new family friendly neighborhoods with parks and schools, and then nearly everyone ages in place and all the family amenities become empty over time, and the families all end up in the next new neighborhood and then it repeats, this doesn't seem ideal to me.
Schools aren't forever. They're just buildings that get built, expanded, replaced, upgraded, mothballed, abandoned, sold and/or destroyed all the time as the needs of the community using them changes. Some may last for decades, and some for centuries. Some have already lasted far too long.
It's OK that they don't last forever; they're schools, not irreplaceable shrines.
And speaking of things that also don't last forever: Homeowners. Grandma Sally isn't going to live forever. The house winds up on the open market in order to seek satisfaction of Grandma's debts, and then some new family buys it at market price and is free to breed a whole new fleet of kids to raise there.
There's still eventually churn in the marketplace, and in the neighborhood. The churn didn't disappear just because Grandma Sally was able to choose to keep living in the same place until she died quietly of an agonizingly painful heart attack as she stood in the kitchen making tomato sauce after church on a Sunday morning before the family dinner that afternoon.
People die all the time. It's often tragic, but it's natural and ultimately unavoidable.
People also get forced out their forever-homes all the time, too. That's also often tragic, but it happens for artificial reasons that could be avoided if we bothered with trying to do so.
> Schools aren't forever… Some may last for decades, and some for centuries. Some have already lasted far too long.
That seems a bit ironic?
> Grandma Sally isn't going to live forever. The house winds up on the open market in order to seek satisfaction of Grandma's debts
Not always, grandma can pass the home down to whoever. IIRC there are ways to do it without triggering a reevaluation on the original purchase price.
Ironic? Is it ferrous or something?
Anyway, Grandma is as dead as that Sunday dinner. She won't care that the new occupants are being complete heathens about smoking dope and makin' babies on the sofa.
Schools closing are a symptom of a community that has not retained a healthy mix of people at different stages of life.
The comment you are responding to is saying the opposite. They are saying that the person can access the wealth of the house (eg via a reverse mortgage) in order to pay the taxes while staying in the house. That's what this meant:
> Houses are wealth. And the wealth in them can be accessed while retaining use of the house. Especially when you are getting older.
Simple example. I bought the house at $100k. It's now worth $500k. That means I owe $20k/yr in taxes, but it also means I have $400k of additional wealth. A bank will lend me money with that wealth as collateral. If you imagine that the interest on the loan is roughly equivalent to the rate of appreciation of the property going forward, that's 20 years of taxes paid for by the increase in home value. Seems like a pretty good deal for everyone!
GP is not forcing the retiree to move. GP is instead advocating retaining the use of property while reducing the cash flow burden. Asking someone to get a cash out refinance is not morally bankrupt; it is a pragmatic and fair solution. Some states also have deferred property tax schemes; these are even better. It is only fair for someone who, by luck, paid $100k to get a house that is now worth $500k and lives in a neighborhood that is now far better than when she bought the house.
Defered property tax for elderly can be (and usually is) implemented as a lien on the estate, to be settled upon the owners death. Do you heve any problem with that? Or should we now also think of (inheritance of) the children?
Yeah, _seriously_.
"And where would she move to?" -- Either the graveyard or the incinerator? She's dead... the bill doesn't come due until after her death and is settled from the value of the house.
It's classic neoliberalism think which for some reason the tech crowd is unreasonably susceptible to. "Oh you're poor? Can't afford your bills? Must be your fault." It's utterly disgusting.
Everyone needs a place to live, not only boomers. There's a generational injustice at play in the idea that you get for $10 what I must pay $100.
You're not wrong, but that's an entirely different discussion from whether or not someone should be forced out of their house simply because gentrification and inflation causes their taxes to go up year after year likely long after they're done working. Oftentimes people buy homes in low-cost areas because that's what they can afford. It's not their fault when the area gentrifies and their taxes skyrocket past their means through no fault of their own. We can advocate both for homes to be more affordable for people that need one and for people to not lose their homes due to constantly rising taxes.
It’s not a bullshit idea, it is realistic and the problem in California is that it includes commercial and second homes.
I don’t want my country to force old people to either move from their home, or take out risky debt.
There are absolutely problems and prop 13 has been awful for California but it’s a red herring to worry about the primary residence exceptions.
To actually realize this value she would have to sell it.
So your solution is to force her to sell her home and move? Move where? I've seen this in so many areas of the country where property taxes on your property are tied to market value rather than purchase price. It drives retired and lower income people out of neighborhoods that they have lived in for decades, forcing them to move down the scale of home ownership.
Perhaps the retired person is living on a fixed income of $40k/year. Over time their proterty taxes on the home that they have lived in for decades can now be more than half of their total income? How is this fair at any level?
Reverse mortgage.
> How is this fair at any level?
How is it fair that working people have to pay 10x for housing than she did when she was young? How is it fair that the money goes to her inheritance while she made her working neighbors pay her share of taxes?
Of course, let's let yet another corporate land grab take even more residential property off the market for profit-based motives. This can't possibly do any more harm than locking property taxes at the time of sale.
Where I live, we are looking at locking property taxes once you hit a specified age (65) and have under a specified income ($40k+/-). The current debates revolve around exactly what those numbers are and at what level the taxes get locked. The goal is to protect the elderly who have already contributed to the economy and society for 40+ years and not force them into a financial situation forcing them to sell their home just to pay even more property taxes that they have paid for the entire ownership.
A number of states have this. Basically if you are low income, where that may be calculcaed differently depending on cost of living of the county you live in, you can defer or freeze property taxes.
Oregon has a deferral where the delayed property tax comes from the value of the house when it is sold or I guess when you die. https://grantsforseniors.org/property-tax-relief-for-seniors....
Washington has a similar thing.
"All Washington counties offer senior citizens and disabled households property tax exemptions. Eligibility is based on your age or disability status, home ownership, residency in Washington, and income level. Seniors who are at least age 61, or retired from regular gainful employment by reason of a disability, with an income of $64,000 or less are eligible."
The idea is to help people stay in their houses. This is really really important. And if you can afford it, you should be paying property taxes. I'm lucky I can afford mine, but I highly support this strategy.
In my state I occasionally see people in online discussions saying they can't afford their property taxes - I think a lot of people aren't aware of these programs, people are amazed when I post a few pointers and tell them about it.
Meeting the basic needs of the population, by having enough housing and preventing hoarding of housing by wealthy individuals, is not a "coporare land grab."
Quite the opposite.
We are clearly talking about different things. I'm talking about protecting single home homeowners on a fixed income from being forced out of their homes. Staying in the only home she owns is not hoarding.
Telling people that the solution is to sell their home to an insurance company as a solution is most certainly a corporate land grab.
You seem to be arguing about people/corporations that own multiple homes or even entire portfolios of property. These are not the same argument.
The solution is not necessarily to sell, they should only do that if they want.
If their asset is gaining in price so much that the tax burden is getting high, then tax deferement until a liquidity event both keeps them in their home, but also keeps them honest about how much they are taking away from the rest of society by taking that piece of land.
> Of course, let's let yet another corporate land grab take even more residential property off the market for profit-based motives.
The premise does not warrant this conclusion.
They don’t, they move to the ghetto like she did and start the gentrification cycle again
Why should this person take up a family home in a desirable area? It is inefficient. The pressure she is feeling to leave is the system working as intended.
We shouldn’t prioritize efficiency when it comes to moral matters. That’s a bad idea for the government.
People’s primary residences are more than just an economic asset. If you don’t understand that, it’s difficult to have a conversation as we have very different starting points about morality.
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$20k on $500k is 4% annually, which is really high. I'm not seeing any Chicago neighborhoods that are this high (looks like a max of maybe 2%) but perhaps I'm missing something about how Chicago works?
Why can’t she pay from her retirement accounts? 20K/yr isn’t all that much considering today’s cost of living. The stock market has skyrocketed in the last decade and change.
I also don’t buy 20K of property tax on a 500K home, that’s a 4% tax which seems unlikely in Chicago.
Something isn’t right. Poor financial planning maybe?