October 16, 2013
Listed For $30 Million In Pacific Heights
Having been on the market for almost a year for $30 million but not officially listed, the 13,500 square foot mansion on over half an acre of prime Pacific Heights land at 2724 Pacific Avenue has just been added to the MLS with an official "one day" on the market.
Designed by architect E.A. Hermann and built in 1894, the seven-bedroom home was purchased from the Verdier family in 1983 by Doug Engmann, former chairman of the Pacific Stock Exchange.
According to San Francisco's Office of the Treasurer and Tax Collector, the property tax bill for 2724 Pacific Avenue will be $5,167.75 for the Fiscal Year 2013-2014, a tax bill which would go to $356,400 a year with a sale at asking.
∙ Listing: 2724 Pacific Avenue (7/7) 13,500 sqft - $30,000,000 [stevegothelf.com]
∙ San Francisco Property Tax To Increase, Where The Dollars Will Go [SocketSite]
First Published: October 16, 2013 12:30 PM
Comments from "Plugged In" Readers
the perfect poster child for getting rid of prop 13
Posted by: asiago at October 16, 2013 12:36 PM
I'll go along with that provided we remove ALL rent control in San Francisco.
Posted by: Futurist at October 16, 2013 1:04 PM
The RE tax bill on this property is only $1,100 more than I pay for a 2 bedroom condo in the Western Addition; even so, I would not favor getting rid of Proposition 13.
I knew what the property taxes were going to be on my place at purchase and can budget for the future accordingly.
Without the Proposition 13 cap on assessed valuation, homeowners at retirement can be priced out of their homes due to rising property taxes just as their income declines.
I do support a split property tax roll separating business from residential property.
Posted by: Jackson at October 16, 2013 1:49 PM
Prop 13 solved some problems and created more. Why not a city income tax?
Posted by: Steve at October 16, 2013 1:58 PM
Very funny that during the thread on rent control people went on about how renters should just make sure their income kept up with the rental market. But when arguing for prop 13 owners suddenly need government subsidized price stability.
Of course the big elephant in the room is the massive federal government intervention that allows the 30 year fixed mortgage to exist and be priced cheaply.
Subsidies for me, but not for thee. I guess...
Posted by: anon2 at October 16, 2013 2:05 PM
I love subsidizing the rich. /s
About time to Marie Antoinette the city.
Posted by: sf at October 16, 2013 2:11 PM
The primary beneficiaries of prop 13 are, of course, tenants. Whenever the shrieking starts about prop 13 in these threads and we get threats to behead the aristocracy, remember it's RC tenants who will pay the price, not the rich. (Don't forget the new rich are the tech titans and financial gurus who aren't living in great-grandma's house paying 4k a year in taxes). Unless, the city decides that only multi-family buildings are subject to tax controls, every long-time landlord who owns a RC building will have to Ellis.
Obviously, prop 13 and rent-control should go, but there's a huge difference between "owning" a piece of property and "leasing" a piece of property from the "owner." Eliminating prop 13 altogether essentially means the government has enormous power in determining who is able to keep a property they "own" based solely on their current tax base. Whereas, under rent control, the "owner" has the legal right to go out of the tenant business and Ellis if he/she choses.
I always use this example, but here goes again. A house near me sold for an insane price years ago and is now valued on Zillow at $3.5k per foot. Is every surrounding SFR now worth 3.5k per foot? If I were the city, I'd certainly be tempted to use the highest comps to determine fair market value of under-assessed homes. I've not yet heard a reasonable argument how the CITY should go about reassessing properties.
Yes, there are a few dinosaurs like this home left in D7, but not that many... Remember that article from a few years ago braying about the low taxes on outer Broadway? Half of those homes have turned over since that article was published and each now pays annual taxes well over 200k.
Prop 13 should be phased out. When a property sells, the taxes can be adjusted for inflation, CPI or whatever metric you want to use. No passing stuff down to the next generation. Rent control should end when a tenant leaves.
Posted by: Denis at October 16, 2013 2:55 PM
This is a spectacular property / home. Considering where some of these homes have traded recently, I'd say this is a good buy. No idea if it will sell anywhere near $30M. Regardless, I'd put this home here on Pacific as the currently best available home in SF.
The Scott St listing is also officially on the market after years of off market ask in the high 20's. Same thing with the sharper image home on lyon.
Curious timing for these homes to get formally listed. Perhaps a little birdie has something to do with it....
Posted by: eddy at October 16, 2013 3:45 PM
" who is able to keep a property they "own" based solely on their current tax base. "
If your property taxes have skyrocketed, so has your property value. So you have plenty of equity to pay the property tax with. Or you can cash out and move out.
I'm no class warrior, but it's absurd to lecture working class people about making their incomes keep up with rents and then turn around and cry out for a subsidy because you don't want to pay property tax on a windfall equity gain. And that equity gain already gets a big subsidy with the half million exemption on capital gains tax.
Posted by: anon2 at October 16, 2013 5:09 PM
I've already said in previous threads, the rich would hardly feel an impact by removing prop 13 because they can cash out and move to Boca or wherever or tap into equity... It would cause some temporary chaos where prices of some SFRs plummet, but it would quickly stabilize as inventory of SFRs is still limited and can be quickly absorbed.
My ultimate point is that landlords are not going to refinance and start pulling out equity in their rental properties to pay higher property tax rate when their rental income remains unchanged because of rent control - even if interest rates remain low indefinitely. Again, the rich will be fine, but it's the working classes who are going to be screwed again.
Both RC and Prop 13 cause bizarre market distortions and should be phased out. I'm just not in favor of the "ripping the band aid off method" often espoused on this site.
Posted by: Denis at October 16, 2013 6:08 PM
Getting rid of prop 13 doesn't have to mean people getting priced out of their own home after retirement or unforeseen events. Set a maximum tax based on income, with the caveat that you pay the remainder of your tax burden when you sell your home.
Posted by: Avery at October 16, 2013 7:24 PM
Why not just amend prop 13 to allow a 3% increase in taxable value per year instead of 2%? Easy.
Posted by: fred at October 17, 2013 9:05 AM
Why all the engineering? Property taxes should be one flat rate over the market value period.
Now if we want to keep granny in her home, this is a laudable goal. But if granny has 2000sf on her own then maybe she should do what millions are doing: either scale down or let a room or two. A retiree friend of mine lives in 2500+sf in NV with a potential of 4 units due to the layout. Of course her P. Tax is next to nothing. She won't bother to maximize her rental revenue because she is content with her SS check and the occasional rental when she bothers to do it. She doesn't like having strangers around.
Now, this situation alone is at least 4 to 6 people who have to hunt down for a rental somewhere else. With a higher Property Tax bill, she would offer at least one flat for rent, if not two. Or she would cash out and sell.
Posted by: lol at October 17, 2013 9:23 AM
Denis, you're overlooking the fact that prop 13 is state-wide while rent control exists only in certain cities, so your reasoning doesn't hold in areas without rent control. And as anon2 and lol point out, those materially benefitting from prop 13 are typically sitting on substantial equity in a property - nobody's grandma would be thrown to the wolves if both rent control and prop 13 were gradually phased out over a 10-year period.
That will never happen, but as I've mentioned before, there are at least ways to make prop 13 less lopsided: have it apply only to primary residences, and prevent it from transferring to heirs.
Posted by: Legacy Dude at October 17, 2013 9:53 AM
As usual, the comments suggesting any alternative to Prop 13 would be chaotic, unworkable, and make people homeless neglect the fact that NO OTHER STATE in the U.S. has it.
And I completely disagree with Avery that property windfall taxes ought to be lower for those with lower incomes (the "cap" idea) -- you get to have a bigger windfall for sitting on property as a result of you doing less productive work? The opposite of good policy. I'd rather property taxes be raised substantially and state income tax eliminated entirely. Encourage useful production; do less encouraging of sitting on land and hoping for luck.
lol's point is a good one too. "Grandma" doesn't need multiple bedrooms and large square footage; that's an inefficient use of property and should be discouraged by tax policy.
Posted by: shza at October 17, 2013 10:33 AM
Don't want Prop 13, go ahead and move to one of the other 49 states. It's not going away.
Posted by: Rillion at October 17, 2013 10:39 AM
And "grandma" should NOT be told by anyone what she needs or doesn't need.
Posted by: Futurist at October 17, 2013 10:51 AM
And "grandma" should NOT be told by anyone what she needs or doesn't need.
Deliciously ironic coming from the most opinionated and overbearing personality on this site. But she does need to be told to pay her share, actually. I had never pegged you for a libertarian before, but I guess anything that's consistent with your own personal monetary interest is par for the course.
Posted by: shza at October 17, 2013 11:08 AM
…I completely disagree with Avery that property windfall taxes ought to be lower for those with lower incomes (the "cap" idea) — you get to have a bigger windfall for sitting on property as a result of you doing less productive work? The opposite of good policy. I'd rather property taxes be raised substantially and state income tax eliminated entirely. Encourage useful production; do less encouraging of sitting on land and hoping for luck.
Then you'd need some way to suss out the land value aspect of real estate appreciation from the overall appreciation of the price of the real estate.
I totally agree that property owners shouldn't be rewarded for just being lucky enough to have purchased at the right time and in the right neighborhood to benefit from appreciation without doing any improvements. I also agree that a tax on that kind of "land hording" would be a better idea than the current tax regime in California. This would be sort of a Georgist approach.
But, even though I think most of the flippers in this city are ruining the architectural fabric of our residential neighborhoods, the fact is that some people are in fact doing productive work by preserving or improving the existing housing stock before selling for a capital gain.
That counts as "useful production", so you'd want the flipper to be able to just pay the usual tax on the marginal value of their improvements, assuming that they actually made some.
Posted by: Brahma (incensed renter) at October 17, 2013 11:09 AM
>> And "grandma" should NOT be told by anyone what she needs or doesn't need.
Well, I don't tell her what she needs. But if she WANTS more, she should PAY more. Pretty simple.
Posted by: NJ at October 17, 2013 11:11 AM
Of course "she" should pay more, if she wants more. That's obvious.
But if the house she OWNS and has owned for decades and had 5 bedrooms and 6 baths, that's up to HER to keep and enjoy it.
AND! She pays her property taxes on that property, as she should according to:
Until Prop 13 is repealed, which I doubt will happen, she is allowed to use and enjoy her property as she desires. Pretty simple.
Posted by: Futurist at October 17, 2013 11:21 AM
And "grandma" should NOT be told by anyone what she needs or doesn't need.
Translation: And "grandma" should NOT be told by anyone other than a licensed architect what she needs or doesn't need.
Posted by: TruDat at October 17, 2013 11:23 AM
futurist, the context of this discussion had to do with the wisdom of Prop 13 as a policy. No one has argued that Prop 13 isn't the current law or that "grandma" is acting contrary to it by tying up 5 bedrooms and six baths. That's just your face-saving straw man. FYI: policy arguments are inherently about what "should" be the case.
Posted by: shza at October 17, 2013 11:29 AM
Well, you have that wrong shza, because there are those who think "grandma" should not be allowed her choices. And that kind of thinking is wrong.
You may not like the wisdom of Prop 13. I do.
But I can't figure out the silliness of the comment by TruDat at all. Except to get personal and well, ridiculous.
Posted by: Futurist at October 17, 2013 11:40 AM
Believe me, I'm well aware that prop 13 is a state law and that RC is governed by the city. But when the state allows modest prop. tax increases, it's filtered through the city's office of the assessor-recorder. If prop 13 were eliminated via a congressional act or ballot initiative, the city/county of SF would bear the brunt of reassessing property value, unless a new state bureaucracy were created. I don't know what would happen outside SF, nor do I really care because the market distortions caused by the conjunction of prop 13 and RC are most visible in San Francisco. I'm sure there's a few Norma Desmond types still living in rotting mansions off Sunset Blvd, but no one cares... It's only in SF that people start frothing at the mouth when they see some old lady paying 5k a month for a 10ksq ft home.
Clearly, if prop 13 were repealed, the city of SF would still have rent control. People get so caught up in the 20 or 30 underassessed mansions in D7 that they quickly forget that, in SF proper, the ONLY people negatively affected would be working class tenants and long-term, lower income homeowners in say D10 (if there are any left).
Posted by: Denis at October 17, 2013 12:11 PM
There's no reason granma would pay only a tenth of what the new family next door is paying in property taxes for a similar property. And yet it's pretty common.
No we shouldn't tell granma what to do. But for the sake of equality she should pay like everybody else. Then she'll have to accept or adjust. We all have to adjust to external constraints at some point. It's part of life.
What's interesting is that futurist seems to be against rent control just like I am. Rent control is an unjust system that favors person A vs person B based on some arbitrary criteria. Yet futurist is for prop 13 that does exactly the same thing for homeowners. Interesting paradox.
Posted by: lol at October 17, 2013 12:27 PM
Denis, you couldn't be more wrong here. Prop 13 is called the third rail of California politics because it affects so many people statewide. If it only affected some SF working class rent controlled tenants and a few D10 long-term homeowners, it would have been gone long ago.
And as you point out, if prop 13 were eliminated the city of SF would conduct the assessments. And politically, there is absolutely no way that the city would raise the assessments on RC buildings high enough to cause a wave of Ellis evictions.
If the political winds ever shift against RC, the city will phase it out. But the idea that we need to keep prop 13 statewide to prevent SF from accidentally taxing rental buildings out of business is ridiculous.
Posted by: anon2 at October 17, 2013 12:36 PM
@ lol: your statement makes absolutely no sense.
First you say we shouldn't tell grandma what to do, same as my thought. Next you take about the "sake of equality". Huh? Make up your mind. Be specific.
Since I own a house, maybe you do too. I don't have to adjust to any constraints, re; my current property tax bill. Until and only until, I choose to see and buy another property. Otherwise my tax bill remains essentially the same.
So what do you mean by "accept or adjust"?
Posted by: Futurist at October 17, 2013 12:41 PM
And politically, there is absolutely no way that the city would raise the assessments on RC buildings high enough to cause a wave of Ellis evictions.
But they would on single family homes... I see.. Sure. How then would the city not be in violation of the state constitution if they start cherry picking how to apply the repeal? Homeowners would likely sue.
I'm not saying it's not a statewide problem, but it's intensified in San Francisco like no where else in the entire state... and this is an SF based blog... I'm only speaking about how a repeal would play out in SF.
Posted by: Denis at October 17, 2013 12:52 PM
Increasing someone's taxes is not the same as saying someone what they should do. There's a slight subtlety there.
Telling granma what they should do would be the city sending granma a letter saying she would be taxed on underused property else she makes a better use of it (like in Paris, where I did receive a few of those letters asking to rent property I had vacated before selling).
But increasing a tax is just that: an extra tax.
The anomaly is not as much that granma would have to pay extra, but more that she underpaid for so long, even if was a voter-sanctioned and therefore perfectly legal anomaly.
It's the same as the crazy situations we see with rent control, really.
Yes, I do own, and Yes, I am benefiting from prop 13 since my property has gained a solid 40% since I purchased. Since I do airbnb and other kinds of non-long-term rentals not subject to rent control in practice, my situation is a win-win: prop 13 benefit, and none of the rent control constraints.
But I am against prop 13 against my own interest, because the self-serving behavior we all have is what creates Frankenstein markets, deficits, and social imbalances. In the long run, we all lose.
Posted by: lol at October 17, 2013 12:59 PM
Guys, the whole widow in a mansion thing is largely a political construct. The clear reality, as the subject property demonstrates, is that you have a lot of wealthy individuals/families that own multiple properties across the state. So you end up with giant trophy mansions that sit empty for decades, meanwhile a few miles away people are living in converted bungalow garages. How is this good public policy?
Denis, those "20-30 underassesed mansions" you mention would probably pay more in taxes than an entire block of the Sunset if marked to market.
Futurist, even you should be in agreement that prop 13 should be limited to primary residences, no?
Posted by: Legacy Dude at October 17, 2013 1:03 PM
the whole widow in a mansion thing is largely a political construct.
I was not talking mansions. I know quite a few elderly people in rather spacious NV SFHs who pay next to nothing in P Taxes.
The rich families like the subject property affect tax revenue, but have very little impact on the overall property market. But the large number of long-timers who are benefiting from prop 13 DO HAVE A SIZABLE IMPACT on the family-oriented market.
Posted by: lol at October 17, 2013 1:11 PM
"How then would the city not be in violation of the state constitution if they start cherry picking how to apply the repeal?"
Assessing a building based on the current and future expected rent stream wouldn't violate the state constitution. A building that can't collect market rents is worth less then one that can and thus can be assessed at a lower rate.
This is a complete non-issue.
Posted by: anon2 at October 17, 2013 1:12 PM
No Prop 13 should not and does not distinguish primary residence from secondary or rental. That's the way it should be.
Don't like it, then voters will lobby our legislators to change the law.
And @ lol: my behavior is hardly "self-serving" just because I was smart enough 29 years ago to buy a fixer upper piece of junk in Noe Valley. Trust me, you're not going to make me feel any guilt.
And our grandma shouldn't either.
Posted by: Futurist at October 17, 2013 1:13 PM
You're still against rent control, are you?
Because the underpaying rent-controlled tenants were "smart enough x years ago to sign a lease on a xyz property".
You cannot defend prop 13 if you wish the end of rent control. It's almost the same fight.
Posted by: lol at October 17, 2013 1:16 PM
lol, I think it's long been established that the only shred of consistency in futurist's positions is that he's in favor of his own economic interests and windfall luck and against anything that presents an impediment to them or that would advantage people who made different decisions (thus making his own situation slightly less relatively favorable to others').
I'm sure he would defend a hypothetical tax policy that exempted small-firm or sole proprietor architects from all U.S. taxes as well.
Posted by: shza at October 17, 2013 2:02 PM
"And @ lol: my behavior is hardly "self-serving" just because I was smart enough 29 years ago to buy a fixer upper piece of junk in Noe Valley. Trust me, you're not going to make me feel any guilt."
Futurist, your mentality exemplifies what many of us believe is unfair about Prop 13. In our capitalist economy, you get the benefits of your early home purchase through appreciation, which translates to increased wealth for you. That is your victory. That does not justify your paying LOWER TAXES than your neighbors who came along more recently. If one is going to accept the concept of a "property tax," that tax fairly should be proportioned to the fair market value of the property.
For the record, like lol, I benefit from Prop 13 in the sense that my house has appreciated considerably. But I was against Prop 13 before I bought, and still am today, because it is an unfair law. And every year Prop 13 stays on the books, the disparities will grow even more, making the law even more stable, since voters like yourself will have even more of an interest in keeping it.
But since so many California homeowners are misguided like yourself, I doubt Prop 13 will change appreciably for some time.
Lastly, I note that this is a much bigger issue than 20-odd Pac Heights mansions. For example, my next door neighbor pays 1/10 the property tax that I do, and we do not live in Pac Heights nor are our houses mansions. He gets the same City services that I do, yet by inheriting his house he has essentially a free ride on it when it comes to paying our common government. Not fair.
One last point -- I don't favor upping everyone's property taxes to the current marginal rate. Much as the impetus for passing Prop 13 in the first place, I do not doubt that our leaders will squander the money, and the effect on housing prices will be drastic. Instead, I'd advocate for a more neutral tax change, where assessments are at FMV, but rates are lowered such that the overall revenue to the government is mitigated.
Posted by: NJ at October 17, 2013 2:12 PM
@ lol: read the second comment in this thread, by me. READ IT.
But, IMO, Prop 13 is fair to those who buy AT ANY POINT IN TIME. Think about it. My neighbor has owned her house for 45 years. I'm glad for her. She is retired and disabled. And she lives in her own home, with very little cost. Fair or unfair?
And the house up in the next block just sold to a nice young couple. They paid upwards of $3m. Their property taxes are, shall we say, larger than mine or my neighbors. Did that stop the young couple from buying? The older couple who sold can now retire and move pretty much where they choose. Fair or unfair?
Some of you seriously think I am the ONLY one here who owns property and benefits from my investment. Get a grip.
And no, I do not think the millions of CA homeowners who are "misguided" like myself, will lobby for repeal of Prop 13 anytime soon.
Posted by: Futurist at October 17, 2013 2:31 PM
If we assume, just for the sake of argument, that the reason we have Prop. 13 is to make sure that Grandmas aren't taxed out of their own homes by rising appreciation and the consequent rising taxes (which isn't the case), then it makes absolutely no sense to not distinguish primary residence from secondary or rental.
If you're old and need a place to live in with stable property taxes when you can't work, then all you need is your primary residence. If you are affluent enough to still own income property or a vacation home when you're retired and elderly, that's great for you and no one should tell you that you can't have it, but it doesn't make sense for other taxpayers to give you a tax subsidy to horde real estate. You should have to pay full freight for the secondary property.
A rental property is part of a commercial enterprise, and shouldn't get the benefit of a public policy choice that shields homeowners from the full rise in taxes that go along with rising property values for their primary residence.
Similarly, if one chooses to own a second home, the "Grandma's getting 'taxed out of' her home in her dotage" justification is weak at best, because you can't yourself live in more than one home at once.
As public policy statewide, having Prop. 13 apply to rental property makes no sense at all if the justification is to prevent the elderly from being subject to taxes that rise fast enough to force them out of their home. And its only a little less senseless when it comes to second homes.
And as an aside, since Prop. 13 isn't means-tested, why are we assuming that just because someone's elderly, they need a tax subsidy to stay in their homes? Because it works rhetorically, that's why. There's no logic to it.
As a case in point, Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., owns a second home in Laguna Beach in addition to his primary residence in Omaha:
His home in Omaha, he said, is valued at roughly $500,000. His current yearly property tax bill on that home: $14,401.These are all circa 2003 figures.
In California, he owns a Laguna Beach home valued at $4 million, or eight times as much. The annual property taxes on that home are just $2,264 — a fraction of what he pays in Omaha.
More to the point, said Mr. Buffett, the taxes on his Omaha home rose $1,920 this year, compared with $23 on the Laguna Beach home.
People say they're worried about Grandma, but a bigger worry is people who buy California real estate/second homes not to live in, but as a tax shelter.
Posted by: Brahma (incensed renter) at October 17, 2013 2:36 PM
Nope, none of this is "fair" per my definition of fairness. Yes it's "nice" or "kind" to let granma pay less than her neighbor. But "fair" it is not to everyone else.
Indeed, and the increase in property taxes for what is basically mom-and-pop rental property would force the hands of politicians to repeal rent control laws. Otherwise landlords would have to massively Ellis to make the numbers work.
Posted by: lol at October 17, 2013 3:01 PM
Lots of things in life are not "fair" Big deal.
Prop 13 is the law and it works.
Posted by: Futurist at October 17, 2013 3:06 PM
Futurist, you still didn't address lol's point about rent control at 1:16.
Posted by: Legacy Dude at October 17, 2013 3:11 PM
Oh, I think futurist has addressed all my points very clearly.
If I resume:
- rent control should be repealed (for whatever reason)
- but please do not touch prop 13 because it works for whatever that means
In short, in futurist's world, buyer granma deserves a break, while renter granma is fresh out of luck
Posted by: lol at October 17, 2013 3:21 PM
Once again, NONE if any of you read what I said in the second comment here. I'll help you out:
My comment followed immediately the comment by asiago: "the perfect poster child for getting rid of Prop 13".
I SAID.(that's me Futurist): "I'll go along with that provided we remove ALL rent control in San Francisco."
How can my position be any clearer?
Seriously, Legacy Dude and lol, you need to go back and read stuff more carefully.
Posted by: Futurist at October 17, 2013 3:43 PM
ok, I take it back. I am always blinded by any argument that try and justify prop 13 in some cases.
Posted by: lol at October 17, 2013 3:45 PM
So then just for the record, Futurist, when you stated "I'll go along with that provided we remove ALL rent control in San Francisco.", does this mean you're in favor of repealing Prop 13 in addition to removing RC?
Posted by: Fishchum at October 17, 2013 3:47 PM
OMG. Fishchum you're joking?
Posted by: Futurist at October 17, 2013 3:52 PM
Nope. Not joking. Which is it? I don't see how anyone can possibly support Prop 13 and still be in favor of repealing rent control.
Posted by: Fishchum at October 17, 2013 4:07 PM
Seriously, I'm not going to dignify your question by any comments.
Read what I said and take what you will.
Again, the key operative word is READ.
Posted by: Futurist at October 17, 2013 5:18 PM
I read what you wrote. You seem fine with grandma keeping her Prop 13 property ("Prop 13 works. Deal with it"), but you're in favor of repealing rent control for the grandma renter ("we remove ALL rent control in San Francisco").
Seems to me there's some incongruity there.
Posted by: Fishchum at October 17, 2013 9:46 PM
The Boomers have passed all kinds of laws favoring themselves over everyone else. They really believe that they have the right to taxpayer financed gold-plated medical care in retirement, next to zero property taxes, massive government debts that they can pass on to the next generation and the right to destroy the environment for their comfort and convenience.
The great thing about living in a Democracy is that we can change the laws. Gen X is pretty small, but Gen Y is not and the Millennials even larger. Plus California is turning into a renter-majority state. Give it 10 maybe 20 years, and Prop 13 will be repealed. It should be overturned in pieces, probably the most onerous part about being able to pass along your property tax basis to your heirs first. It is precisely this kind of law that led to the French Revolution.
Posted by: NoeValleyJim at October 17, 2013 11:37 PM
Well the millennials and Gen Y get to benefit from Prop 13 when they inherit the house and get to keep parents/grandparents tax basis. Prop 13 is not going anywhere.
Posted by: Rillion at October 18, 2013 7:13 AM
Well, boomers in general have not proven very wise with their assets so far. Fimancing the suv with an heloc was not such a good idea in 2005...
Posted by: lol at October 18, 2013 8:14 AM
@NoeValleyJim: totally agreed with your assessment above. But don't forget that boomers will soon become retirees en masse, and retirees have always been one of the largest and strongest/most united voting blocks. So I don't expect many changes given their numbers.
Meanwhile, many millenials are too preoccupied staring into some device to even read a voter information pamphlet. Most of the people I know under 30 aren't even registered to vote in SF...go ask someone in their 20s if they even know what prop 13 is.
Posted by: Legacy Dude at October 18, 2013 9:00 AM
Wow, as I am waiting to die as are all of us selfish boomers, watching you guys turn yourselves into pretzels is entertaining. Sorry we all asked to be born and then just planned ahead with the existing regulations, we now get to be hated.
wow. Enjoy your dying city
Posted by: contrarian at October 18, 2013 9:33 AM
"Well the millennials and Gen Y get to benefit from Prop 13 when they inherit the house and get to keep parents/grandparents tax basis. Prop 13 is not going anywhere. "
Most of the windfall benefit of Prop 13 was due to some years of very high inflation.
With inflation being held well around 2% and prop 13's 2% allowed increase I doubt most new Gen Y/millennials will see much benefit in prop 13.
Some will inherit a low tax base, but California attracts a large number of people from out of state and if you look at some data on boomer retirement you'll see that they are very light on pensions or liquid assets. Many many of these houses are going to be sold or reverse mortgaged not passed down to kids or grandkids. I don't think there will be enough people with inherited low tax bases to matter much.
NoeValleyJim is right in 10-20 years prop 13 will fade away.
Posted by: anon2 at October 18, 2013 11:34 AM
In looking at this property, it actually seems to be two lots, so the current taxes are closer to $14,000.
Posted by: twolots at October 18, 2013 2:07 PM
The idea of SF's kind-of-rich creating a barricade of Google buses and hipster food trucks blocking Market in front of Twitter headquarters to protest the inequality caused by the slightly more rich has the making of a great musical. iMiserables. During the climax, the super-rich tech titans hit the collective off button on the protestors' smart phones causing them to wander aimlessly till they fall in the bay and drown.
Posted by: Denis at October 18, 2013 3:30 PM
Well the millennials and Gen Y get to benefit from Prop 13 when they inherit the house and get to keep parents/grandparents tax basis
That is a serious "let them eat cake" kind of comment. What percentage of people even inherit a house from their parents? It has got to be in the low single digits.
Posted by: NoeValleyJim at October 18, 2013 11:25 PM
You can believe whatever you want, but the reality is that the pool of people that people that believe they would benefit from a repeal of Prop 13 is small and will remain small, while the people that benefit from Prop 13 have a financial interest in preventing its repeal.
Who is going to pay for the repeal Prop 13 campaign? People that think they may soon want to buy a house and that if they repeal Prop 13 that property tax rate will actually go down on new homes? Yeah, you are going to be able to raise millions need from this group. So realistically the people going to be pushing a Prop 13 repeal are people that are doing so to RAISE tax revenue which means you are unlikely to see a reduction in the property tax rate to offset an increase in the assessed value.
Meanwhile on the other side, opposed to a Prop 13 repeal will be most people that have owned a property for any length of time and renters since part of the anti-repeal campaign will be to tell renters that they property tax increase is going to be passed on to them.
Prop 13 is not going to just fade away. It requires a vote of the people to make any changes which means you are going to have to sides buying ads. I just do not see where the money to support repeal is going to come from for a campaign that will be effective in repealing Prop 13.
There are currently too many vested interests with a lot of money to defend Prop 13 for it be repealed. Any successful campaign would first have to start by pealing away some of Prop 13 a little at a time. First you got to get commercial property taken out. Even that is an uphill battle where no progress has yet been made.
Good policy/bad policy, it doesn't matter, we are stuck with it and dreaming about how millinials are going to somehow get rid of it is just that, dreaming.
Posted by: Rillion at October 21, 2013 12:26 PM
Prop 13 is here to stay because there's no money for TV ads?
Wow, people make up such bizarre arguments.
This is just silly. There's so much money involved in CA real estate that if a majority of voters ever feel that they'd benefit from removing prop 13 there will be plenty of money to go around for a campaign.
The bulk of the prop 13 benefit sits with people who bought before the bout of high inflation. Their numbers are shrinking. Someone like Futurist's Noe negibor's with a $40k-$50k tax bill (A bill that can rise around the inflation rate as long as inflation is held in check) isn't going to see much benefit to passing that on to future generations.
Posted by: anon2 at October 21, 2013 1:00 PM
^ well, you could have made the same argument in 2008, saying that 2008 NV buyers would not much benefit with prop 13. And yet someone who purchased in NV in 2008 is now probably benefiting from prop 13.
RE has been expensive, even outrageously expensive, in the past. We all have stories in our families of relatives who were struggling with their brand new mortgages.
20-30-40 years later, what is their property value? How much is their tax bill with prop 13?
Heck, as a strong detractor of prop 13, I benefit from it, 3 years after my own purchase. The pool of prop 13 supporters naturally inflates with every price increase.
Posted by: lol at October 21, 2013 1:12 PM
There's always somebody that benefits (and suffers) from any law.
But overall, sales volumes were very low during the slump and not many areas recovered afterwards like NV.
So I don't think the "people who bought in NV in '08" contingent is going to alter the course for the state.
Posted by: anon2 at October 21, 2013 1:25 PM
I'd happily trade lower income taxes for people such as myself for higher property taxes for others. That's a value proposition I could really support.
Posted by: Jimmy (No Longer Bitter) at October 21, 2013 1:29 PM
"I'd happily trade lower income taxes for people such as myself for higher property taxes for others. That's a value proposition I could really support."
You joke, but that is the real problem here.
Philosophical debate is great and all that, but people who frame these sorts of things as a Keynes vs von Mises debate are overlooking the reality of a lot of naked self interest by participants.
I see a lot of people trying to score a victory for their own pocketbook rather than trying to win one for 'ole Ludwig.
Posted by: anon2 at October 21, 2013 1:39 PM
Anon2 - I'm sorry but although it sucks, the CA inititive system means that in order to change something it takes either the government or the people (with $$$) to put something up to a vote, once it is up for a vote, money talks. Also that is not an argument in favor of Prop 13, it's the reality of the situation. The Courts have ruled on Prop 13, the government can't amend or repeal it, the only way it can be changed is through the initiative system. And that takes a lot of money.
You have yet to identify the people that will have a financial interest in repealing Prop 13. I have at least noted that those that want more tax revenue from real estate would have an interest and those are the groups that have tried to chip away at it in the past (and failed because it is very hard to get people to vote to increase taxes on themselves).
Posted by: Rillion at October 22, 2013 9:25 AM
"You have yet to identify the people that will have a financial interest in repealing Prop 13. "
People who are paying artificially high property taxes which will rise with inflation to subsidies a dwindling number of people who bought long ago.
Posted by: anon2 at October 22, 2013 1:19 PM