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Comment by jerlam | Hacker News Reader

It's a much bigger group than homeowners. Banks don't want housing prices to fall, since then homeowners start foreclosing and then banks lose interest payments and own undesired property. Cities don't want housing prices to fall, since they were counting on money from developers and property taxes.

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I don’t agree with this take, we’re overly simplifying the nature of housing here. It depends on the housing mix as well. If the vast majority of the pro-housing prices crowd is heavily invested in single family residential then they should favour widespread upzoning and deregulation of apartments because that would increase the value of their SFHs through two mechanisms: 1) presumably single family homes will be destroyed so any remaining single family homes become more valuable and 2) every single family home is now a potential townhouse or high density building which increases the value a developer would pay for it.

Are there any serious objections to that line of reasoning?

No, what you said is mostly correct; but I'm mostly talking about not having home prices go down, which is different but related.

There are different kinds of homeowners. There are those who are flipping houses and directly betting that the values go up, which is the crowd that you're describing. But at least in my area of the world, the majority of the anti-housing crowd is just old and is more anti-change than anything else. Even if the value of their home skyrockets even more, they won't sell and move. Their complaints are more about noise, traffic, and "quality of life" than home values.

But assuming that the upzoning and deregulation doesn't happen, isn't their calculation correct?

I think the value of their main residence is a bigger driver than opportunities through zoning changes. It's easier to sit in your house year after year as it increases in value than it is to go through a redevelopment process, and have to move or end up with a less impressive residence. I'd guess that many would look for opportunities in denser suburbs elsewhere than agitate to change zoning closer to home.

There are strong factors around character of a neighbourhood: I think people in valuable SFHs tend to resent people in units as one example. Housing prices have typically risen without the assistance of zoning changes.

Property taxes are relatively independent from the absolute value of the property. Only the relative value of a property to other properties in municipality determines property taxes.

I live in California where property tax is fixed at 1% due to Prop 13, so I don't really know how it works anywhere else.

Ok, I guess that is specific to California. Where I live it doesn’t work that way.

In Nevada, it's a percentage (approximately 0.5%, varying from city to city and with other conditions, like commercial usage) of its assessed value, which is 35% of taxable value. Taxable value is the market value of the bare land plus the replacement cost for all improvements on the land, less depreciation.

Ok, but if real estate prices half the city can just double the tax from 0.5% to 1%? Correct?

Yes, but every elected official will lose their job at that millage rate increase and you'll have riots.

Why? If the real estate prices half and the municipality doubles the tax rate, everyone pays the same amount of tax in dollars per year?

Because people don't enjoy paying taxes if they perceived they should go down.

The cost of running a city is largely independent of house prices, so if the real estate market crashes there is no getting around that municipalities need to increase tax rates to meet their cashflow needs. People may not like that they feel they are getting ripped off, but the existing infrastructure has relatively fixed ongoing costs to maintain.

Oh absolutely, but that ignores the political cost of doubling tax rates.

Better to not get into that mess to begin with. Strongtowns is a great resource for cities looking to be prudent financially.

> Property taxes are relatively independent from the absolute value of the property.

In most places they are not. What would even compel you to write something like this?

Property values are regularly re-assessed according to recent sales and a % of the property value is then levied as tax.

Ok, where does the percentage come from? It is an arbitrary number set by the municipality to collect enough money from the property owners. Basically, if the city needs $100 million/year to operate it is just going to tweak the tax rate to hit that income number.

For example, in Vancouver the residential tax rate is around 0.15% and homes average around $2 million. Where I live which is a few hundred kilometres away the residential tax rate is around 0.5% and homes average around $600k. If you do the math, for both places the average place has $3000/year in taxes due — which is totally independent of house costs.

What does make the difference is if your house is more expensive than the average house. If you have a $2million dollar house in the place with 0.5% tax rate you are paying $10000/year in taxes despite your counterpart in Vancouver with a $2million dollar house is paying $3000/year.

I get this can be different across the world, but that is generally how it works in Canada.

That's a different question that I'm glad you were able to answer for yourself.

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