Comment by mbillie1 | Hacker News Reader

Comment by mbillie1 | Hacker News Reader

While I'm sympathetic to the situation folks find themselves in with skyrocketing housing prices due to an influx of tech workers, sentiments like “Nobody wants change,” and "[residents who] want to halt the city’s growth" are unrealistic.

The same thing happened in places like Rockland County, NY - once a small, rural community of primarily Norwegian immigrants, it has seen skyrocketing property taxes, cost of living and population due to the increased population / desirability of NYC over the past say 60 years, as well as the Tappan Zee Bridge making it a viable home for Manhattan-working commuters. The residents (at least some of the old time residents, whose number includes several of my family members) are understandably upset, but you simply don't get to control your community size in this fashion. If you want to live in a small, rural community and find your lifelong hometown increasingly developed, the unfortunate reality is that you are not the only human being who wants her peace and quiet, and you may have to move.

What makes it totally impossible for me to sympathize with these folks, as opposed to the ones being pushed out by rising rents in SF, is that as homeowners rising property values make it easier for them to move elsewhere. If you bought a house in a sleepy suburb in the 1980's, well now it's worth $1 million+. You can get a wonderful property almost anywhere in the country for half that and pocket the rest. Or you can stay and enjoy your new-found wealth.

> Or you can stay and enjoy your new-found wealth

I am equally unsympathetic, but is that statement true? A teacher buys a house in 1982 for $125,000. That house is now worth $800,000, but while her salary has increased according to cost of living (ideally), it has definitely not accounted for the massive increase in property tax that her new values command.

There's a difference of around $500 a month, just in property taxes between her home in 1982 and 2015, and that doesn't even account for the increase in cost of goods and services as the rest of the economy thrives around her.

I've never paid property taxes in California, but my understanding is that Prop 13: 1) limits increased in assessed value to 2% per year (under the rate of inflation historically); and 2) prevents re-valuation of property except on ownership transfer or new construction.

Ahhh, that would change the situation dramatically. I'm used to dealing with property value assessments occurring every 5 or so years.

Just for reference, that situation doesn't apply to California because of [Prop. 13](http://en.wikipedia.org/wiki/California_Proposition_13_%2819...). It restricts the annual increases of property taxes to an inflation factor, not to exceed 2% per year.

Provided you can afford to pay the property taxes on the newly valuable house. Otherwise, the second option is off the table. I think that's important because we're not talking about the leisure class here, we're talking about people who work. That means they may not be able to move very far away (they must stay within commuting distance). This is especially true since many people are stuck in their current jobs for various reasons; changing jobs would result in a large pay cut.

I'm not saying they have a right to tell anyone else where to live or not live, but I do sympathize with them.

Prop 13 did quite a bit to prevent this from being an issue.

Yeah except now you can't move out of your current house. If you move across the street to a house worth as much as your current house you could end up paying 5x property taxes.

Huh... I didn't really think about it but I wonder if other states (NY was mentioned in the thread above) have a similar rule regarding reassessing the value only under change of ownership or new construction.

Florida amended the "Save our Homes" regulation into the state constitution in 1995. Property is reassessed every year, but growth is capped for the purposes of property taxes. The value can only increase for the lesser of 3% or the CPI. Furthermore, if the assessed value drops below the current taxed value, the capped value is reset to that lower value. Overall, it is a very owner-friendly regulation. The Department of Revenue has a table of all increases since inception. [0] Obviously, transfer of ownership resets the taxed value to the current assessment.

[0] http://dor.myflorida.com/dor/property/resources/limitations....

Yep, the unfortunate reality is that living in a gentrifying area does not guarantee someone a right to continue living there.

Property taxes are a controlling factor on house price inflation to an extent. As property values and taxes increase in an area, residents who can no longer afford that (often times lower-income or fixed-income residents) are forced out. While that sucks for them, this ultimately puts more homes on the market and increases the inventory. Increased inventory means a downward factor on house prices. Probably not enough to prevent them from increasing, but it may slow them nonetheless.

The Bay Area seems to be missing this critical market factor. I'm now seeing townhomes in MV list at 1 or 1.1 and go for 1.3. How depressing is that.

"Or you can stay and enjoy your new-found wealth."

In most places, if your $200,000 house now has a value of $1 million, you cannot stay since property taxes will increase. So, you can sell and leave, but staying is often not an option particularly for people on a fixed income.

Yes, people in California often forget others have real property tax :)

That said, the 5x increase in property taxes from 200k to 1 mill may really mean going from 2k a year to 10k a year.

That is probably not at the "can't stay" level for most people, not to mention it being tax-deductible

8k for someone on a fixed income is a must move. An example of this is the boom in western ND with rents going up $600 - $800 month which forced an issue with a lot of elderly people on fixed incomes.

Tax-duductible doesn't cover it for fixed income folks.

Sure, but fixed income is a set of much larger problems anyway

If you're in fixed income and you now have million dollar home, property taxes are going to put you under?

This is quite the ivory tower view (one I must admit that I'm privileged to share with most other tech workers). The median income of a California resident is about $29k. In a dual income household property taxes rising to 10k a year would be a pretty big deal. Particularly for those living paycheck to paycheck.

They weren't in a $200,000 house. They aren't in a million dollar house. That doesn't mean that a similar 5x increase in their property taxes would be affordable, but the 10k doesn't apply.

> The median income of a California resident is about $29k.

The median income California resident (even a dual-income household of such residents) is unlikely to have had a $200,000 home in the 1980s, or, if they managed it, to have its property value increase to $1 million in the intervening 30 years while remaining a median income California resident.

Heck, by a common guideline (reasonable house price = 2.5 times annual household income), a dual-median-income family at the current median level can't afford a $200,000 house today.

So you believe a person living on 29k a year is in a 200k house? Interesting ...

In California we have this absurd voter-approved law we call Proposition 13, which caps property rates. It effectively eliminates the only "wealth tax" we have, leaving our schools perineally underfunded and removing incentives to upzoning from both city governments and home-owners! It's a real piece of work.

So, the rate is capped, but what does that mean if the value of the property goes up? Let's say the tax assessment went from $200,000 to $1 million, how much would the yearly payment go up?

// it is a bit off-putting to down vote everyone not up on CA law.

The amount the tax assessment can increase is capped by prop 13 (IIRC at 2% per year).

The tax basis value can only increase 2% per year, except when certain qualifying events (transfers of ownership, mostly, but IIRC some improvements qualify, at least as to the value added by the improvement, as well.)

So, given the prop 13 maximum tax rate of 1% and maximum increase in tax basis value of 2% per annum, a property that was fully taxed at a basis value of $200,000 in 1985($2,000 annual tax) that increases in value to $1 million -- or even $10 million -- in 2015 would have a tax basis value of $362,272 and a total annual property tax bill of about $3,623.

So you think that home owners who don't work in high growth industries should be forced out of their homes.

Prop 13 causes all sorts of issues. Many people want to move (kids moved out, changed jobs, etc.) but they can't because they would not be able to afford the huge jump in property taxes.

It's just another thing that creates artificial scarcity.

Note this also affects commercial real estate!

http://en.wikipedia.org/wiki/California_Proposition_13_(1978...

The people who want to move but can't afford to are the exact same people who would be forced to move without prop 13. At least with prop 13, people are not forced out of the homes they have purchased.

The problem is not with Prop 13. It's with property taxes at all. I'm not fundamentally against a wealth tax of some kind, or against cities raising income, but if you base this on assessed values of real-estate, a highly illiquid asset for most people, you are guaranteed to generate these problems, not to mention undermining the very notion of property.

The problem is not prop 13. It is that something else should be taxed instead of property.

Seriously people why the downvotes for these guys not being up on California law? Also, this particular post specifically calls out "In most places". In most places this IS in fact true. Feel free to reply and let him know that California has a special law in place that makes this possible, but nothing he said is worthy of a downvote.

> In most places this IS in fact true.

In many places property tax can increase after you purchase a property without California-style Constitutionally-imposed limits; there's very little evidence that this actually makes it reasonably likely for anyone to actually be priced out of property due to value increases in other-than-highly-unusual circumstances.

> In most places, if your $200,000 house now has a value of $1 million, you cannot stay since property taxes will increase.

Property taxes in the US typically vary between 0.5% and 1% of market value; even in the absence of Prop 13 style limits on increases, that means an increase of property tax of between $4,000 ($1,000 to $5,000) and $8,000 ($2,000 to $10,000) per annum, and, regardless of rate, represents about a 5.5% annual increase in value (and, thus, tax costs for ad valorem taxes.)

With the posited increase having increased over ~30 years (GP's scenario had a house purchased in the 1980s), that's only about double the rate of inflation, so even with no increase in real income over the time, you'd have to have been fairly tight initially to be priced out of the home by tax increases.

Apparently none of the people responding to this with property tax arguments know about Proposition 13 ...

Not to mention a home equity line of credit could almost indefinably pay for property taxes. Reality is its only renters who are negatively impacted.

As one of the idiots who responded with a property tax argument, I did not. Then again, I don't live in California, so I'll just eat the downvotes as the cost of a lesson learned.

Don't ask questions that other people know the answer to.

I've always thought the same as well. I sure wish my parents had experienced the woe of having their home value go up 5x over my childhood, but alas it merely maintained its value for the most part (we grew up far from any major cities).

It's the life-long renters who will be mainly impacted by this negatively. I do have sympathy for them. Many of them rented not because they were opposed to buying, but because they couldn't afford to buy even in the 80s. Granted, you might argue that if you can't buy a home then that's a sign you shouldn't stay in the area long-term, precisely because of this risk. But try telling that to all the new college graduates rushing off to Silicon Valley with incomes that are less than a 10th of home values around them. They'll possibly be subject to the same fate.

This is one of my fears for when I graduate next year.

> It's the life-long renters who will be mainly impacted by this negatively.

Not to mention the people who would normally have bought within the next few years who've just become life-long renters because housing prices have shot up out of reach.

I live in Vancouver, and hey, I even work in tech, but the housing princes here are out of reach. If I'd made ten years ago what I made now I'd own my own home, but now it just seems like an unreasonable course of action.

> ... you can stay and enjoy your newfound wealth

I'm not sure how true this is. If you're on a fixed income, for example, an increase in the value of your property doesn't do you much good unless you sell it. You could take out a mortgage... but then it's just a matter of time before you have to sell. Meanwhile the overall cost of living in your area is increasing due to the influx of wealthy residents.

EDIT: I think that if I were retired and found myself living in a neighbourhood which I could no longer afford, I would sell my house and buy a nice place in the countryside with the profits. But I can understand why some people might resist moving.

> you simply don't get to control your community size in this fashion

You actually do. If enough residents don't want this to happen (and if the politicians are responsive to their citizens' interests), you deny construction permits. Just look at the various municipalities that have blocked 'big box' retail stores in their boundaries (or in specific areas).

The biggest problems are unforeseen circumstances. No one blocked Walmart when they were up-and-coming, but the objections started rolling in once they saw what effect big-box stores in general, and Walmart in particular, have on the local economy, traffic patterns, etc.

The same is true of tech companies. We'll start to see some towns, counties, municipalities, whatever turning down these companies because it's bad for the community they have already. Not all areas will do so, and not all the tech influx will be harmful for everyone, but it'll still happen in some places and in a lot of cases that might be the best decision.

"You" as an individual don't get to control your community size, but "you" as a community do (zoning and ordinances). It's simply a majority decision.

The big difference is that Mountain View is increasingly a one-company town. It's not just fear of change, but fear of that specific change.

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