August 27, 2007
Don't Let Them Increase Your Property Tax Payments
We know we're treading in slightly dangerous territory here -- while we're fairly sure a good chunk of our readership are homeowners (condo, single-family, multifamily, whatever), we know an even larger chunk are not, and could care less about the burdens of homeownership, predatory mortgage-ship, and property tax increase-ship.
But for those of you that this applies to (or those of you thinking about owning property in the future), consider this a bit of a PSA.
Property owners should have all received their reassessment statements by now. Prop 13 will only let the city increase its valuation of your property for tax purposes by 2% -- but should you let them take even that much in a down market (understatement? perhaps; we'll leave that to the experts)?
Point is, you might want to think about contesting your reevaluation. What not everyone knows is that you have until Sept. 19th to contest it -- go to the city assessment appeals board's site for explicit details. We're afraid that forms are indeed involved. But should the government make more money if your place isn't actually appreciating? Yeah. Thought not.
Picture from CBS 5.
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I think you mean non-homeowners could "not" care less, not that they could care less, which would mean they do have a level of concern, but that level could be lower than it is.
I care, because property taxes pay for basic services including schools, police and fire, and more. Prop 13 was the nail in this state's coffin...and I know...because I was in public school when it passed. Kids in school are cheated out of an education and basic services because a bunch of greedy folks decided it was more important to pay less in tax than educate children, have safe neighborhoods, and pave streets. We are paying now for that greed.
So...before you (sfist) take a strident stand about property tax....think a bit....
#1 -- Ah, ya got me.
#2, good points, but this is not a strident stand against property taxes by any means. Sorry that you took it that way.
Let me put it this way: folks that have bought places in the past few years are probably paying more than they should in property taxes, as those properties have probably diminished in value. Now, your point is especially well taken for, say, a place bought in the 90s or earlier, the value of which probably FAR exceeds what that homeowner's paying taxes on. Those are the people that Prop. 13 allows to truly screw the system.
So I suppose you should appeal your assessment according to your own conscience.
are we sure that home prices didn't rise by at least 2% since last year?
That would seem to be the case according to the real estate blogs I read.
Thanks for the heads up, Jeremy.
Dear anonymous poster number 2:
The average property tax bill in SF is just under $10K per year. Please step forward if you would gladly like to pay an addition $10K on top of your State and Fed. If you don't want to do this, shut the f**k up. The greedy peeps are the renters who don't pay this yet still benefit from the services it pays for.
Before you start twatting on about something you obviosly don't pay...think a bit...
are we sure that home prices didn't rise by at least 2% since last year?
I think it's a case-by-case basis thing. Plus I don't trust blogs.
commercial interest should not benefit from prop 13, but regular folks like the rest of us here should. the only time anyone should be assessing the value of your house for taxation purposes is when it sells, not annually.
just common sense.
before you left wing nut jobs jump on me, i'd like to see any of you pay anything close to my 23k a year in property tax and not complain about it.
i am not. i'd feel a lot better about it if i could get one extra vote per 1k i pay for our municipal elections so i could drown out all you wind bags that have no idea what's important around here.
>are we sure that home prices didn't rise by at >least 2% since last year?
Home prices have not risen in the last year. The *median* price has gone up. That is because lower priced houses were selling in large bunches because of reduced standards in lending. Now they
have stopped selling because of tightening in the subprime lending standards. Higher end houses have still been selling because people in that end of the market are more likely to have larger amounts for down payments, credit history, income, etc...
So while a single house would probably sell for less than it would a year ago - the median home sales price has gone up simply because less lower priced houses have sold.
The evidence pointing to this - median price has gone up - but total number of sales has gone down.
Alright, I'm going to address the elephant in the room here. Has anyone ever had a property tax assessment that values their home anywhere near market price? Aren't they usually way off the mark anyway?
Non-homeowners can stil find plenty of reason to worry: Higher property taxes = higher monthly rent.
fizzandpop - Yes. And boy does it hurt.
mattymatt, I was just trying to figure out a way to present that exact sentiment (higher property taxes = higher rent) but I couldn't quite get the economics right in my head. Isn't the price of a rental determined more by supply and demand than the rental owner's actual cost? So that a dollar increase in property taxes doesn't necessarily result in a dollar increase in annual rent? And that a unit held off the market by rent control does more to increase monthly rental rates? Alright, I have a headache now.
And renters should enjoy fewer or different rights, or have less to say about where tax revenues are directed, than property owners in SF, correct?
It's values like those that created the current conflict. And it's not much different from whining about the cost of parking when you own a car.
Of course, if we could only set our short sighted biases aside, we'd come around to seeing that property owners should rightly enjoy the right to unlimited profits... that's what made this country great, ain't it?
Uh, so property taxes should never go up when the market is up, but they should go down when the market is down? That makes ... no sense.
Yes, please, contest your property assessment but be prepared to pay for owning a home.
That's the deal, if you buy it, you need to be able to support it. Don't buy an expensive car if you can't afford the expensive maintenance, etc.
Also, make a note, that the renters should be paying enough to cover the mortgage on the building, yet the owners get the tax break on interest payments, etc.
Suckafree: Based on a tax rate of 1.135%, your 23k in taxes means your house has been assessed at over $2 million, I'm not sure why you expect sympathy from all us peons who can't tell "what is important around here" since we're too busy busting our humps to afford rent and will never be able to buy a house in SF.
i think it's hilarious how people did not mind huge increases annually in their property values for years. Now it's only going up about half as much, and somehow people are "losing value."
Bogus. if you own in SF, you're not going to be a victim of the crashing values affecting Middle Loserville, America. You will always sell your house at a price ABOVE WHAT YOU PAID.
What's really funny is that despite all these skyrocketing values, local governments are not allowed to reap any benefit , limited to 2% a year. So now we have to depend on the state of California for money, which as we all know has done wonders for local control of services.
Renters always pay higher taxes when the rents go up due to property taxes. Wealthy people who own 2 million dollar houses don't deserve any more say than anyone else. It's called democracy and one PERSON one VOTE. If you don't like it, move to the third world and buy a gated home. Otherwise try persuading the rest of us with something besides "F*ck all you renters and people who don't subscribe to my views 100% and are not in lock step with me and think like me, because it's about me me me."
jwb -- Let's get the semantics out of the way.
The rate of taxation is not what we're talking about, we're speaking merely of the current valuation of a property.
SO: The question at hand is: when the value of my property decreases, should I have to pay taxes on that value (or at least the same value as last year) for tax purposes -- rather than an automatic 2% increase assumption?
Yes, property taxes should go up when the market is up (or, more specifically, the property in question goes up in value). Silly me for believing the opposite holds true as well.
yes slappy, i presume you don't know what's good for you as you don't own a 2mm property, sorry. i presume that i do, and here's what it is. i want you to be able to live somewhere where you won't get shot at or robbed daily. where you can walk your dog, raise your kid and not have to teach them to avoid the discarded needles on the street or in their sandbox at the park. i want you to be able to send your kid to the public school down the street that they can safely walk to without getting molested or run over by a bike messenger or a car or muni. i want your kid to be able to apply to and get into any school they want, granted they applied themselves well in school and studied hard vs playing nintendo all day.
is that wrong?
do you agree that should be our priorities?
or are you one of the renters on this board that thinks the current state of the haight and golden gate park is charming?
So typical of greedy landlords to limit their property taxes with Prop 13 but begrudge renters the protections of rent control.
When it comes to wealthy property owners no amount of government welfare is too much when it goes to them, but when people are evicted in mass numbers then government intervention through constitutional laws and rent control is an abomination perpetrated by free loaders.
If you bought property in California anytime within the last 10 years you're gonna find out how dumb a person can be speculating in over priced assets, brought to you in part through your favorite government welfare program for the rich, prop 13.
Dear anonymous guest #20: Did you huff too much glue sticking the CRASS patches to your jacket?
Well, the former doesn't hold true in California. Property values go up and up and up some more, but taxes don't track. So why should they track on the downside?
The economic end of this discussion is way over my head; but I can offer this anecdote:
I'm good friends with my landlord. And when we talk about the house, it's clear that when his costs go up, he only has one way to recoup them: raising the rent. He doesn't WANT to raise rent -- keeping the price low and competitive is better for attracting good tenants -- but he has to pay the mortgage somehow.
Slappydafrog sez... " the renters should be paying enough to cover the mortgage on the building, yet the owners get the tax break on interest payments, etc."
This is absolutely untrue. If one were to purchase a house in San Francisco right now, and rent it out, you would be lucky to cover 50% of the mortgage/taxes/insurance. There is still value to owning something and renting it out, certainly, due to tax benefits and appreciation, but owning a rental in SF is far from a cash cow.
guest says "Renters always pay higher taxes when the rents go up due to property taxes."
Again untrue. Rent is set by supply and demand - period.
guest also says "if you own in SF, you're not going to be a victim of the crashing values affecting Middle Loserville, America. You will always sell your house at a price ABOVE WHAT YOU PAID."
Absolutely untrue. If I could be promised this, I would be buying as many homes in SF as possible, on margin, and I would be a billionaire many times over. And there would be no subprime mortgage crisis now because lenders would be happily lending more money to people without any resources or even a job, because the loan would be collateralized by property that can only magically appreciate.
Note - I am a renter in SF. I used to own in SF. I decided to sell because frankly, renting was a better deal than owning around here, I took my money and put it elsewhere.
The vilification of people who own homes astounds me.
I also think Prop 13 is very very bad for California. But it's an amusing conundrum. Many posters on this board would go nuts if some 87 year old renter had their rent raised beyond what they could afford on their fixed income. But if an 87 year old property owner had their property taxes raised beyond that they could afford on their fixed income - screw them!
That was the theoretical point of Prop 13, I would argue that the state needs the ability to raise taxes locally for schools and the like, and if you want to be a homeowner you should plan accordingly knowing that you will continue to pay increased property taxes over your lifetime - this may include the need for a reverse mortgage late in life.
Murph
First: renters DO pay property taxes(unless my landlord, who doesn't have a job other than sitting around and owning rental properties his daddy gave him has some other source of income than MY RENT MONEY. We renters pay the tax...we just don't receive the benefits of owning property.
Second: Anyone dumb enough and rich enough to buy a 600K one bedroom condo in SF during the absurd bubble deserves what they get. Think of this as a Darwinian correction...The world becomes a very dangerous place when too many people who are rich are also dumb. This "correction" is a way of bringing morons a bit closer to an economic notch that better reflects their intellectual properties.
It is just brainless to think that your property taxes can be frozen when property values go up, but when property values go down you get a nice tax break.
JWB sez: Well, the former doesn't hold true in California. Property values go up and up and up some more, but taxes don't track. So why should they track on the downside?
So, let me get this straight -- you think people that didn't buy before the boom should be punished? Because that's exactly that you are saying: "screw you for trying to own property in an inflated market."
Prop 13 is the very reason they don't track on the upside; I can understand if folks have a problem with that. What I can't comprehend is the shortsightedness of someone believing that a property owner should pay the city taxes that are based on more than the market says a property is worth.
The system isn't going to let anyone reassess the value of their property without a change of ownership -- the system merely allows you to contest the AUTOMATIC 2% raise. And that's what folks should do if they honestly believe their property is not appreciating.
Nobody's "tracking down," best case scenario in a tax sense is treading water.
Boo fucking hoo. As a property owner, you're already at a good advantage over a renter in terms of taxation. You can claim mortgage interest as a deduction on your federal income taxes at least. With that in mind, where would your money go if you weren't paying it in property taxes? Hmm... federal income taxes maybe? If you don't believe me, have a real CPA look over your taxes (no, not one of the droids at H&R Block or the like).
Fact is, nobody really likes paying taxes, but they're more or less a necessary evil. The whole myth that there's so much waste, abuse, and fraud in the government that we can just shift things around and poof have all sorts of money for new projects is just that... a myth. That myth has landed us in the mess we're in today with the state budget. There's so little discretion, everything suffers, and everyone's stuck arguing for months over trivial details.
Do I feel much sympathy for Bay Area home owners? Nope. Has your salary adjusted downward? Doubt it. Has inflation magically stopped? Ha. Take a look at Warren Buffet. Buffet made the point that he paid more in property taxes on his Nebraska house than he did on the comparatively posh Laguna Beach house.
Want a thoughtful analysis on Prop. 13? Read Peter Schrag's Paradise Lost.
guest #25 - I find it amusing you are calling other people dumb.
Again - renters do not pay property tax. They pay RENT. RENT is determined by the market - not by the cost of the asset. There are certainly renters in this city whose rent does not cover property taxes, insurance, and maintainance on the home - not making a dent in the mortgage.
Second - the people buying the 600k one bedroom condo during the bubble might certainly be dumb - but probably not rich. Note that many of them are now facing foreclosure. If they were rich - why can't they make the payments? If they were rich - why didn't they actually put more than 0% down when they bought the condo? Because they are *not* rich - by most any standard. And those morons will end up on the same economic notch as they will just declare bankruptcy. The rest of us will foot the bill one way or the other.
Murph
Murph: maybe if they're facing foreclosure, they just can't afford to buy a house in the Bay Area. Given the popularity of these asinine sub-prime mortgages being hawked a few years ago (interest only, stupidly short terms, etc, etc) it's hard to believe even a few thousand dollars a year would make the difference between sustenance and foreclosure.
Prop. 13 is bad for California, period. However, this does not mean that limits on property taxes as a whole are bad. Take a look at how other states handle the issue.
Properly differentiating between commercial and residential real estate would be a first step (for some). This would allow the same (overly restrictive, IMO) limits on property tax increases to remain on residential property so granny wouldn't loose her home.... and at the same time this would allow us to properly tax commercial property (instead of allowing commercial properties to remain with the 'same' owner for some asinine period of time).
Another thought would be to allow for exemptions and/or deferrals based on your level of income. Right now, in California, your only excuses are pretty much age or disability.
Yet another thought would be to abolish the 2/3rds requirement in favour of a simple majority.
There are lots of things that *can* be done, but until Californians get over the whole "ZOMG taxes are evil, tax everyone else, I shouldn't have to pay for anything" mentality nothing will be done. Look at Ahnold. As expected, he got accused of trying to drive granny out of her home when he proposed Prop. 13 reform. Look at the Democratic candidates for governator in the last 'election'. ZOMG we would *never* touch Prop. 13, anyone who would is simply trying to tax the retired folk.
California has one of the lowest property tax rates in the country - the only states that have lower rates are Hawaii, Louisiana, Alabama, and West Virginia. Hawaii makes its money off tourists, those other states aren't exactly known for the quality of their public services.
For example, as a consequence of our unwillingness to pay fair property taxes (aka Prop 13), California's public school system has plummeted from amongst the top 5 in the nation to the bottom 5.
You get what you pay for.
Here's some information (although given the quality of this conversation, I suspect very few will bother to read it)
http://www.boe.ca.gov/proptaxes/pdf/pub29.pdf
http://www.caltax.org/research/prop13/prop13.htm
http://www.nahb.org/fileUpload_details.aspx?contentTypeID=3&contentID=76984&subContentID=105281
Yes, property taxes should go up when the market is up (or, more specifically, the property in question goes up in value). Silly me for believing the opposite holds true as well.
Jeremy, the taxed value doesn't go up (at least not to the degree that the actual value goes up). That was the whole intent behind Prop. 13. Property prices shot up in the 70s, and people said "ZOMG I can't pay those taxes".
Why should the taxed value of the house track the actual value any closer on the downward slope? If you wanna knock off at most 2% of the taxed value, you've got my support.
Murph: In this market, any one who buys a property to make it in to rental would be an idiot. If a rental property can't pay for itself than it is a bad investment.
Suckafree: The logic of your "argument" escapes me, somehow my being in favor of people paying their fair share in taxes equates to my enjoying how scummy parts of the Haight are?
Services cost money. The money government spends comes from taxes. If you want services, you need to pay for them. Pretty simple concept. If your assessment went down, your taxes should go down, if your assessment went up, your taxes should go up. Seems like a pretty simple concept to me.
Prop 13 will be seriously amended or changed when ... how about never? Is never a good time?
Seriously, there is really no point in arguing about how to fix Prop 13, because the state's voters have repeatedly and overwhelmingly rejected such changes. It's horrible public policy, but we have to live with it. That means if you're a buyer since about 2003, you really should check your assessment, because not only are you paying 4-5x what your neighbor is paying, you may also possibly be paying too much on your assessed value.
Wow, #32, with an attitude like that it's no wonder people don't listen to you. Try a little less "snooty" next time. Even so, good links and thanks.
I'm glad the scope of the argument has increased here in comments. I'm also glad it appears the vitriol is largely directed at those whose properties are massively undervalued for tax purposes due to Prop 13. I still say that's no reason to punish those who are paying a fair property tax, one that reflects the true value of their property. (i.e., those I directed the above post at.)
#33 -- That's pretty much my opinion; thanks for your support. In fact knocking off 2% would be generous; I'm just looking to countermand the automatic increase when one isn't merited.
AJ -- thanks for breaking it down so succinctly.
"...Prop 13 is the very reason they don't track on the upside; I can understand if folks have a problem with that. What I can't comprehend is the shortsightedness of someone believing that a property owner should pay the city taxes that are based on more than the market says a property is worth..."
The same logic you use that property taxes should not go up when property values go up is the logic I use that property taxes should not go down when property taxes go down.
By the way, who was evicted to empty the property you purchased???
sorry slappy. i thought you were going to attack me for being a dumb property owner and asking for some accountability in what they spend my money on every year. ie. anything other than the homeless and needle exchanges.
Uh, look people. 2% tax increase is not even tracking inflation. If you bought a condo at the top of the market with an exotic loan, I frankly do not have any sympathy for you. You participated in an asset inflation bubble that has made it so only the top 3% of San Francisco earners can afford to buy. If property taxes did not take advantage of that asset inflation, then those revenues would simply have to come out of some other place, like wages, or sales taxes. Is that what you want?
Face the fact that the only reason your property is valuable is because it is in this city, and pony up for your share of the road paving and policing.