Ethics of Real Estate Investment, NIMYism and the Housing Crisis

Toyman! said:

In reply to docwyte :

So you are OK with forcing the elderly out of their homes when SS or retirement doesn't pay enough to pay their property tax? 

 

That's what happens in the current system.  Not saying its good or bad.  I dont think locking in taxes makes much sense as people will never leave, and the community will slowly lose tax revenue to inflation over the years.  Get a community where everyone is staying there for a long time and you are berkeleyed because your revenue will be crap in 30 years.

This thread has taken a real interesting turn the past few pages.

I fully support amending, adjusting, eliminating, or adding legislation that can assist with the housing shortage, fix zoning laws, etc.  (I'd love to see more places allow lower sq. ft homes).

A lot of this discussion of land is bananas to me.  It doesn't matter where anyone is located if they have land or if they are contributing to the community.  A vacant lot has the same impact whether owned by the guy next door or one 3000 miles away.  It has a certain value.  When someone offers the owner enough money, they will gladly sell.  I'm not convinced there is an evil scheme to buy up all the land and sit on it.

The amount of mental gymnastics in this thread is disturbing. 

In reply to docwyte :

No, I think property taxes should be banned completely. It would encourage the county to stop pissing money away on the politicians' pet projects. 

ProDarwin said:

A lot of this discussion of land is bananas to me.  It doesn't matter where anyone is located if they have land or if they are contributing to the community.  A vacant lot has the same impact whether owned by the guy next door or one 3000 miles away.  It has a certain value.  When someone offers the owner enough money, they will gladly sell.  I'm not convinced there is an evil scheme to buy up all the land and sit on it.

That assumes that the majority of buyers who want to live on that land have enough money to buy it. 

If they don't, the owner sits on it. Not because they are losing money on it, but because of the opposite, it's expected to increase in value because they have something that people want but can't afford. Why potentially lose money developing land when you can simply take a check and absolve yourself of risk? 

I think there are many in this thread who believe zoning laws and regulation are the only thing keeping America from building houses like we did in the 40's. 

Yeah I'm not getting it.  It sounds like you want land to be artificially cheap.  There is a market rate for land, just like everything else.  If you cant afford it, go buy a piece you can afford and build on that.

I don't entirely disagree on Toyman's view of property taxes.  I am a big fan of schools being well funded, but I am not a fan of this revenue coming from property taxes.  This means good schools where the land is valuable and E36 M3 schools where it isn't.  And arguably those with the most need for really good schools are those that live where land isn't as valuable (lower income households).

Property tax funded schools are one way of making sure the poor stay poor.

It's why I don't think we should fund services (aside from roads and infrastructure) from property taxes.

Schools

Fire Stations and EMS

Police

Should all be funded by via locally voted bond measures. Local governments should have the freedom of taxing residents however they see fit. If that means taxing the rich, so be it. When all the rich leave, the masses will tax the next highest in line, and so forth down the line until the community crumbles. After that happens a few times we'll figure out what's a good tax rate for everyone. 

Property Tax should fund infrastructure like roads, water, sewer, trash. 

I still contend that vacant land owes taxes because it benefits from all that infrastructure that supports local property values. Communities are desirable, are valuable, because of the residents and the investments those residents have paid into the community. Just because someone doesn't use it doesn't mean anything. Plenty of people with huge houses never use local schools, local roads, local EMS, but they ride the desirability of the community with an increase in their property values. 

Why should the vacant land owner pay those same taxes, because they too benefit from the rising property values?

They do pay those same taxes.  Proportional to the value.  

pheller said:

That assumes that the majority of buyers who want to live on that land have enough money to buy it. 

If they don't, the owner sits on it.

That is correct, just like any other product. If you do not have enough money to buy it, you don't buy it.  

Are you angry at the Ferrari dealer for not selling you a Ferrari for $10k since that's all you can afford?

Sell me your house for $100k, I'll use it in a more ethical way than you are, deal?

In reply to pheller :

Speaking as a dedicated libertarian, I don't think that excessive regulation is the only thing stopping a huge building push.  There are many factors at play.

But you can't just force someone to develop their land by threatening to take it away from them or making them sell it.

Some projects just don't make any economic sense and forcing a Use It Or Lose It taxation policy doesn't change that.

It just makes it infeasible to hold property until it might make economic sense.  Instead it encourages riskier development projects that have a higher chance of economic failure.

I'm still not seeing any thinking deeper than "things shouldn't be this expensive dammit".

Duke said:

 

I'm still not seeing any thinking deeper than "things shouldn't be this expensive dammit".

Not things, just land he can't afford without taking a risk he's not willing to take.

Hive,

Here are the stats since Gameboy RMH's December 19th resurrection of this topic...

Congratulations Duke, you won the internet!!!

Edit: Please ignore my Average as I'm pretty sure I Plus One'd myself at least once because I'm shockingly insecure and because I'm buzzed.  

The primary reason there was a building boom in the 1940's is because there was a World War. Construction stopped for the duration of the war, and created a logjam in the housing supply chain. 
 

We could have a war. That would create a building boom (eventually). 
 

ProDarwin said:

They do pay those same taxes.  Proportional to the value.  

But because we often weight structure as the primary driver of property taxes, a vacant lot might pay 1/4 of what a developed lot pays. 

In my opinion, the structure should not be taxed. The land should be taxed solely. 

pheller said:

ProDarwin said:

They do pay those same taxes.  Proportional to the value.  

But because we often weight structure as the primary driver of property taxes, a vacant lot might pay 1/4 of what a developed lot pays. 

In my opinion, the structure should not be taxed. The land should be taxed solely. 

In my experience, tax value is based on appraised value.  Actually, if I look up vacant lots near me, the owners are paying more in tax proportionally than I am.  My assessed value is ~37% below market, so that's what I pay tax on.  Meanwhile a 1/2 mile away there is small lot that has a tax value of $43k and just sold for $50k. (tax value 14% below market)

So I still dont fully understand what you are suggesting.  You think that the owner of the $50k lot should pay taxes on an 'appraised value' as though there was a $300k house sitting on it?  That's absurd.

Also just a point, where I live is very much in line median cost.  Land is not the limiting factor here.  Its cheap.  Builders can only build so fast, and the city on grows economically so quickly.

Additionally, I would be scared if we were growing housing much quicker, because I am very skeptical of the quality of new homes going up.  Probably a different subject, but I think many of them can actually be a net loss for the first owner.  I'd vote for much stricter building code (I know this isn't going to go over well with some in this thread) before just about any of the other ideas suggested.

I decided to do a little research to get an idea of just how much more expensive homes are than they should be. Here's one helpful graph I ran across:

If we take the notably stable period from the early '50s to early '80s as a "normal" period, then homes are not quite 2x as expensive as they should be - I would've guessed the overvaluing was in the range of 2x-5x. Quite a bummer that there's not as much room for a decrease as I thought.

In terms of the undersupply, it looks like most of the damage was done from the mid-'80s to early 2000s and then since the great recession. Curiously it looks like new builds were starting to skyrocket just before the pandemic smacked them down:

pheller said:

ProDarwin said:

They do pay those same taxes.  Proportional to the value.  

But because we often weight structure as the primary driver of property taxes, a vacant lot might pay 1/4 of what a developed lot pays. 

In my opinion, the structure should not be taxed. The land should be taxed solely. 

I assume AZ does not break it down land tax/structure tax? Maryland does, so my land is taxed at x rate, as is the vacant land down the street, then improvements are taxed at y rate, to get the total. If the owner never improves the land, we are both taxed the same on the land amount. How is that not fair?

I suspect Flagstaff is like many desirable zip codes whose economies are supported mostly by tourism. Lots of the homes seem to be airBnB rentals. Feels like a ghost town yet everything for sale is super expensive.

I'm not sure it is a problem that is fixable by tax policy. I'm not sure it's even broken - I just can't afford it.

Steve_Jones said:

pheller said:

ProDarwin said:

They do pay those same taxes.  Proportional to the value.  

But because we often weight structure as the primary driver of property taxes, a vacant lot might pay 1/4 of what a developed lot pays. 

In my opinion, the structure should not be taxed. The land should be taxed solely. 

I assume AZ does not break it down land tax/structure tax? Maryland does, so my land is taxed at x rate, as is the vacant land down the street, then improvements are taxed at y rate, to get the total. If the owner never improves the land, we are both taxed the same on the land amount. How is that not fair?

That's how my property tax is in GA also. I'm curious what the bill looks like in AZ.

In reply to GameboyRMH :

You are missing a couple things when looking at the history of home cost. Home cost is much more than the price of the home. You need to factor in the interest rates of the time. It would also be helpful to factor in how the cost to build a new home impacts housing prices over time. You said homes much more expensive than they should be. But didn't provide any data it back up what you think they should be. Sure supply affects the price, and adding supply should lower costs. If everything is equal. But if the added supply- new houses- are much more expensive than the existing homes, lots of the effect of increased supply is mitigated. So it you really want to "fix" the housing price problem, maybe look into why new houses are so expensive instead of why existing houses appreciate. Comparing your housing starts and your housing price graphs will shed a bit more light on the dynamics between the two. Nobody is going to build new houses when they cost a lot more to build then they will be worth. That's why more houses are built when values are up. 

In reply to Boost_Crazy :

I think interest rates and taxes (as are loan structure) are a big part here. Most people buy houses based on payment (not that its right or wrong, just what Ive seen) not cost. If taxes or interest are high they can contribute to a much larger part of the payment. Its also something we saw changed rapidly over the last few years and saw its effects on the market.

My opinion is one of the largest drivers of home prices is interest rates. If want housing prices to stabilize and prices to be more reasonable, you probably want high interest rates. I dont think money should be 2 or 3 percent, or you get what we have.

The average new house size in 1970 was 1500 SF. The average new house size in 2014 was 2657 SF. 
 

They have bigger kitchens, more baths, and far more upscale devices. 
 

They SHOULD be twice the price. 

The average new car in 1975 was $4950. Inflation adjusted $27,391. 
 

The average new car price now is $48,000.

Huh. Almost twice....

SV reX said:

The average new house size in 1970 was 1500 SF. The average new house size in 2014 was 2657 SF. 
 

They have bigger kitchens, more baths, and far more upscale devices. 
 

They SHOULD be twice the price. 

I've heard this argument before, but you can't buy a 1970s-sized house for inflation-adjusted 1970s house prices, so increased size is not a major factor. It's also why I think it's actually more useful to examine appreciation rather than new-home build costs, because this eliminates variables such as size increases and material costs which can be legitimate reasons for a house to be more expensive. That's not as much of a problem as an older house becoming more expensive for no reason (Edit: Of course the two problems are interlinked, but from some research I've already done there doesn't appear to be a link between build costs and new starts or home prices in general)

SV reX said:

The average new car in 1975 was $4950. Inflation adjusted $27,391. 
 

The average new car price now is $48,000.

Huh. Almost twice....

I think this is more of a mean vs. median issue (caused by the luxury car/supercar market taking off and the student-loan-like situation causing new pickups to go for whatever customers can finance) than a market-wide runaway price increase as seen with housing. You can still buy a decent new car for $27k no problem, AC and ABS and all, but you can't buy a decent house in a decent area for '70s house prices.

Opti said:

In reply to Boost_Crazy :

I think interest rates and taxes (as are loan structure) are a big part here. Most people buy houses based on payment (not that its right or wrong, just what Ive seen) not cost. If taxes or interest are high they can contribute to a much larger part of the payment. Its also something we saw changed rapidly over the last few years and saw its effects on the market.

My opinion is one of the largest drivers of home prices is interest rates. If want housing prices to stabilize and prices to be more reasonable, you probably want high interest rates. I dont think money should be 2 or 3 percent, or you get what we have.

The "housing shortage" is a huge political issue here but we didn't really have a problem until you could get a mortgage at 1% and banks approved everybody.

The government really dropped the ball with interest rates, and it was blatantly obvious even as it was happening.