Attitudes of the uber-rich

[yeahman]

fact.

This is really fucking annoying.

fact.

[TahoeJ]

If you’re expanding beyond SF proper then that likely just puts $340k even higher above middle class.

There are all kinds of reasons to choose to live in a certain area, including to stay near family. It’s still a choice about how to spend your wealth.

You're just flat out wrong. SF isn't even the most expensive market in the bay area. And my ex wife had to be in the office every single day.

Do you have any kids?

[Mofro261]

Cities With the Highest Middle-Class Ceilings

1. Fremont, CA

Fremont has the highest minimum threshold for middle class at $104,499, going all the way up to nearly $312,000. Households here need a minimum income of $104,499 to be considered middle class. Fremont’s proximity to the high-paying jobs of Silicon Valley contributes to its high median income of $155,968. This Bay Area city has nearly 230,000 residents, and almost one-tenth of that population works at Tesla3.

2. San Jose, CA

San Jose is the third-largest city in California and home to high-profile technology companies, including Adobe, Cisco Systems, eBay, PayPal and Zoom. Middle class households here earn between $84,673 and $252,754.

3. Arlington, VA

Arlington, situated on the banks of the Potomac River, benefits from its proximity to Washington D.C. and a highly-educated workforce. Over 76% of residents 25 and older hold a bachelor’s degree or higher, more than double the national average4. The federal government is Arlington’s top employer, with the Department of Defense and a number of other agencies based there5. Middle class households here earn up to $251,302 per year, while those earning less than $84,186 miss the threshold.

4. San Francisco, CA

While some large tech companies are based in San Francisco, including Salesforce, Uber and Twitter, the city is also home to non-tech brands like Wells Fargo and The Gap. Middle class households here earn between $81,623 and $243,652. But buying a home in the City by the Bay can be a challenge. The median home value in Frisco is $1.2 million dollars6.

5. Seattle, WA

In Seattle, households earning up to $221,562 are still considered to be middle class. Those earning less than $74,223, however, haven’t yet entered this middle income group. Nearly 66% of residents 25 and older hold a bachelor’s degree or higher and there are plenty of high-profile local companies to work for, including Amazon, Starbucks and Boeing.

linked article

...

[J. Barron DeJong]

You're just flat out wrong. SF isn't even the most expensive market in the bay area. And my ex wife had to be in the office every single day.

Do you have any kids?

‘The entire Bay Area’ is what you referred to. Much of the Bay Area has lower median income than SF proper.

Regardless, earning $340k gives you economic freedom in a way that a family earning $150k absolutely does not enjoy, regardless of where you choose to live.

Your wife had to be in the office every day, for a job she chose to take, near a city you decided to live in. You still made a choice and to accept the financial impact. You had the freedom to make that choice in a way that lower earning households aren’t able to.

And yes, we have kids. We chose to move to a very expensive area, because it’s where we want to be. Because of that, we aren’t able to afford many of the other things we could if we were to live in a less expensive/less desirable location. No one should feel sorry for us.

[TahoeJ]

The conversation was prop 13. All we wanted to do was live in our hometown to be near family. Without prop 13 we would have been forced out due to wild real estate price increases.

And sorry, but no fucking way is $340k around Marin / Sonoma “wealthy.” It’s just not.

[J. Barron DeJong]

The conversation was prop 13. All we wanted to do was live in our hometown to be near family. Without prop 13 we would have been forced out due to wild real estate price increases.

And sorry, but no fucking way is $340k around Marin / Sonoma “wealthy.” It’s just not.

And again, there are more efficient, more equitable ways to achieve that goal compared to Prop 13’s max 2% assessed value cap, along with all the other bad policy that was also in Prop 13.

[old goat]

Because housing prices rise faster than inflation, that means there's an even higher present value of lower taxes.

When housing supply is limited you can calculate the present value of the property tax to see how the house price mirrors the full property tax over a given time horizon. Back of the envelope, if you buy a $500,000 house and pay 1 percent a year in property taxes that will require $5,000/year to pay taxes. The present property tax value is how much money would a person need to put into an account today to pay their property taxes.

That is, how much cash would be needed to generate the annual property tax payment. For simplicity, a 2 percent interest rate to pay a 2 percent tax rate is two dollars. You need a $500K earning 2% today to pay a 2% annual tax. At a 1 percent annual tax an interest rate you also need $500K. Your house is going to cost double the purchase price in present value terms or a 100 percent effective tax rate.

If however the interest rate is 2% and the tax rate is 1% then the tax rate is cut in half 1/0.02 = 50%. At today's ~5 percent rates the present value tax rate is 1/0.05 = 20%. If the annual tax rate doubles then so to does the present value 2/0.05 = 40%. And so on. The average effective tax rate under Proposition 13 went from 2.5 percent (2.5/0.05 = 50%) to 0.7 percent (0.7/0.05=14%).

In other words, house prices reflect the present value of the increase or decline in property tax payments. Specifically, in the case of Proposition 13 an empirical model of property tax capitalization shows each dollar reduction in property taxes due resulted in a seven dollar increase in property values:

https://escholarship.org/content/qt8...c52aa270a6.pdf

Let's talk about real people living in real houses earning actual money and paying actual taxes.

[old goat]

And again, there are more efficient, more equitable ways to achieve that goal compared to Prop 13’s max 2% assessed value cap, along with all the other bad policy that was also in Prop 13.

Let's scrap property tax and raise taxes on high earners, eliminate corporate tax loopholes, and intitute a wealth taz. Could you deal with that please? I'm busy doing my defensible space, or else I may not have to pay any property tax soon.

[MultiVerse]

Let's talk about real people living in real houses earning actual money and paying actual taxes.

Sure, Prop 13 was a citizen tax revolt against oppressive taxation that was passed with 63 percent of the vote. It created billions in tax breaks for many California homeowners. Reducing property taxes rather than other taxes meant savings in property taxes increased property values. This should be obvious to anyone with a mortgage whose monthly payment includes taxes and insurance.

These are basic economics forces at play. A mortgage payment ratio is the mortgage payment (principle & interest) plus taxes and insurance divided by income. A lower ratio helps buyers qualify for a higher priced house. In addition to income or cash on hand, future expectations of taxes and appreciation play a big role in housing demand.

Property taxes are viewed as a permanent second mortgage. A homeowner views property tax payments in their projections of affordability. A house with lower future property taxes is worth more than a house with higher future property taxes. There's a clear direct relationship between lower property taxes and higher home prices.

That's why so many people in this thread argue without Prop 13 they know people who couldn't afford to stay in their homes, because that second property tax mortgage would eat away at the ability of owning their home in the future. Therefore lowering the total future cost of ownership increases the present value of homes.

[TahoeJ]

Property taxes are viewed as a permanent second mortgage. A homeowner views property tax payments in their projections of affordability. A house with lower future property taxes is worth more than a house with higher future property taxes. There's a clear direct relationship between lower property taxes and higher home prices.

This was true once upon a time. But California has since seen a ridiculous influx of massive wealth that has thrown the real estate market sideways and basic economic models don't necessarily apply any longer - or are at least far more nuanced.

[MultiVerse]

Yeah, agreed that's why I wrote "income or cash on hand." It's still a mortgage of sorts even if a person doesn't have a primary mortgage. For those people who can afford to pay cash, lowering the total future cost of ownership makes buying a house even more desirable which increases demand.

Case in point, in 2003 Warren Buffett said that he pays property taxes of $14,410, or 2.9 percent, on his $500,000 home in Omaha, Nebraska, but pays only $2,264, or 0.056 percent, on his $4 million home in California. Long term, it can cost less in taxes for the wealthy to own in California thanks to Prop 13.

[Mazderati]

Four more pages of old fucks being out of touch. Fill out an app at your local big box store and start paying your taxes, geezers.

[mcski]

Yeah, agreed that's why I wrote "income or cash on hand." It's still a mortgage of sorts even if a person doesn't have a primary mortgage. For those people who can afford to pay cash, lowering the total future cost of ownership makes buying a house even more desirable which increases demand.

Case in point, in 2003 Warren Buffett said that he pays property taxes of $14,410, or 2.9 percent, on his $500,000 home in Omaha, Nebraska, but pays only $2,264, or 0.056 percent, on his $4 million home in California. Long term, it can cost less in taxes for the wealthy to own in California thanks to Prop 13.

Buffet sold his Laguna house 6 years ago for 7.5M. He bought it in ‘71 for 150k. At that time, the majority of Laguna was still mostly middle class. His would have been one of the nicer ones and about 3-4x a middle of the road house. Laguna is a good example of somewhere a lot of artist types would have been pushed out without p13 getting passed when it did

[MultiVerse]

To be clear I'm not arguing for or against Proposition 13. I'm merely describing the economics of Prop 13. There is really only one way to lower the cost of housing: build more housing. Of course, there is only a limited amount of desirable land in places like Laguna. Non-universal property tax relief measures OTOH help one group at the expense of another. Maybe seniors and artists are more deserving, but that comes at the expense of higher overall home prices.

[Meadow Skipper]

Let's scrap property tax and raise taxes on high earners, eliminate corporate tax loopholes, and intitute a wealth taz.

Sounds good to me.

Really good.

[mcski]

Yep, agree. And fund some guillotines too

[old goat]

Here's a developer's point ov view on why it's hard to build affordable housing in Truckee.
https://www.moonshineink.com/opinion...all-to-action/

Multiverse--I just noticed that your paper is from 1980. The only data supporting the hypothesis that Prop 13 raised property value is the increase in housing prices in the Bay Area from immediately before the passage of Prop 13 to a year later. I would want to see--and tried unsuccessfully to find--a graph showing California property values from say 1965 to 1985, to see if Prop 13 changed the pre-13 rate of housing inflation, over enough time to smooth out year to year variability.
A lot of theorizing about Prop 13 assumes that people are rational economic actors, a concept that the recent Nobel-prize winning discipline of behavioral economics has disproved. When I bought my first house in 1977 pre 13I didn't think about what would happen to my property taxes, nor did I think about it when I bought houses in 1984 or 1990. (All in CA.) I don't think most people think about future property taxes when buying a house, in states with caps and in states that don't. Just like people buying houses in CA always assume they can sell for a large profit if they get in over their heads. See Great Recession.

[MultiVerse]

I looked at multiple papers. I cited that particular paper because it directly answered your question, "how you think that you can separate out the rise in property values due to Prop 13 from the other, much larger factors affecting the market is beyond me."

A more recent example from the 2018 American Economic Journal arguing Prop 13 led to a sizable increase in housing prices: https://www.aeaweb.org/articles?id=10.1257/mac.20160327

This 2023 paper discusses Prop 13 housing distortions and has a chart showing Single Housing Prices and New Housing Supply per capita in 2019 with California vs other American Metropolitan Areas on page 34:
https://www.lincolninst.edu/app/uplo...g_crisis_0.pdf

Looking at housing prices, rents, and supply (all of which are related) California is very much an outlier owing in no small part due to Prop 13.

[J. Barron DeJong]

Paper from 2018:



https://www.aeaweb.org/articles?id=10.1257/mac.20160327


Free link to their earlier paper https://economics.nd.edu/assets/1476..._13_sept25.pdf

”Welfare gains of reform (away from Prop 13) are quite large and stem mostly from the decline in the tax burden when young and borrowing constrained.”

[MagnificentUnicorn]

That’s a little skewed however. Because it’s a huge state with a vast population and wild variation based on location. In much of the greater Bay Area and SoCal $340k ain’t shit these days. It’s not bad but it’s not wealthy.

Someone in the Central Valley might as well be on a different planet.

Again, wealthy depends on your perspective


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[MagnificentUnicorn]

Ah, so she’s the one whispering in your ear that prop13 is bad because of da edumacation fundies

While she works remotely from Truckee


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[MagnificentUnicorn]

Cities With the Highest Middle-Class Ceilings

1. Fremont, CA

Fremont has the highest minimum threshold for middle class at $104,499, going all the way up to nearly $312,000. Households here need a minimum income of $104,499 to be considered middle class. Fremont’s proximity to the high-paying jobs of Silicon Valley contributes to its high median income of $155,968. This Bay Area city has nearly 230,000 residents, and almost one-tenth of that population works at Tesla3.

2. San Jose, CA

San Jose is the third-largest city in California and home to high-profile technology companies, including Adobe, Cisco Systems, eBay, PayPal and Zoom. Middle class households here earn between $84,673 and $252,754.

3. Arlington, VA

Arlington, situated on the banks of the Potomac River, benefits from its proximity to Washington D.C. and a highly-educated workforce. Over 76% of residents 25 and older hold a bachelor’s degree or higher, more than double the national average4. The federal government is Arlington’s top employer, with the Department of Defense and a number of other agencies based there5. Middle class households here earn up to $251,302 per year, while those earning less than $84,186 miss the threshold.

4. San Francisco, CA

While some large tech companies are based in San Francisco, including Salesforce, Uber and Twitter, the city is also home to non-tech brands like Wells Fargo and The Gap. Middle class households here earn between $81,623 and $243,652. But buying a home in the City by the Bay can be a challenge. The median home value in Frisco is $1.2 million dollars6.

5. Seattle, WA

In Seattle, households earning up to $221,562 are still considered to be middle class. Those earning less than $74,223, however, haven’t yet entered this middle income group. Nearly 66% of residents 25 and older hold a bachelor’s degree or higher and there are plenty of high-profile local companies to work for, including Amazon, Starbucks and Boeing.

linked article

...

I moved to Wenatchee from Fremont…


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[MagnificentUnicorn]

Four more pages of old fucks being out of touch. Fill out an app at your local big box store and start paying your taxes, geezers.

You do realize that retirees pay income tax on their pension/40xx, right?


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[Conundrum]

Property taxes are viewed as a permanent second mortgage. A homeowner views property tax payments in their projections of affordability. A house with lower future property taxes is worth more than a house with higher future property taxes. There's a clear direct relationship between lower property taxes and higher home prices.

Disagree. A fixed rate mortgage is a contract with predefined terms. Most people buy fixed rate mortgages. An undetermined variable tax dependent on market conditions can be paid via escrow as part of a monthly mortgage payment but is not part of your mortgage contract. As a personal example on my 30 year fixed rate, 21 years ago, my taxes were 3.5% of my monthly mortgage payment including escrow. 21 years in, my taxes are 33.8% of my monthly mortgage payment including escrow. I don’t want anyone thinking I’m complaining. Merely pointing out the numbers. I can afford my mortgage. I don’t think it’s reasonable to tell someone they should project something like that.

I do vote yes on school bonds so I’ve voted for higher taxes. The city demolished the school across the street from my house and built a new one six miles from me in the new subdivision recently finished. Those people have the same tax rate as me. Seems equitable right? Glad I could help them get education in their new neighborhood after paying for it in mine.

[TahoeJ]

Again, wealthy depends on your perspective


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Sure, so compared to much of the world anyone making more than 10k per year is extremely wealthy. But that’s meaningless in a proper context and not just raw math on a massive scale.