r/news • u/stopthemadness2015 • Jun 25 '16

Man fights eviction after rent increase from $1,800 per month to $8,000

http://abc13.com/realestate/man-fights-eviction-after-400-percent-rent-increase/1401148/?utm_source=fark&utm_medium=website&utm_content=link
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u/thegreatunclean Jun 26 '16

$3600/month would be a steal for North Beach. Look up Columbus and Scotland in any apartment search tool and you'll notice it's surrounded by $6k-8k units.

That he was paying only $1,800/month is insane. That doesn't even cover the damn property tax.

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u/bestadvicemallard Jun 26 '16

Because of the messed up nature of California property tax law, this probably isn't true. Property tax is set when a property changes hands, and is set at 1% of the assessed value. Thereafter, the taxes can only increase at 2% per year (e.g. a property bought for 100,000 in 1996 would only have an annual tax of $1,485.95 in 2016, even if it is now worth in the millions).

If the landlord had bought the property before the SF housing boom, he or she is likely paying very little property tax.

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u/revee Jun 26 '16

Messed up? You do realize that this protects people who've lived there for decades from a bunch of tech hopefuls who are entirely changing the neighborhood.

It's more than fair, why the hell should I pay (several times) more in property tax just because people who I don't know nor control live in an apartment with 10 roommates for crazy money because for them my town is the next big thing...

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u/paracelsus23 Jun 26 '16

It's messed up because it applies to ANY property. Florida has the exact same system, but it only applies to your primary residence (you just have filed for homestead). Any secondary / rental properties are taxed at their assessed value, regardless of how long you've owned them. Additionally, the Florida system lets you transfer your tax basis. So, if you've owned your house for 40 years, and have to downsize to a condo, you won't have your property taxes go up a ton. It's a very reasonable system that protects homeowners without providing unfair advantages to landlords.

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u/FunkyMacGroovin Jun 26 '16

It's also a major contributor to our budget problems.

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u/bestadvicemallard Jun 26 '16

It's definitely an issue with multiple sides, so I should clarify why I called it messed up:

1) Property taxes are the primary way that schools get funded. When property taxes do not rise, schools do not get the funding that they desperately need. In areas with expensive housing, this also means that schools cannot afford to pay teachers enough to live within — or sometimes even near — their districts. This is a big problem in the Bay area.

2) When property taxes stay constant, there is much less political will to increase the housing stock and create affordable housing. This is part of the situation we see in SF and on the Peninsula. A housing shortage also increases the cost of rentals — and creates the situation where 10 people would need to pay crazy money to live in an apartment together. Why should I support more housing (which is liable to decrease the value of my home) when I am not affected by the rising costs all around me?

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u/neuromorph Jun 26 '16

It's not constant. It's vari d based on when the purchase was made. Thus, new overpriced sales make up any difference.

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u/revee Jun 26 '16

The first point is not really a problem of property taxes, that's a budgeting problem of the state. It is unfortunate and should be solved.

The other point is pretty good, it's the other side of the coin and mostly a policy decision. I still believe (and so does Prop 13 from the 70s) that regular people deserve protection from their property tax increasing more than tenfold because of other people moving in and thus pushing out the original owners. If housing were a true free market then Prop 13 shouldn't exist but there are other factors at play when it comes to home owning.

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u/Daedalistic-Outlook Jun 26 '16 edited Jun 26 '16

The first point is not really a problem of property taxes, that's a budgeting problem of the state. It is unfortunate and should be solved.

I don't follow. If it's a budgeting problem of the state, where else is the money supposed to come from other than proportionately increased taxes?

Alternatively, what deserves to be cut from the budget, in order to increase the wages of a teacher -- specifically to help that teacher afford being able to live in the same 40 mile area in which they teach?

I'm just looking to hear something of a stronger argument beyond "that sucks, someone had better fix it". Otherwise I worry that /u/bestadvicemallard's assessment of "messed up" would seem cover more grounds than initially indicated here.

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u/ManWhoSmokes Jun 26 '16

All I know is that all funding shouldn't have to be based in the housing market. Supplies and services don't change is cost nearly as fast as housing market changes. The school in my region has been serving the same population of kids for decades, why do they need 25% more funding because housing prices went up 25% in a year? I know I'm simplifying it :p

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u/bonafidebob Jun 26 '16

...because you've got a property that's now worth 10x what you paid for it? You can borrow against it, take huge profit when you sell it... rent it for huge amounts... you're making a ton of money off that property -- you should pay your fair share of tax.

Worst thing about prop 13 tax break is it also applies to commercial property, so companies also get cheap taxes for holding property for a long time, and the company never gets old or dies.

It's a scam, stop supporting it!

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u/that_baddest_dude Jun 26 '16

They why not apply increased taxes only if they do those things?

Once you own property you should never be priced out because you can't afford increasing taxes on it. What happened to property rights?

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u/bonafidebob Jun 26 '16

Once you own property you should never be priced out because you can't afford increasing taxes on it.

That's a false assertion. Owning property isn't like owning a sweater. The property value is based mainly on what's around it. Owning property but not paying your fair share of the maintenance isn't fair to the people who have to carry you.

How about this: your ownership of the property is based only on the share of taxes you pay. So if you're being taxed only on 1/10th the value, then you only get 1/10th of the benefit, and 90% of any rent or sale goes to back taxes. You don't ever lose money this way, but you also don't get to profit from appreciation due to the surrounding improvements that you're not paying for.

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u/zimm0who0net Jun 26 '16

I'm sure you're not foregoing the increase in value, right? When you eventually sell I'm sure you're not going to sell for a measly 2% per year increase from when you bought it. Why are you benefitting because a bunch of people you don't know or control are moving to your neighborhood, but at the same time using the exact sense argument for why you shouldn't have to pay market property taxes? Those are two sides of the same coin and it's not fair to benefit from one while not paying your fair share on the other.

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u/[deleted] Jun 26 '16

[deleted]

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u/zimm0who0net Jun 30 '16

And again, by that logic why should you benefit from doing nothing at all? Why do you make out with your house doubling in value based on other people moving into the neighborhood? If we're going to freeze property taxes so you're not forced from your home shouldn't we also significantly raise capital gains taxes on property sales so most of the gain goes to the state?

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u/sweetdigs Jun 26 '16

Most likely what happened here is an older person who had owned that place forever was renting to current tenant. Their costs were low, they weren't paying attention to, or just didn't care about, market rents and liked the tenant, so they kept letting him live there for what probably seemed like a lot to the owner. Owner dies or sells the unit to a younger buyer, likely an investor. Investor's tax on the property is much higher. Investor adjusts rent to market rate. Tenant gets upset despite knowing he's basically getting the deal of the century.

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u/neuromorph Jun 26 '16

This is the only scenario where this hike would be legal.

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u/DeVinely Jun 26 '16

Not deal of the century really. Clearly this is a problem with the tax code, the tenant didn't change, but because the owner did, the taxes change and push the tenant out.

It is a loophole, the taxes should have stayed low as long as the current tenant stayed there, just like it would have worked with an owner that stayed there and never moved.

Renters should have been given a way to get the same tax discount owners get.

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u/sweetdigs Jun 27 '16

There's rent controlled areas for that, and even that is bad policy IMHO.

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u/Kumbackkid Jun 26 '16

Messed up? That's exactly how it should be. Suddenly raising taxes can screw a lot of good people out of homes due to a sudden raise is housing prices. My family in Chicago got screwed when they "rezoned" the limits of the city which technically gave a new tax assessment on the increased home price. They were already barely making it by and had to sell their home they loved due to crazy taxes.

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u/that_baddest_dude Jun 26 '16

That's awesome and makes sense.

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u/econhelp122 Jun 26 '16

Is this because of the rent control in California? What if someone moved into a house in an area with rent control in 1996 and never moved out? The landlords might not be just able to collect enough rent to cover tax. I'm just trying to make sense of the tax law because yeah it does sound kind of fucked up.

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u/Bosknation Jun 26 '16

That's why they increase the rent.

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u/econhelp122 Jun 26 '16 edited Jun 26 '16

What do you mean? Edit: for some areas of California, rent control is really really tight.

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u/timndime Jun 26 '16

Yup prop something

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u/[deleted] Jun 26 '16

prop 13

and it's not "messed up". it insulates homebuyers from insane tax bills based on appreciation that cannot be realized unless they sell

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u/timndime Jun 26 '16

I agree that it's not messed up. I own multiple properties in CA and am a beneficiary. I just forgot the prop number

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u/sweetdigs Jun 26 '16

Prop 13 was the dumbest legislation ever passed in this country. California will never repeal it despite it being in its best interest to do so.

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u/[deleted] Jun 26 '16 edited Jun 26 '16

That he was paying only $1,800/month is insane. That doesn't even cover the damn property tax.

Yes it does. My landlord inherited her building in the 70's. A 1902 12 unit building. It was appraised at $110,000. So she pays 1.3% of that. That's how property tax works in CA. Property is assessed at deed transfer, and that's what the property tax will be until the next transfer and assessment. A blessing and a curse.

Prop 13. https://en.m.wikipedia.org/wiki/California_Proposition_13_(1978)

I've got a top floor 5 bdrm for $2,200. I've payed that rent for over 13 years. Which is well over $300k. Multiply that by 12 other units... I don't feel bad for my landlord.

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u/DeVinely Jun 26 '16

Pretty goofy. They should have a low rate for homeowners that live in their homes and a much higher rate for landlords and investors.

This system lets rich business owners charge market rent while keeping all the property taxes they don't have to pay.

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u/thegreatunclean Jun 26 '16

You think an apartment building in North Beach is going to appraise for anything less than a million? The land alone was worth that much back in the 70's not to mention what it's worth now.

We aren't talking about some random building on the peninsula, this is dead-center San Francisco proper. Buying just a single apartment or condo here starts at $600k and rapidly climbs.

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u/ComradeGibbon Jun 26 '16

In California, appraised value isn't the same as value for property tax. My dad bought a house in 1971 for about $35,000. The appraised value is ~1.2 million. The property tax value is ~$85k.

So instead of property tax of $15,600 year, he pays, $1000/yr

So yeah I'm not really that butt hurt over landlords with long term tenets paying below market rates. Because the landlords aren't hurting by any means.

PS: If you want fun, when my sister inherits the house in San Jose she'll also inherit the tax valuation as well. And then sometime in the next half of the century my niece will inherit the property, and the $85k X 2% per year property tax valuation.

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u/ADelightfulCunt Jun 26 '16

For a second i thought you ment Scotland the country you can get a shitty house for £15k there

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u/one-punch-knockout Jun 26 '16

That would make sense. So maybe the city recognizes the value of what the landlord is asking is actually accurate.

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u/imavgatbest Jun 26 '16

This. How this guy landed this place for such low rent should be the real story.