That’s exactly the way it happened here, in Chicago. Wicker Park was the big one - not five years ago it retained its arty-farty, funky flavor. Next up: my home, Logan Square. Now, developers are hawking cheap loft space in previously-reviled Humboldt Park to artists with an eye towards gentrification in the very near future.
My city of neighborhoods is turning into McBlockBucks, and I don’t like it one bit.
This overly generous reading is not borne out by sailor’s remarks. Poor people are poor because they have bad habits. Thus they deserve to be poor, and deserve no government help.
As for Mayer’s sociological experiment, I believe the jury is still out on that one. Improving stagnant neighborhoods without gentrification and solving the problem of third-generation institutional welfare recipients are two entirely different beasts. Obviously payroll tax relief and minority small business loans are going to aid the working and lower middle class who actually have jobs, are trying to save, yet still have no equity to their names. To the innumerable working poor, the problems that afflict institutional welfare recipients do not necessarily apply.
MR
The issue of Chicagoland gentrification also illustrates the problem of a tax structure based on “fair market value”. Under the old Indiana tax regime, the assessed value of these houses would not change due to a localized increase in market value because Indiana property tax is computed formulaically from the size and use category of the land and from the nature of the fixtures attached to the land. The market value of the land and fixtures is not a factor. The Indiana Tax Court ruled a few years ago that Indiana’s property tax structure violated the Indiana Constitution, however, and Indiana seems bent on enacting a FMV-based property tax.
IMO, if you have a FMV-based property tax, the assessed value of a parcel should be based on its market value at the last time it was sold in a fair sale, adjusted for inflation. This insulates long-term homeowners (who are likely to be on fixed incomes anyway) from skyrocketing property taxes when their neighbors get the home improvement bug. Currently, in an FMV-based assessment regime, if your neighbor improves his home, your FMV, and therefore your taxes, rise. It seems unfair to increase your tax because of something your neighbor did.
The other option is to do away entirely with property taxes and use income taxation to make up for the shortfall.
jayjay, the “culture of poverty” is actually created by and perpetuated by the way the welfare laws are written. Welfare regulations, in most areas, are designed to prevent recipients from ever getting back on their feet. For example, in Indiana an TANF recipient may not accumulate more than $1000 in cash at any time, or lose benefits. Participation in a job training program lasting longer than six months is not counted as “job training”. A six month program will not provide you with enough credentials to raise your job finding ability enough to provide a living wage for a family of any size.
Many of the much-vaunted “welfare reforms” have merely acted to create an ever-larger underclass of people who were kicked off (not helped off, as commonly reported)welfare and are now homeless. However, the states report these cases as “successes” because there is no followup on these individuals.
I think most posters here are missing the point about the relief being suggested.
Take this example: A couple gets married. They get a job and buy a house near that job. They have kids and do all of the things that a family does. The kids grow up go off on their own, etc. Finally after 30 years the couple pays the last installment on the mortgage and move off toward retirement in the home they made together.
Now they live comfortably on a fixed income in a community they have considered “home” for most of their lives.
Gentrification begins.
In a few years our couple is paying more per year in property taxes than the original value of their mortgage. Yea, they could sell and go get a one bedroom apartment in some area they don’t know. (Remember though that these people don’t have a monthly housing payment, rent or mortgage, so that would be a significant increase in cost of living.) Sell all of the furniture that is full of memories for them. Be cut off from all of their friends and the community they have been a part of for decades. All because some speculator has bought up the property around them.
The alternative? Stay, with taxes taking up what might have been their disposable income until they can’t pay any more and are evicted by the city. Their property sold to cover taxes that are two or three times per year the entire purchase price of the property.
That, I think, is the type of scenario that the relief is aimed at. Not supporting poor people living in luxury but simply assuring that hard working people who have successfully purchased their property are not forced out of an area simply because of artificially high property taxes.
My understanding of the proposal is that it wouldn’t help renters at all. The only tax relief the Mayor has control over is property taxes. Renters don’t pay those (directly) anyway. Besides the proposal won’t effect rent prices which will continue to be driven by the market. The proposal would only assist those who own their own home. It would assure that someone who bought a home over thirty years, investing themselves in a neighborhood, wouldn’t be forced out due to rising property valuations.
I for one would give a hearty thumbs up to a proposal to help homeowners stay in the homes that they have purchased if that is what they want. Even if that means they don’t pay as much in taxes as their new Yuppie neighbor.
I’m confused. If you’re right, Degrance, wouldn’t these people be able to sell that house for way more than they ever dreamed of, and buy a house for cash somewhere else with the proceeds? No increase in cost of living called for in a case like this.
Keep this in mind: except for slum neighborhoods, housing is priced as an asset, which means that housing in urban/suburban areas is generally worth much more than housing in rural areas because you can make quite a bit of money in these areas. The extreme example is Silicon Valley and to an apparently slightly lesser extent San Fran. But it explains the fact that houses in Connecticut are generally priced well above houses in Mississippi. If you’re living in an area with a dynamic economy, change comes with the territory. Your old couple should never have expected that things would always stay the same.
After all, one can be sure that when they moved in, many years ago, it was because they were near a good, solid, secure job. Same thing those reviled “yuppies” moving in have, and would like to keep.
Why should they have to? Why should they have to, in their twilight years, abandon the seat of their long lives, where they have lived, loved, and grieved for three, four, even five decades? When you’ve lived in a place for that long, it becomes more than a capital asset, to be discarded for some small shiny coins. It is home.
Who in Heaven’s name is saying they have to do anything? They can pay the taxes and stay, or they can sell and go. I’m sorry, but a couple such as this has had a very nice life. Yes, I can see the heartbreak in going, but keep a little perspective here: it’s not like they’re being evicted by some landlord or have been made homeless by a fire. Get a grip.
In many cases, they cannot pay the taxes. There are instances where gentrification has caused such increases in tax rates that families that were managing to get by fine on their fixed retirement incomes are now unable to even pay their income tax bills, let alone food or utilities. When you’ve planned your retirement on the premise that your housing costs would be taxes and that those wouldn’t rise all that fast, it really hurts when your housing cost suddenly multiplies by ten.
I think y’all need to get a little human perspective here. There’s more to a house than a fair market value. Things have value that can’t be measured by an accountant, and I think our legal systems need to recognize that once in a while.
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*Originally posted by KellyM *
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Ugh, that should have been property tax bills. My bad.
In which case they sell. Heartbreaking, yes. But it’s not by any stretch tragic. Tragic would be if they were to become homeless. Given that the house can be sold for many times what they paid for it many years ago, it’s the opposite of tragic.
Exactly how many allowances for the vagaries of life are we supposed to make? Presumably, these people would have benefitted from the deductions for mortgage interest and real estate taxes during the entire time they owned the property.
If they have to sell, so what.
Some people know the price of everything, and yet the value of nothing.
Ad hominem arguments will get you nowhere.
I am now living in a bought house, after renting my entire life.
I’ve gone from having my federal taxes withheld at a rate of single and 0 to having them withheld at a rate of married and 7 deductions. I am now contributing the max to my 401(k) plan. All because I bought a house.
So I know exactly how much it’s worth to have a house. You’ll forgive me if I can’t work up a whole lot of sympathy for someone who, after feeding at this trough of subsidy for 30 years, is now forced to sell their home at a multiple of what they paid for it.
Such a tragedy. It should happen to me.
Subsidy? What are you talking about? No one is doing any subsidizing. Care to clarify?
Um, unless the house came already occupied how on earth did buying a house get you 7 deductions on your withholding ?!?!
You being a renter for so long I’m not surprised you don’t see the issue. But I have seen elderly home owners evicted because of this situation. They could not bear to leave the house they lived in for 50 or 60 years or even the house they were born in some cases. So they paid what they could until the government seized the house for non-payment of taxes. These people were left homeless by this very process.
My own grandparents were in the same house for 65 years. We had to almost blast my grandmother out after my grandfather died at 86. They never would have even considered selling as long as they were both alive. Fortunately they were never faced with the issue.
The point of the relief is the belief that if someone chooses a house and invests in a neighborhood for decades the government should not be able to force them out of that house in favor of more desirable owners by raising the property taxes to a point that could never have been predicted by the unsuspecting home owner.
Also please remember that valuation is not the same as selling price. Your land may be valued at a certain level because of improvements, buildings, etc. but that is no guarantee that it will fetch anything near the valuation price on the open market.
Mortgage interest is tax deducible and has been for at least a generation. Thus, the US government has subsidized the purchasing of houses by an entire generation of owners. Those homes have also generally increased in value two to threefold. Just about anybody who owns a house today (unless they bought in the last year, perhaps) has made a nice pile of equity, in part because of preferential tax laws.
I feel for people with sentimental attachments to their homes, but it’s simply not the government’s business if people refuse to use their own assets for their own benefit. (Unless you’re claiming that these people are mentally ill, in which case they should be either treated or committed, depending on the circumstances.)
Even if elderly homeowners refuse to sell, there is such a thing as a “reverse mortgage.” We are talking about people whose main problem is that their large asset is not liquid; I’ll save my sympathy for people who have more serious trouble.
I can’t speak for pantom of course but I’ll venture a guess as to the answer.
You can call the tax credit you get on your mortgage anything you want but it in essence amounts to a subsidy. Don’t think so?
The trick here is the government doesn’t write you a check for buying a house but they let you pay less in taxes for having done so which amounts to the same thing in the end. Make no mistake either…this tax break is fairly significant.
Some people (and I believe there are a few on this board who have argued this) believe that this subsidy is unfair in the sense that it’s regressive. If you’re wealthy enough to buy a house you get a tax break. If you’re poor and can’t get a mortgage you get no such tax break (to be fair then renters should get some tax relief).
Of course, getting rid of this tax relief would be sheer political suicide for any politician dumb enough to suggest it so for the forseeable future homeowners have it easier than none home owners.
If the valuation on your house is significantly higher than what you could expect to receive for selling the house I’d get on the phone to the Assessors Office ASAP. The assessed value should approximate what one might expect to receive for the sale of such property.
Owning your own home has been promoted as the American dream. There are many reasons for the government to want Americans to buy into this. As it says in the preamble, part of the reason for government is to ensure domestic tranquility and to promote the general welfare. Getting people to own their own home generally does both. Those who own homes have a very personal stake in their community. They are motivated to keep their property in good condition and also to avoid any trouble that might make them lose it. Renters are generally less rooted in a community and can easily move to another.
Gentrification is directly against these purposes. If it is possible for a homeowner to do everyting right, buy their home, put down roots, obey the law and make their neighborhood a pleasant place to live and then be turned out of their houses because their property is valuable as a result they have much less motivation to be goood citizens and good neighbors. Since the government plays a key role in gentrification, it makes sense that it be the force to counteract it.
The choice here is between helping long time residents of a community stay residents and the community collecting more in property taxes. The community is still getting enough in property taxes to function, partially because of the greatly increased revenue caused by the higher property values that drive gentrification. These communities would not get to be the great places to live that the yuppies hunger for were it not for the long time residents. They should not be punished for making their community a nice place to live.
I do not see how this follows at all. What you seem to be suggesting is that I buy my house today and intend to stay in it a long time. However, somewhere down the road, my neighborhood may get gentrified so I may as well just be a bad neighbor and member of the community from the get go.
That’s rubbish. People will be good or bad members of the community as their personalities and circumstances dictate…not based on some nebulous possibility 30 years from now.
I don’t see this either. Taxes may be the reason some people get forced out of a neighborhood but the government isn’t trying to push or pull this one way or the other (in general some government initiatives may try to bootstrap bad neighborhoods into good ones). They take XX% off the top whatever happens to the property value. I don’t think you can ascribe some motivation or conscious effort on the government’s part to get people out of their homes. Indeed, most legislation (what there is of it) tends to protect the people already living in an area and not help the rich who are coming in to displace them.
It doesn’t usually work that way. Earlier in this thread someone listed how these things tend to progress (artists move in and get displaced by the gay/lesbian community which gets displaced by yuppies and so on). In general it’s not as if there is some gleaming jewel of a neighborhood that everyone there has busted their ass to get into shape only to have the evil yuppies swoop in and buy it out from under them. There is usually a large gray area as these area evolve from one stage to the next. When yuppies or their ilk latch on to a neighborhood it may skyrocket in value over the course of 5 years but the neighborhood was probably 10-15 years or more in transition on the way to that point.
Whack-a-mole: you got it exactly right as to my thinking on the deductions homeowners can take.
A quick explanation on the married & 7: this is the rate at which you have your taxes withheld from your paycheck. Prior to owning a home, because of our two-earner status, I had to get the gov to withhold at the highest rate possible in order to prevent owing them a slug of money on April 15 (which is when we owe taxes here in the U.S.). Note that frequently I owed them a slug of money anyway; it wasn’t always enough to prevent this from happening.
Now, with the mortgage interest and property taxes deductible against my Federal tax liability, I can have them withhold at the married rate, which is a lot lower than the single rate, and pile on the equivalent of 7 personal exemptions to boot. Because when I do that, I give myself enough money per paycheck to contribute to my 401(k) plan to the max, which lowers my tax liability even more.
So, like I said, I have a hard time working up sympathy for homeowners who have to move because of gentrification. All the poormouthing in the world will not cover up the huge amounts of money the U.S. throws at homeowners, forcing renters, who are frequently poor and have no assets, to pay much higher taxes than they would if homeowners just paid their fair share. It would be the height of injustice if, after all this, we make some special accomodation so a homeowner doesn’t get affected by gentrification either. As it is, you don’t have to pay the capital gains tax on the profit if you sell your home and use the proceeds to buy another one. Which is yet another way homeowners are coddled.
How many more of these special little laws do we have to pass for all those poor, oppressed homeowners with all that wonderful sentimental attachment to their homes and communities?