Incentives and taxes

As I took a walk around the block today, I noticed that yet another house was being taken apart in that strange California way. Here is what happens. Almost all of the house is torn down and taken away. A small vestige of the original house is left. Usually, the wood and material of this small portion are of questionable value. These houses were built in the late 40’s and the materials were the cheapest available. They then add a second story and build out almost to the edge of their property line. For all practical purposes, it is a new house with double or triple the rooms and bathrooms.

Why?

To avoid getting re-assessed at a higher value which would then trigger higher property taxes. On the surface, it seems like a smart thing to do. However, this is a neighborhood where paying a million dollars for a house is not uncommon. Usually the families doing this are the ones that bought in the last 1-2 years (aka, the top of the market), they are already paying the big property tax hit.

Here is the kicker.

At the last city board meeting, a lot of parents were upset because they couldn’t get their kids into the neighborhood school. Usually these ‘renovations’ are done by new families with small children. Their kids have their own room, but may not have a school with teachers that receive a great salary.

Prop 13. Regardless of its original intenions or spin (protecting those on fixed income), it hasn’t saved anyone in California from higher taxes or inflation.

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