Gov. Jerry Brown hinted Thursday that if the budget talks with Republicans break down, the initiative fight that would follow would not be limited to Brown's plans to raise sales, vehicle and income taxes. He said he expects labor groups to pursue changes to Proposition 13, tweaking the current caps on commercial property taxes, if no bipartisan deal can be reached.
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First the good perfessor (that killjoy McKenzie guy) gets some press accompanying his latest book, Beyond Privatopia: Rethinking Residential Private Government with early media accounts honing in on the book's suggestion that HOAs are unsustainable and could face extinction.
Now comes California Gov. Jerry Brown -- who has predicted a ballot box mother of all initiative wars (Brown prefers the term "war of all against all") -- as the state remains mired in a partisan fiscal standoff and unable to enact a budget for the fiscal year starting July 1. Brown told a gathering of 250 apartment owners and developers today that sacred political cows such as Proposition 13 may be put up for alteration by the electorate in this bellum omnium contra omnes. (The audience is notable given that apartment owners provided much of the support and funding for the successful 1978 initiative).
What does Prop. 13 have to do with HOAs? By sharply limiting property tax increases, the ballot initiative spurred local governments to find creative ways to protect property tax revenue while limiting services. As self financing privatized local governments, HOAs nicely accomplish that objective since the HOA property owners pay property taxes but require fewer services.
In the current economic/political climate, I'm betting voters wouldn't think twice about carving out commercial properties from Prop. 13's provisions limiting ad valorem property tax increases. If Prop. 13 is changed to provide more property tax revenue to California local governments, one of the major drivers of privatized local government in the form of mandatory HOAs could be reduced. And what happens in California (like the property tax revolt of Prop. 13) tends to influence other states.
4 comments:
A very intriguing discussion. As you say, as much as anything else, the seismic shift in property tax revenues away from cities and counties occasioned by California's Proposition 13, has been responsible for the wholesale move to privately maintained infrastructure and away from traditional neighborhoods where municipalities maintained everything outside of the private lots.
There are other major trends however, such as greater urbanization using mostly attached or stacked housing near transit and away from expansion into the suburbs, which also is influenced by property tax revenues. New owned housing pays higher property taxes than older rental housing or industrial sites, so cities would still be encouraged to re-devlop those properties--and almost all new high density housing is privately maintained. The big question is whether the additional revenue would encourage municipalities to create traditional neighborhoods and accept more responsibility for maintaining infrastructure or just use the added revenue for existing obligations.
If the trend to greater urbanization continues, it doesn't seem that there would be much incentive for cities to encourage traditional single family home neigborhoods when the revenue from high density, privately maintained housing comes without the cost of additional city services.
"There are other major trends however, such as greater urbanization using mostly attached or stacked housing near transit and away from expansion into the suburbs, which also is influenced by property tax revenues. New owned housing pays higher property taxes than older rental housing or industrial sites, so cities would still be encouraged to re-develop those properties--and almost all new high density housing is privately maintained. "
Brown has got redevelopment in his sights as well and has proposed to eliminate local redevelopment agencies as part of his proposed budget.
"If the trend to greater urbanization continues, it doesn't seem that there would be much incentive for cities to encourage traditional single family home neigborhoods when the revenue from high density, privately maintained housing comes without the cost of additional city services."
Trend toward greater urbanization? I thought people still prefer non-urban settings, particularly when they have children. I have read however of a resurgence in the urban rental driven by young single adults who can't afford or are leery of home ownership, driving up demand for urban rentals.
Fred, you don't need re-development agencies to convert an old inner-city apartment to condos, and you don't need a re-development agency to build town homes on the site of an old mall or in a former industrial plant. Re-development agencies allow cities to use the power of eminent domain to aggregate multiple properties to re-develop entire neighborhoods or districts of a city. Their elimination won't likely stop the construction of individual attached or stacked housing projects in urban areas when the market will finally support them.
As far as cities vs. suburbs, the commuters will have to vote on that. When an hour and half in the car to get to work finally gets to be too much because there are no funds to build more freeways, extend transit, or widen roads, suburban living will probably lose a lot of its luster, as it already has.
A move back into urban areas led by whatever demographic group always means more attached and stacked housing. But the interesting question is the one you pose--should that housing be owned or rented? Should owned housing be as available to everyone as it has been over the past two decades--especially if the current condo model is not sustainable as many of us have suggested? Should cities encourage the construction of more investor-owned rental housing instead?
Now, that's a debate topic that might be worth some blog space. And while everyone is considering that question, also consider this fact which is very relevant to the central theme of this blog: both condos and investor-owned rental apartments are privately governed.
What are the pros and cons of
(1) investor owned rental property
(2) condominiums
(3) the co-op model?
It goes without saying that "both condos and investor-owned rental apartments are privately governed," but there are significant differences.
Unlike landlords, so-called community associations hold a homeowner's most valuable personal possession hostage, leading to incredibly perverse incentives and moral hazards by the HOA/COA/POA corporation. An entire industry of property managers and HOA lawyers has developed whose purpose is to extort as much as possible from homeowners.
While bastard landlords from hell certainly exist, the damage they can do to their tenants is far far far less than what a so-called community association can (and regularly does) inflict upon individual homeowners.
Landlords have some incentive to not abuse their customers. Tenants are much more free to pick up and leave at any time, risking only their security deposit.
In contrast to landlords, HOAs and their property managers and law firms have every incentive to abuse and mistreat homeowners to the maximum extent possible, because they profit greatly from doing so. A homeowner -- burdened with a mortgage and with equity at risk -- has no practical recourse.
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