talk of reducing the mortgage deduction

[Smurf Hunter]

agriculture is very big business in some parts of the state, including my county. Produce needs to be picked. You either raise the pay of those working, which is also done, at least one farm by me pays $15/hour, with benefits, or you bring in illegals and provide housing. Or, more usual, the government section 8 program, or migrant farm worker housing, subsidises the housing. But, this is off track for this thread. This is a very large state, in general, the agricultural counties are geographically removed from the industrial counties, so 2 way different housing markets. However, these barriers are being removed by enhanced commuting transportation. So then the non-ag industry tied housing area is going to expand. We will lose farmland ( that exports fruit, nuts and produce to everyone outside the state) and we will have some amazing political water wars

So in your thinking, assuming a network of bullet trains or similarly efficient transportation, you'd have silicon valley and the surrounding counties would become bedroom communities?
To a smaller degree that happens up here.  When I was a little kid there was a ton more agriculture in just 10 miles outside the metro area.  Now aside from smaller boutique/hobby farms you have to drive an hour or more.

[mountainmoma]

So in your thinking, assuming a network of bullet trains or similarly efficient transportation, you'd have silicon valley and the surrounding counties would become bedroom communities?
To a smaller degree that happens up here.  When I was a little kid there was a ton more agriculture in just 10 miles outside the metro area.  Now aside from smaller boutique/hobby farms you have to drive an hour or more.

You already have to go more than 1 hour drive from Silicon Valley to hit major ag. People commute 1-2 hours each direction, ones with low salaries that want a single family home.

So, I am no saying it is desirable, I think it is NOT desireable. But, from teh articels I linked to, and others, it does seem to be what business and government is going towards as a solution.....The bullet train will make a 40 minute train ride out of what is now a 3hour with no traffic drive. So, this would be a much bigger "footprint" than what is out by you with the "light rail"  trains. The bullet train is much faster, so cover a large distance in that 40 minutes, look at the map I linked to

[Smurf Hunter]

You already have to go more than 1 hour drive from Silicon Valley to hit major ag. People commute 1-2 hours each direction, ones with low salaries that want a single family home.

So, I am no saying it is desirable, I think it is NOT desireable. But, from teh articels I linked to, and others, it does seem to be what business and government is going towards as a solution.....The bullet train will make a 40 minute train ride out of what is now a 3hour with no traffic drive. So, this would be a much bigger "footprint" than what is out by you with the "light rail"  trains. The bullet train is much faster, so cover a large distance in that 40 minutes, look at the map I linked to

Last year we hired this kid fresh out of college and he worked in our downtown SF office.  He was paying $3500/month for a STUDIO apartment to be within walking distance.

[Carl]

Last year we hired this kid fresh out of college and he worked in our downtown SF office.  He was paying $3500/month for a STUDIO apartment to be within walking distance.

College did not do much to educate him. While a good job is great...if you are a slave to wages to support your living space ,it is a life wasted.

My 2100 foot home cost me less than 56K and it was not unique as the average home in my neighborhood is 70K and often less.

If it is all you can do to simply support a home, then you should MOVE.

[mountainmoma]

College did not do much to educate him. While a good job is great...if you are a slave to wages to support your living space ,it is a life wasted.

My 2100 foot home cost me less than 56K and it was not unique as the average home in my neighborhood is 70K and often less.

If it is all you can do to simply support a home, then you should MOVE.

This gets back to topic on this post, an area like this is the people who do use the income tax deduction as they are paying ALOT of interest on a mortgage, because housing prices are a very large part of peoples pay. 50% of pay to rent/mortgage is on the low end, I think an awful lot are paying way more, and then are at the produce distribution weekly, etc...

I often say this, it is another potential solution. But, instead, we get demands for more government subsidized affordable housing. I figure if there are no servers, baristas, housecleaners, etc.... then the tech workers will complain the area is unliveable and maybe the companies will spread out their operations -- but this is not going to happen ! It is hard for people to think about taking risks these days, it becomes normal this housing craziness, people often do not leave what they know. I did communicate with someone on this forum a few years ago to talk to him about housing when he was considering a transfer. He did not transfer. Absolutely everyone (ok, not everyone, but you know what I mean...) is paying a large percentage of their pay for housing. I was stuck here for years, until 1 year ago actually, as California courts do not allow divorced parents to move away with their children, even if it is unaffordable. There is no provision for this (in practice, in theory, there is.) This last year, I have been paying 2/3 of my take home, and I own the house outright ! Doesnt leave anything for needed repairs. Likely I will leave once the kids settle in a spot, and irritate others as I will be another Californian moving to "their" area and buying up "their" housing. 2 of my family members are off to other states, and everyone talks about it.

[RitaRose1945]

San Francisco is kind of the mecca for "Holy crap, it costs how much???" real estate, and this is an interesting article from a little more than a year ago.

After first decline in years, SF home prices hit all-time high in April 2016 - Open Listings.com

I had some friends from San Francisco that were contemplating a move to Vegas, mostly because taxes are fairly reasonable (no state income tax) and we're business friendly (tech companies love us).  They literally laughed when I told them you could buy an average home in an average safe neighborhood for under $300,000.  That's a down payment for many houses out there.  But at the same time, I know you can buy multiple houses with $300,000 in other areas. 

It all comes down to finding a place where you can work.  And the annual pay for a job in cheaper areas may not be as high as for the more expensive ones, though it's not usually a 1:1 comparison.

[fritz_monroe]

Folks, the thread is drifting a lot from the original post. 

[Morning Sunshine]

Folks, the thread is drifting a lot from the original post.

kill joy 

[Smurf Hunter]

To my original point, I'm hearing many of responses of  "doesn't affect me". 
Fair enough, but there are plenty of people it does/could affect.

There are two axis of concern with this proposed change:

1) how it affects federal tax revenue
2) how it affects the real estate market

#1 is being my concern.  The .gov doesn't balance their budgets most of the time as it is.

#2 is closer to home (pun intended).
We know historically, if interest rates go way up, or it's otherwise more difficult to borrow money for a mortgage, prices are kept down.

So as a home owner, depending on your life stage this is a threat on a couple levels:
1) you may get a smaller tax refund (or owe money)
2) your home value may not increase as much as otherwise

Again, if you are retired, plan to die in your current home, I'm happy for you, but I also don't care for the context of this subject.
There are millions of young families who purchased homes with the home of building financial equity.

When/if the rug is pulled out from under, we could see something like 2008 again.

[mountainmoma]

yes, for the people in my area who do use this deduction, which is most recent-ish home buyers (since recovery of 2008 crash for sure) and these people are paying a larger, much larger, than national average percentage of take home on housing, so even though high salary "on the edge" a bit in their budgets, yes they are going to feel that pinch of a few hundred a month effect less take home due to the loss of this deduction, and since people buying in the expensive market, when they look at budget of the maximum amount they can possibly pour into a house payment, which is what they do, that calculation does take into account the money they dont spend in taxes due to this write-off. So, yes, without the write-off, they can afford that much less of a house price. Of course, in this area the prices are so speculative that not going up as fast will be a good thing ! And, so, it might slow down the rate of increase in prices, but in itself, would not make anyone lose money due to a dip in the increase of prices, their "investment" will just yield slightly less when they sell. But, those young families right on the edge will absolutely feel a budgetary pinch, and they will be vocal about htis, and likely already are being vocal about it to congressional rep's

[mountainmoma]

the other question of course in any tax deduction is fairness appropriatness. So, is it right that we give a tax write-off to this group of people ? Can we afford this ? Has it outlived its usefulness, and is now just another piece that helps fuel absurd houging bubble/speculation and helps make the market that much less affordable ?

[RitaRose1945]

the other question of course in any tax deduction is fairness appropriatness. So, is it right that we give a tax write-off to this group of people ? Can we afford this ? Has it outlived its usefulness, and is now just another piece that helps fuel absurd houging bubble/speculation and helps make the market that much less affordable ?

That's my issue.


Is it fair to subsidize people who have a mortgage, which effectively penalizes those who either rent or own their home outright?

[FreeLancer]

Is it fair that marginal tax rates increase as one's earnings increase?  If so, how high should the top bracket be?  Deductions for mortgage interest, and property and state taxes help bring those high rates down a notch, although the AMT usually kicks in and still extracts an extra pound of flesh. 

How much of anyone's income does .gov have a right to?

[mountainmoma]

Is it fair that marginal tax rates increase as one's earnings increase?  If so, how high should the top bracket be?  Deductions for mortgage interest, and property and state taxes help bring those high rates down a notch, although the AMT usually kicks in and still extracts an extra pound of flesh. 

How much of anyone's income does .gov have a right to?

yep, good point. When I made enough to have itemized deductions, and I did for many years, I always thought if deductions go away as part of simplifying brackets, that could even out. Overall, people are paying too much to taxes, and it is never enough.....

[Carl]

How much of anyone's income does .gov have a right to?

NONE.

[RitaRose1945]

Is it fair that marginal tax rates increase as one's earnings increase?  If so, how high should the top bracket be?  Deductions for mortgage interest, and property and state taxes help bring those high rates down a notch, although the AMT usually kicks in and still extracts an extra pound of flesh. 

I don't think it is fair, and I'm not even close to high tax bracket.  I'd be thrilled if we went to a flat tax and got rid of the menagerie of "special people" tax breaks.

How much of anyone's income does .gov have a right to?

However much we, as a group, decide we need to run emergency services like EMTs and things we (almost all) use like roads and law enforcement and judges and regulatory agencies like the EPA that make it so we can breath without sucking in chunks of pollution.

[Smurf Hunter]

The .gov wants more property tax base, so they have an incentive to encourage home ownership.  So in a weird way, the FED .gov gives us a deduction, so we are more motivated to buy a home, and fund our LOCAL .gov.

Why can't the FED just give money to the LOCAL directly???

[Carl]

The .gov wants more property tax base, so they have an incentive to encourage home ownership.  So in a weird way, the FED .gov gives us a deduction, so we are more motivated to buy a home, and fund our LOCAL .gov.

Why can't the FED just give money to the LOCAL directly???

Because they can't GIVE what they don't first TAKE MORE of......

[LVWood]

Because they can't GIVE what they don't first TAKE MORE of......

And that's the truth...

[iam4liberty]

This gets back to topic on this post, an area like this is the people who do use the income tax deduction as they are paying ALOT of interest on a mortgage, because housing prices are a very large part of peoples pay. 50% of pay to rent/mortgage is on the low end, I think an awful lot are paying way more, and then are at the produce distribution weekly, etc...

Yes, and this is geographically concentrated in a few markets where regulations have created a market distortion.  The  interest is directly determined by the underlying cost.  And the underlying cost in these markets is driven by political decisions on land use (Not In My Backyard syndrome) not real scarcity.  This is one of the few things I agreed with former president Obama on...you have to stop the underlying political driver...regulations driving up the costs and stoping new housing from being developed.  Then the whole mortgage deduction becomes moot like it is in the vast majority of the country.

https://www.forbes.com/sites/scottbeyer/2016/09/30/the-verdict-is-in-land-use-regulations-increase-housing-costs/#6f7800d94162

This past Monday, September 26, could prove to be a landmark day in the political discussion about urban America's housing woes. On that day, the connection between land-use regulations and higher housing costs, long made by urbanist bloggers and think-tankers, was finally acknowledged by a sitting president, when the Obama administration published the report "Housing Development Toolkit." Rather than echoing past presidential administrations, and thinking up all the ways that the federal government could subsidize homeownership, the report listed why homes are so expensive in the first place: restrictive zoning, bureaucratic delay and other regulations. The report laid out a 10-point plan for how expensive major metro areas can reduce their housing prices, mainly by liberalizing their markets to increase supply.
...
“that in much of America the price of housing is quite close to the marginal, physical costs of new construction. The price of housing is significantly higher than construction costs only in a limited number of areas, such as California and some eastern cities,” with “zoning and other land use controls, play[ing] the dominant role in making housing expensive.”


http://www.mercurynews.com/2017/08/12/housing-crisis-will-california-force-its-cities-to-ok-more-building/

Housing crisis: Will California force its cities to OK more building?
State lawmakers are desperate to address a statewide problem that has been decades in the making.

Amid a housing crisis that is displacing the poor and forcing millennials and countless others to look outside the Bay Area to live, all eyes turned this week to the tiny Peninsula town of Brisbane where a developer wants to build thousands of homes on a 684-acre swath of wasteland.

Powerful tech companies, state lawmakers and pro-growth activists from around the region implored the City Council on Monday to allow housing on land once used as a rail yard and a landfill ​— an idea many residents oppose. But after hearing passionate arguments from both sides, the City Council shelved the decision, prolonging a land-use debate that has dragged on since 2005.

“There is a paralysis when it comes to decisions about housing, and the Brisbane project is the poster child for that,” said Matt Regan of the Bay Area Council, a business-sponsored public policy group.
In the nine-county Bay Area, the median price for a single-family home has topped $800,000. And nearly one-third of renters statewide — 1.5 million households — spend more than half their income on rent, according to state estimates.

As soon as next week, lawmakers are expected to unveil a package of affordable-housing bills that will include new tools to prod cities and counties to add their share of housing — at least, in theory.

“I think that many of my colleagues understand that individual decisions by city councils and boards of supervisors are having an extremely negative and detrimental impact on our region,” said Assemblyman David Chiu, a former San Francisco supervisor who chairs the Assembly’s housing committee. “When you have so many decisions going the wrong way on proposed housing that meets all local laws and planning and zoning requirements we have to do something different.”

[mountainmoma]

Yes, there is a parcel of land in Brisbane that could be developed.

But, this is an anomaly, for the most part, it is NOT a political decision, for most of the bay area, there is no more land. I live out here, and drive thru these places, etc..... Look at a map of where SanFrancisco is located, water on 3 sides, on down that peninsula, the bay on one side, and mountains on the other. What small bits that can be found, like that one in Brisbane, would be a drop in the bucket for the demand out here.

[RitaRose1945]

I wonder if people in other states, especially on the east coast, understand how truly massive California is.  And as I said, it's not like you can just drop a city in an unused area.  The reason it's still unused is because it's very likely completely unusable.

It's like in the Vegas area - so much land around, but most of it is not suitable because it's either owned by the BLM/military/USFS, a ridiculous amount of miles away from water (river, aquifer - any type) or consists of about two inches of sandy soil above several feet of solid caliche.  I have literally gardened with a jackhammer in both California and Nevada. 

And with no water for miles and miles and miles, there's no industry, and with no industry, there's no way to make a living and pay even a nominal house payment in the outlying areas.  When you do find the smaller town on the outskirts, there's usually a very large portion of the population supported by either welfare, disability or social security payments, not employment earnings.

[iam4liberty]

I wonder if people in other states, especially on the east coast, understand how truly massive California is.  And as I said, it's not like you can just drop a city in an unused area.  The reason it's still unused is because it's very likely completely unusable.

Well, i routinely travel all over the country.  i have had clients in both San Francisco and LA and have probably spent a couple years there if i counted up all the travel days.  From what i have seen it is exactly like the experts cite, an unwillingness to let the market respond to the needs.  What does California have to lose by adopting more reasonable land use policies?  Why cant developers be allowed to "build up" in some areas to provide housing for younger, less affluent people?  Like all the experts aay, it makes no sense.

[iam4liberty]

https://www.bizjournals.com/sanjose/news/2017/02/16/bay-area-housing-prices-crisis-regulation.html

Should a Bay Area house really cost $300K?
California's housing prices overinflated by regulatory hurdles, building laws, report says


The Bay Area is too expensive to live in because the region's housing crunch is worsened by overly-restrictive building laws and regulatory hurdles, a new report says.

The New York Times asked in an article this week, "Why Does It Cost So Much to Live in California?" It parsed data from a paper by two economists, Ed Glaeser and Joe Gyourko, that found that in coastal metropolitan areas (including San Francisco), that most projects proposed for housing drag on for years because of the state's onerous regulatory framework.

"As the chart shows, the worst discrepancy is the San Francisco metropolitan area, where a standard house should cost about $300,000 — but in reality is more like $800,000 (based on 2013 figures)," the Times reports. "Next comes cities and counties in coastal Southern California — basically a band of overpriced housing that stretches downward from Ventura to the San Diego border."

That research paper, "The Economic Implications of Housing Supply," argues that once a project has gone through years of environmental reviews and restrictive state and local regulatory hurdles, the housing it then puts on the market is vastly overpriced.

"The result is overpayment on a grand scale for the few homes that do get built. Their figures are theoretical, and people are sure to disagree with them," the Times reports.

"The broader point — which isn’t remotely controversial — is that California cities have some of the most restrictive building laws in the nation, and this is a big reason why the state’s per capita home supply is 49th out of 50 states, and why it costs so much to live here."

[mountainmoma]

What they have to lose is the character and liveablity, such as it is, of what they have now ! San francisco is Sanfrancisco and not New York or LA due to its historic neighborhoods, etc... And, they did just build a new high rise apartment building, and it is sinking...

The smaller cities feel the same way, they have height restrictions in established neighborhoods. they do not want to become nothing but high rise apartments with no yards. On the other hand, they do build new multistory apartments and condos in the urban core areas by transit.

People who live in existing single family home neighborhoods have ALOT to lose by letting zoning change ! They would no longer live in a single family home neighborhood, some developer would by a house and put in a 10 story condo building next to them ! Is that what you think San Jose and Palo Alto, etc... should do ? DO you realy think the people who live in those neighborhoods would agree to such zoning changes ? If they had nothing to lose, why wouldnt they ? Because, they do have something to lose in terms of lifestyle in that neighborhood.

I lived in Silicon Valley proper for about 20 years. Including in a very nice, one of the most desireable, single family home neighborhoods. A place where you have large yards, tree lined streets and can walk to the library and shops. There would be an awful lot to lose by changing zoning to allow multistory dense condos to replace the single family homes. The entire neighborhood would become something else entirely, and not be anywhere near as liveable ! I cant imagine residents allowing such a thing, and why would they ? People actually prefer to live in a nice, safe neighborhood where the kids rollerskate on the sidewalks, play in teh back yard, and they know their neighbors.....

[iam4liberty]

What they have to lose is the character and liveablity, such as it is, of what they have now ! San francisco is Sanfrancisco and not New York or LA due to its historic neighborhoods, etc...

Agreed, it s a choice.  They are using the force of government to suppress housing development driving up the price of housing.  This Not In My Backyard approach feeds a haves vs. have-nots dichotomy with the have-nots being pushed to the streets.




And the federal tax code is being used to force people in the other states to subsidize this practice.  So we end up with a tax at the federal level whose purpose isn't to fund the public good but to transfer wealth from lower wage workers in the central part of the country to higher wage workers in these areas. 



Hence the impetus across much of the country to reset the tax system to get back to a more fair and honest approach where the consequences of these local political decisions are felt where they occur rather than exported to others.  It would be a smart thing for people in these areas to prep for some economic shocks as tax reform moves forward.

[Smurf Hunter]

I get it. You think I'm a mooch.

Maybe in the aggregate, longer term scheme of things you are correct.  However you can't fault people for defending their near term interests.
Should I forfeit a large chunk of my personal wealth as an act of altruism?

Because it's not just the annual deduction, if this "entitlement" went away, real estate prices would drop in some of these high cost markets.
Then I could lose the last several years of equity I've gain - or maybe more.

[Morning Sunshine]

Another issue with building houses in California: water.

It is NOT unlimited, and the rest of in the western half of the country are getting pretty paranoid about our water.  California (and Las Vegas) are wanting more and more of our water supplies.  If our state .gov sells the water to CA, because money, we are not allowed to use it even if it is a stream flowing through our land.

I remember some CA liberal (wish I could remember who; may not have even been a CA, but she was from a coast) a few years ago complaining that when she flies over the middle of the country and looks down, she sees plenty of open places where we can build refugee spaces.  What she and many on the populated coasts do not understand: those open spaces feed the rest of the country.  And we need water to be able to do so.  Water does not just fall from the sky all the time.  It is usually only a few months a year and we have to carefully conserve that to last the whole year.

[Smurf Hunter]

Some positive news: After a few months of ZERO rain, outside of Seattle it rained last night.  Hard to believe SEATTLE went nearly a quarter with no rainfall.

[Carl]

  I remember a TV documentary about some desert people who would spend their entire lives wandering the desert looking for food and water.
They were seeking donations for food and such for these poor people who apparently could not just travel to a place that had food and water.
This also explains why no one yet,unless you believe Alex Jones,lives on the moon.