The Anecdotal “Buyback Effect”

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Here’s another little tidbit about this house. According to the algorithms, this place is currently worth $1,400,000. Rent for a property like this is assumed to be $4,500, although that number is substantially too low in my experience. Public records show property taxes on this house are $766 per year. That’s a consequence of Proposition 13, a 1978 tax revolt that caps property tax at the value of the house on the day it was purchased, plus a 2% annual increase, rather than present value.

That one law is probably what’s keeping a lot of older folks in their homes as prices reached for the stars over the decades, which is exactly what the law was designed to do. But it had unintended consequences. In order to make up for the lost revenue, the city has found all sorts of alternative income streams, not least of which is to massively jack up the cost of new building permits. This same couple couldn’t duplicate the construction of their own home today largely because the culture and economy that existed in 1953 is entirely gone.

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