As the search for solutions to the homeless problem continues current property owners and the equity they have in their homes are often cited as targets for funding homelessness relief. What is ignored with these proposed remedies is that homeowners are counting on the equity in their homes to help with retirement or other needs.
Steve Lopez’s Los Angeles Times weekend article took issue with the wealth built up in homes partially because of limited housing stock while renters face difficult options.
While Lopez cited obstacles to housing reforms, he quoted two professors who suggested ways to find funding for homeless housing. One proposal was a “a tiered transfer tax on equity” promoted by Carol Galante of U.C. Berkeley’s Terner Center for Innovative Housing.
Lopez also spoke with UCLA professor Michael Manville who thinks it is okay to tax property because the increased value of the property has nothing to do with the efforts of the homeowner.
Manville, along with colleagues, wrote an opinion piece for the Los Angeles Times last July urging a $3 a day tax on property owners to build a homelessness fund. That $3 a day amounts to $1095 a year, a sizeable chunk of change for many homeowners who can find good uses for that money including maintaining or improving their homes.
Whether the increased property value comes from a wise investment decision or just dumb luck as Lopez writes, the value belongs to the homeowner. While the homeowner lives in the home, the increased property values are merely paper profits. Increased property value does not necessarily reflect an owner’s ability to pay increased taxes. When the increased property value is claimed it can be the lifeline to a comfortable retirement or for other needs.
While the legislature went down this path recently of charging property owners to help the homeless by creating fees for housing related documents, cutting into potential retirement funds with large annual or transfer taxes is a bad idea.
What’s disturbing is that those who enjoy government provided retirement pensions often suggest these proposals that can undermine a homeowner’s potential retirement fund.