From today's Statesman, an article on a new push to fight condos and lofts in East Austin by a group calling itself El Concilio:
The group wants city leaders to establish a 90-day moratorium on new construction of trendy lofts and shops that would increase home values and taxes and could price residents out of their single-family homes. During that time, they want officials to investigate establishing an affordable housing district, new homestead exemptions, and a 15-year tax freeze.
My thoughts:
- Market demand is funny; squeeze it one place, and it pops up somewhere else. That "somewhere else" is East Austin for now. It's the pressure-relief valve for central Austin's housing market.
- Neighborhood activists west of I-35 are aware of #1. El Concilio can expect tepid support from them. (I'd agree with the NAs for once.)
- A 15-year freeze on property taxes is worth a lot of money in a rapidly appreciating market. If the freeze transfers with the property, then it enriches current owners by tens of thousands of dollars. Even if the freeze cannot transfer with the property in a legal sense (a more likely alternative), there are lots of ways around that (subleases, life estates, etc.); in any event, a freeze encourages property owners to hold onto property longer than they otherwise would.
- Regardless of the incentives it creates, a tax freeze requires other taxpayers to subsidize those sitting on rapidly appreciating property.
- Here's a better idea: Continue to assess property tax increases based on the market rate, but defer payment of the increases until sale or transfer, with amounts owed secured by a lien on the property. Charge market interest on the deferred taxes. The city solves the owner's liquidity problem without giving the owner a windfall or an incentive to hold onto the property longer than otherwise. (Reverse mortgages are market products that do the same thing.)
