phantom tollbooths in Davis Sq. ...

[an-art-worker.livejournal.com]

apropos of nothing and not a serious proposal but I was thinking about sales taxes last night, the discussion of tolls on 93 south and something to do with all the border violence going on in the world these days. Suddenly I had this image of tollbooths/checkpoints on the roads entering Davis Sq. Weird but interesting to speculate on.

The growth in popularity of the sq. has brought higher rents and housing prices, higher prices in stores and bars and general gentrification. The city of Somerville and the property owners benefit but the residents don't. Would be interesting to have a toll that went to offset the costs of gentrification to people who actually live here.

Comments

[miss-chance.livejournal.com]

Also: most property owners in Davis are also residents (ie, condo/house owners) and they benefit greatly from increased property values.

As a long time home-owner in Davis Sq (we bought about a decade ago), I'd like to dispute this. My property value keeps going up. yup. And so do my taxes. The only way I could benefit from my property value going up would be to either move out or take out increasingly high home-equity loans. The latter just increases my debt load and keeps me from ever owning my house out-right. We've done it a couple time when the repairs the house needed were expensive and time-critical (need a new roof NOW, can't wait until we can save the money for it, borrow off the value of the house to maintain the value of the house). Sure it's nice that we *can* do that, but it doesn't make us rich.

Or we could cash out. Our house has doubled in value since we bought it. Great. We sell it and go.... where? I have been slowly building a personal and professional network in this area. I have dozens of friends who all live within a mile of my home... most of us settled in this neighborhood because it was affordable and convenient. There's no where within an hour's travel we could move to off the equity from our home, and even if we did sell our house here and go buy in Dorchester, everyone I know would be on the other side of town. I could up and move to Iowa I guess, but I have no family there, no friends, no professional contacts, nothing. Homes are not purely financial transactions. You buy a house when you're ready to put down roots, and it's costly in many different definitions of the word, to pull them out.

Theoretically the increased tax-revenue does benefit me. Sure. I pay a little more in each year, and the services in the neighborhood theoretically get a little better. Maybe someday the city will even buy some snow-removal equipment for sidewalks... maybe by the time I'm walking with a walker, I'll be able to get to the market after a snowstorm without tottering in front of the green-line train that will have just been built up through Somerville. We chose to live in this neighborhood because we could afford it. If the benefits that would, indeed, be nice come along at the cost of it becoming a neighborhood I can't afford to live in any more, and I have to pull up roots, how exactly do I benefit?

My grandparents built the house they lived in on a large farm-plot on Martha's Vineyard out of the money they made cleaning houses, selling eggs from their chickens, and taking tourists out on their little boat. By the time that house landed in my father's hands the property value was so high (and thus the taxes) that the only way he could afford to hold onto and maintain it, has become to rent it out year round to people who would not give us the time of day on the street.

Sure. We own a house on the Vineyard, that makes us "rich." Great. The only way that could benefit us financially would be to sell the house my grandfather built with his two hands and that my uncles were born in. I haven't spent a night in it since I was 12 (and that was a *long* time ago).

This is not to say that improving neighborhood is "bad." Gentrification can be a wonderful thing, and often, long-term, benefits a community... it's just short-sighted and overly simplistic to assume that property owners *always* benefit from it within their life times, or even that of their grandchildren.

[rollzroix.livejournal.com]

Not to dispute your larger point, but I always like to make a point about Somerville to people who may be renters or have never owned a home in another community. Residential property taxes in Somerville, if you are an owner-occupier, are actually exceptionally LOW. The city grants an exemption to owner-occupiers that basically amounts to the 1st $145,000 or so (I'm not sure exactly what it is this year) of your assessment being tax free. That means if your house is assessed at $345,000, you are only paying taxes on $200,000. The current annual tax for my home in Somerville is actually more than $1,000 LESS than I used to pay in Worcester for my considerably less valuable home there.

I don't know if this applies to condos as well but I assume it does.

[clevernonsense.livejournal.com]

That's like saying I get no benefit from my 401K because I cannot spend the money in there.

Increased property values = increased personal wealth for the owner of that property. Period. Just because the money is currently locked away does not mean it isn't there. Circumstances that make it less appealing to cash out don't make that value disappear either.

You can't eat market value!

[turil.livejournal.com]

But values fluctuate. So the house may be worth a ton now, but in 40 years it may be worthless. A 401K is far less likely to become worthless...

Re: You can't eat market value!

[komos.livejournal.com]

Curious. I was under the impression that real estate was the most stable investment by far. I also find it hard to believe that a house will drop half of its value in the course of a few months - which my 401k did immediately following 9/11. It's since stabilized, to be sure, but it did certainly raise an eyebrow.

Re: You can't eat market value!

[turil.livejournal.com]

Real Estate is pretty stable, but the bubble that caused the skyrocketing values in the past decade here was an anomoly. If you buy low and sell high, then you're good.

And I'm sorry to hear about your 401K! I know nothing about such fancy things, and just assumed that they were stable investments like my own retirement fund (with a fixed interest rate).

Re: You can't eat market value!

[komos.livejournal.com]

Generally speaking, real estate values may slow and possibly stagnate, but it's rare that they will outright decline without some significant triggering event.

Re: You can't eat market value!

[ukelele.livejournal.com]

The stock market goes up at a fairly steady 10% a year when looked at over a long enough time span, but is susceptible to enormous fluctuations over a period of a few years, particularly if you're aggressively invested. This makes it a fine way to invest for retirement when it's still several decades away, but you need to shift to less stock markety things, or at least much more conservative stocks, as retirement nears. Some people found this out the really hard way during the dotcom bust.

Re: You can't eat market value!

[rmd.livejournal.com]

for most people, "owning" real estate actually means "owning a small piece of it and then paying the bank over 30 years for the rest of it"

real estate doesn't have to drop by half to screw you up. it just has to drop by enough that those folks who have loans outstanding on properties can't pay off the loan with the money they'd make selling the house.

if you can't afford to keep it and you can't afford to sell it... what do you do?

Re: You can't eat market value!

[miss-chance.livejournal.com]

rmd (unsurprisingly) nails it on the head.

Re: You can't eat market value!

[komos.livejournal.com]

Which would be great, except that the scenario described doesn't apply at all to yours. The value of your properties has gone up, not down, and you've indicated that you don't want to sell, not that you can't.

Re: You can't eat market value!

[artic-monkeys.livejournal.com]

you rent out half of it. And then pay for the other half yourself. With the hopes of restoring it back to a single family one day. Unfortunately that would mean less rentals.

[miss-chance.livejournal.com]

That's actually a pretty useful metaphor as it helps to underline the differences between investing in a monetary fund, and investing in a physical place or object. The only value a 401K has is its cash value. When it's time to take the money out, you don't have to pack all your belongings, say goodbye to your garden, your friends, and your neighbors. You don't look at your 401K statements with bittersweet longing, thinking it was a good investment, but it's hard to part with it, now. I personally believe that "investing" in a home in which you live can be fraught, because you have so much else of yourself invested in it, that if you can't afford it anymore, you take a pretty heavy penalty for cashing out. With a 401K there's a penalty for cashing out early, but it's a monetary penalty, so you can compare Apples to Apples: is the amount of money I need (assuming you need it early) worth the cost of losing the tax benefit? With a house you're comparing Apples to Tuesday. It can't be done mathematically.

In my opinion, it's not "wealth" if it can't be spent. Consider a person who works in high tech and gets a big pile of stock options cheap. Day one, she has pieces of paper worth almost nothing. The year progresses, the stock goes public at an astronomically high value, and she's worth a few million bucks. But, because she's a primary stock-holder of the company, she's not legally allowed to sell her stock for another month. Still she's "wealthy" by your definition. A month later, the restriction period has past, but the stock has also plummeted to less than it cost her to buy it.

By your definition, she was really wealthy there for a month, because her stock was worth millions, and then she lost all her wealth when the bubble burst. By my definition, since she couldn't touch that money, couldn't spend it, couldn't leverage it in any way, she was never wealthy in the first place.

Now a house isn't the same as stock that you're not legally able to sell. It *can* be sold, so it's more of a gray area. It's an interesting philosophical point to consider, and I can see aspects of your point of view. The main part of your opinion I can't get behind is the black and white simplicity of it.

[komos.livejournal.com]

Ok, true or false: a person who has $5000 in the bank and owns a home in which they've ten years of equity is better off financially than a person who had $5000 in the bank and currently lives in a rental unit.

[miss-chance.livejournal.com]

sure, in general the person who has the equity is better off...but that wasn't the question. The questions was, starting with a given that a person owns a home and has N years equity in it, is that person ALWAYS better off and does that person ALWAYS benefits when the property values rise quickly? I wasn't arguing that owning property is worse than renting, nor that rising property values cannot be a help, but that the equation that clevernonsense proposes, that "Increased property values = increased personal wealth for the owner of that property. Period." is so simplistic as to be nonsensical.

[komos.livejournal.com]

So the essence of what you're saying is that a homeowner with equity is wealthier than the renter, despite both having precisely the same liquid assets.

That aside, the original point to which you responded was:

Also: most property owners in Davis are also residents (ie, condo/house owners) and they benefit greatly from increased property values.

That is a simple equation which you've not really refuted. You've suggested that increased property values may lead to increased tax burdens, and that they may force uses for the property outside of what you would consider ideal. In no way, however, have you demonstrated that you do not benefit greatly from the rising property values.

You've also listed a great number of things that make it difficult to consider moving from an occupied property which can actually be tied to intangible benefits. I'm sure it would be a lot easier for you to consider selling if you were surrounded by decaying triple-deckers with overgrown yards and there was rampant gang violence in your neighborhood. Instead, you enjoy the relative comfort and safety of a neighborhood that has grown significantly in the past ten years, and has attracted people to whom you've been able to connect. Do you pay for that privilege? Sure! Can you actually say that you don't benefit greatly? You surely can't have chosen to buy in Davis Square in 1996 without being aware that property values were going up, and of the resulting ancillary benefits. If not, why didn't you buy in Dudley Square?

[komos.livejournal.com]

It was likely the overall gentrification of the area and accompanying rise in property values that influenced those residents who have become your personal and professional contacts to gather in the area in the first place. "Benefit" in this case can't be measured solely through monetary gain. There are luxuries like overall quality of life, access to services (commercial and otherwise), relative freedom from crime, and sentimental attachment that all need to be considered prior to saying that there are no immediate benefits to property owners as a result of an area's growth.

The same analysis easily applies to the house on the Vineyard. If your family holds an income property that is earning just enough to pay maintenance, insurance, and property taxes and that is unsatisfactory, then the only two real options are to a) rent it at a higher price or b) sell it. On the other hand, if we take into account that you are able to retain the property for reasons of its sentimental value solely because the property can command that kind of rent, then you are receiving added value. From what you've described, the sentimental value sounds more important than the moneys that could be earned from the sale. I would have loved to have seen my great-grandparents farm in northern Maine remain in the family, but the reality was that any sentiment associated with the place had to take a rear seat to the fact that it was just not economically feasible to maintain the property.

[surrealestate.livejournal.com]

Generally speaking, I agree with you, in that the added value, especially if someone's home is basically their only asset, can be detrimental because of the increase in taxes. It comes in handy most when it's time to sell and other than that doesn't matter much.

Unless the place is also an income property. If someone is in your situation and also has a rental unit, then having the area be more desirable makes a big difference, as the rent you can charge is considerably higher than if your house was in, say, East Somerville.

With a multi-family you also have the option of condo-izing and selling off the other unit, (again, for a far higher price than in other areas) without having to pull up roots or move.