Quote:
Originally Posted by kermitology
No, inner-city homes go for $700k because that's more their market value. I built my house in 2012 in Inglewood and it was about $500k for land and construction. I would list it for somewhere between $700k and $800k (which I will next summer).
The cost of a new build in a new community is artificially lower because they're not paying for their share of infrastructure. The idea is that the new properties will bring in enough tax revenue over their lifetime to offset the capital investment that the city puts into those new communities, as well as the operational costs. But they don't.
Developers front some of those costs (more than they used it until Nenshi), but not all of it. The developer pays for the infrastructure within the community, but the city is responsible for getting that infrastructure connected to the rest of the system. If the city shifted more of that burden onto the consumer by pushing more of it onto the developer, then the cost of the homes would go up a lot more.
These new communities also have lower density than a lot of brownfield communities, so they're cost burden to the city is higher. But increasing the prices of those homes makes them less attractive and evaporates the market for them. It's a bad situation to be in because the city is so far behind.
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I wonder if there are any jurisdictions where property taxes are based on the actual burden to the city, as opposed to being just a % of the property value? On one hand, I do appreciate that making it a % of property value is a progressive tax in a way, insofar as people with higher-value homes probably are more well off and can afford to pay more tax. On the other hand, such a scheme suffers from sprawl - really it's a double-whammy, as homes on the fringes of the city are both lower value (hence pay less tax) and tend to be less dense (hence, more expensive services per household) than inner city homes, as you mentioned. At least if property taxes were based on burden as opposed to based on property value, adding to the sprawl wouldn't necessarily be a financial detriment to the city, though it may depress the price of sprawl homes to an even greater extent and likely would erode the business case for some fringe communities. The main downside I see to burden-based taxation would be the transition to it - ie. lower income people might have bought into suburban communities because that is all they could afford, and if their property taxes go up a lot they may no longer be able to afford living there.