Can the government 'claim' your increased property value?

[Byron Carter]

The term is called "Value Capture" - thank you to posters below.

I bought a house about 6 years ago, in a nice community - and the area around it has been rapidly growing. New hospital, new highway, new mall.. It's really blossoming into an amazing city. My property value has increased about 150% in 6 years.

Now... The talking heads on TV are trying to claim that the government can take any money from you, if you benefit from the increase of property value due to government funded projects, such as the new highway I mentioned before.

 

[VivaRevolution]

I don't know what this practice is called, but I heard it on the news and it's a bit frightening.

I bought a house about 6 years ago, in a nice community - and the area around it has been rapidly growing. New hospital, new highway, new mall.. It's really blossoming into an amazing city. My property value has increased about 150% in 6 years.

Now... The talking heads on TV are trying to claim that the government can take any money from you, if you benefit from the increase of property value due to government funded projects, such as the new highway I mentioned before.

Is this right? Does anyone know what this practice (that's apparently used in New York) is called?

I don't know what it is called, but I have heard people in Washington state say they were forced to have their home value re-assessed, and had to pay more in taxes.

Edit: Also you should have seen what the state did to small farmers about 15 years ago when they implemented this. Some of those 4th deneration farms, were in populated areas, and their small farm was worth millions in property. They couldn't afford those property taxes. Those farms don't exist anymore.

 

[Orgasmo]

Yes it's called property taxes, which is partly based on your property value.

 

[Byron Carter]

Yes it's called property taxes, which is partly based on your property value.

Didn't sound like normal property taxes.

The context was, they were talking about something Trump plans to do - and mentioned how in New York, if the government builds a railroad next to your property, and the property value increases because of the railroad, the government gets the money from your homes value increasing - not you.

 

[Orgasmo]

Didn't sound like normal property taxes.

The context was, they were talking about something Trump plans to do - and mentioned how in New York, if the government builds a railroad next to your property, and the property value increases because of the railroad, the government gets the money from your homes value increasing - not you.

If your property increased in value, the government gains in two ways. The first is property tax, which is like I mentioned partly based on your home value. The second is capital gain tax, which you have to pay when you sell your home.

In some places, you also have to pay a land transfer tax/fee worth about 1% of your property value.

 

[Exception]

Terrifying if true. All of my property purchases will be in places like Iceland if this becomes the norm.

 

[Quipling]

Terrifying if true. All of my property purchases will be in places like Iceland if this becomes the norm.

. . . Iceland also has a property tax.

 

[Exception]

. . . Iceland also has a property tax.

Yes, I'm aware. That fact 1. doesn't change that Iceland is fucking awesome and I like its future and 2. doesn't change that the TS is specifically NOT talking about property tax.

Reading.... do you has it?

 

[Fawlty]

Sounds like TS is about to become a victim of gentrification.

 

[curryjunkie]

Sounds like TS is about to become a victim of gentrification.

i have a cunning plan to forge a banksy on the side of my shed, then flog the wall for thousands

 

[aitkenmike]

It can be a way of part funding large capital projects. Lets say a shopping mall is to be on a newly built rail line, and suddenly it's value goes up 400%, as it's revenue will massively increase. Authorities can use that some of that value uplift (that was created by the authority's project remember, not by the shopping mall owners) to fund some of that project. It is a theoretically a win/win - a valuable project gets built, and some of the private benefit is captured to reduce the public expense, while the private owners still get effort free gains.

Obviously it can be technically challenging to do this fairly, but in theory it is a sound practice.

https://www.greaterauckland.org.nz/2017/07/26/can-value-capture-help-pay-new-infrastructure/

 

[aitkenmike]

Is this right? Does anyone know what this practice (that's apparently used in New York) is called?

It's known as value capture here in NZ, where, as far as I know, it hasn't yet been used, but has been discussed - see above.

 

[Byron Carter]

It can be a way of part funding large capital projects. Lets say a shopping mall is to be on a newly built rail line, and suddenly it's value goes up 400%, as it's revenue will massively increase. Authorities can use that some of that value uplift (that was created by the authority's project remember, not by the shopping mall owners) to fund some of that project. It is a theoretically a win/win - a valuable project gets built, and some of the private benefit is captured to reduce the public expense, while the private owners still get effort free gains.

Obviously it can be technically challenging to do this fairly, but in theory it is a sound practice.

https://www.greaterauckland.org.nz/2017/07/26/can-value-capture-help-pay-new-infrastructure/

Yep, that's the term.


"Value Capture"


And I've got one thing to say to that:

 

[aitkenmike]

Why should you not pay $500,000 to help fund a public project costing $5 billion, if it increases the value of your property by $10million? You still win to the tune of $9.5million and could significantly defray the cost of projects, lowering taxes/rates. To quote a famous statesman out of context (as just about everyone that quote's him does!) "you didn't build that".

 

[Byron Carter]

Why should you not pay $500,000 to help fund a public project costing $5 billion, if it increases the value of your property by $10million? You still win to the tune of $9.5million and could significantly defray the cost of projects, lowering taxes/rates. To quote a famous statesman out of context (as just about everyone that quote's him does!) "you didn't build that".

Well, let's see..

Is this a two way street? If I start a business, that turns out to be a success and attracts people to my city.. will the government give me money? No. Of course not. They'll use that as yet another excuse to take money.

 

[7437]

Why should you not pay $500,000 to help fund a public project costing $5 billion, if it increases the value of your property by $10million? You still win to the tune of $9.5million and could significantly defray the cost of projects, lowering taxes/rates. To quote a famous statesman out of context (as just about everyone that quote's him does!) "you didn't build that".

Its an issue if you dont have 500k on hand

 

[aitkenmike]

Its an issue if you dont have 500k on hand

Fortunately, your asset has just increased massively. I'm sure you can get a loan on 5% of the INCREASE (not in the total value) of the asset. Or fromt the increased revenue streams you would theoretically be getting.

 

[7437]

Fortunately, your asset has just increased massively. I'm sure you can get a loan on 5% of the INCREASE (not in the total value) of the asset. Or fromt the increased revenue streams you would theoretically be getting.

You think a bank is going to issue you a mortgage agai st a theoretical property value increase? Good luck. I hooe you dont have bad credit.


Also needing to get a mortgage to pay the government for theoretical future value os pretty shit.

 

[aitkenmike]

You think a bank is going to issue you a mortgage agai st a theoretical property value increase? Good luck. I hooe you dont have bad credit.


Also needing to get a mortgage to pay the government for theoretical future value os pretty shit.

Um, yes. Banks lend on theoretical property value increases all the time. All property value increases are theoretical until realised.

 

[GSP_37]

I've seen something recently about bitcoin transactions being two transactions: conversion to cash, use of cash to purchase something.

In general, any ascension of wealth is taxable unless there's a specific provision to exempt it from taxation.