Is there a need for Rental Houses in Palo Alto? Palo Alto Issues, posted by TK Davis, a member of the Palo Alto High School community, on Feb 25, 2008 at 8:52 pm
My mother lives in Palo Alto, she is elderly and must be placed in a assisted care home question is:
I want to rent out her 3br/2ba, Eikler house. I have checked Mercury News, Chronicle and Craig's list for rentals in Palo Alto. I found ONE. Looks like community needs rentals or am I looking in wrong media for rentals. Any feedback would be appreciated.
Posted by 14k/yr, a member of the Jordan Middle School community, on Feb 25, 2008 at 10:16 pm
I think the rental arrangement you are proposing is bad for the community. I all likelikehood, you will add several children to the school system, but add nothing to the school budget in property taxes. Your rental profits will go to Sacramento and Washington, not to Palo Alto.
Posted by Lois, a resident of the Midtown neighborhood, on Feb 26, 2008 at 6:32 am
Forty percent of Palo Alto's housing stock is rental. In my neighborhood the percentage is probably higher. To give you some idea of rents, the 3 bedroom, 1 bath, small 1,300 sq. ft. house next door to me rents for $2,500 per month with a deposit of $3,500. An Eickler near me rents for $3,500 per month!! And, no neither of the tenants have children!!!
14/yr: the landlord pays property taxes on the house just like the rest of us property owners, which goes to support the schools.
Posted by Terry, a resident of the Midtown neighborhood, on Feb 26, 2008 at 7:33 am
The curse of prop 13 - the house "turns over" with a new generation, but with a frozen assessment. So sure, they pay taxes - at a small fraction of the actual cost of the services used by those who live there. It is unfair and unsustainable.
Posted by perspective, a resident of the Midtown neighborhood, on Feb 26, 2008 at 8:20 am
Good grief, Terry et al.
You are really, really bitter people who don't understand how the housing economy and taxes work.
In 20 years, long after your children are out of the schools, you will still be paying the same taxes on your property for the schools, yet having no children in the schools.
Of course, you will have leveled off or decreased your income earnings.
And, of course, you will be SO happy when your taxes are quadrupled because enough bitter people who bought into the area, under the game rules, decide to change the rules of the game and force you to pay "market value" taxes. In 20 years, your house will be quadruple the monetary value of today. Assume you are paying 10,000/year....ready to pay 40,000/year in 20 years? 80,000/year in 40 years?
You better start saving your money up to pay the taxes, cuz you guys are really, really bitter and just might get what you are looking for.
Posted by perspective, a resident of the Midtown neighborhood, on Feb 26, 2008 at 11:10 am
14,000/year only if the value of the houses doesn't go down..which they will if we overturn prop 13.
There will be a glut of houses. watch the free-fall!
be ready, all ye who have owned homes more than 4 years, you will lose at least some of the increase in value of your homes if the bitter-folks win...
I have noticed that after about 5 years of owning a home the bitter "let's overturn prop 13" folks get really quiet. No problem, though, they are replaced by the next crop of people who didn't learn to live by the rules of the game they joined.
Posted by Parent, a resident of Another Palo Alto neighborhood, on Feb 26, 2008 at 12:36 pm
Whether it is a good thing or a bad thing is irrelevant. There is a huge demand for family sized rental homes in Palo Alto. In my own neighborhood, several families are renting from elderly people who need the income to pay for their assisted living. Several of my kids' friends live in rental properties. People come here for the schools and if they are unable to afford to buy, then they will rent.
One thing to be ready about, with renters, if they need even the slightest repair done, they call on the landlord (probably you in this case) to come and do the work. Get some good advice before entering into a rental agreement and make sure who does what. Even who looks after mowing the grass. Simple things, but if you don't make it clear, these things become huge problems.
Posted by Terry, a resident of the Midtown neighborhood, on Feb 26, 2008 at 12:55 pm
Perspective, I'm not bitter - maybe you are projecting ;-)
Prop 13 is the policy, it is just bad policy. It may benefit you (a lot) but that doesn't make it good. It locks people into properties, turns owners into absentee renters, and drives up the cost for new buyers (purchase price and taxes).
And oh yeah, it is unfair - if two households use about the same amount of resource, they should pay about the same amount of tax. Property values are a (somewhat progressive) proxy for that. Prop 13 turns it on its head, where people with high equity values pay far less than people with very low equity - so it becomes highly regressive. The idea that two neighbors with similar houses pay wildly different tax rates - it just doesn't make
Hopefully, just as New York and Boston threw off the yoke of rent control, California will get its act together and toss off the yoke of Proposition 13.
Posted by palo alto mom, a resident of the Crescent Park neighborhood, on Feb 26, 2008 at 1:16 pm
Here's a crazy example of how inequitable taxes can be, 2 families with school age kids, living side by side, similar houses. One family' taxes are almost 100K a year, one is about 25K a year. Ok, big houses, people who can probably easily afford the taxes, but a ridiculous difference.
Posted by common sense, a resident of the Midtown neighborhood, on Feb 26, 2008 at 9:51 pm
Prop 13 main benefit is that a home owner can budget with a high degree of certainty their housing expense, just like a 30 year fixed mortgage.
Prior to Prop 13, there was no "checks & balances" on what local government would tax. Seniors were getting taxed out of their homes through increasing assessments. An example of "checks and balances" is the recent decisions on the Public Safety building. The city through a long and thoughtful process decided to use the revenue from the city budget to fund the construction, rather than try to pass more taxes. If Prop 13 were not in place, the city government would find it all too easy to add taxes.
Posted by Terry, a resident of the Midtown neighborhood, on Feb 26, 2008 at 10:17 pm
Common Sense, other jurisdictions came up with much less ham-handed ways of dealing with this problem. Massachusetts in 1980 passed Prop 2 1/2, which limits the total tax vs. assessed value and the rate of increase in total taxes. It works fine. Assessment go up slowly, but equally across all homes. If a senior can't pay, there is a deferment program. Values tripled there over 15 years, but you didn't hear anything about seniors being turned out of their homes.
It is hard to justify Prop 13 for keeping seniors from being priced out when there is no residency requirement! Hence all the rental property - absentee owners simply hanging on to an appreciating property with low tax basis. Where's the sense in that??
Posted by OhlonePar, a resident of the Duveneck/St. Francis neighborhood, on Feb 26, 2008 at 11:45 pm
OH jeez, people!
C'mon, yes, Palo Alto needs rentals. A lot of renters would love to buy here, but they're priced out of the market. HOWEVER, people who eventually buy in Palo Alto often start out as renters. Sometimes, they even buy the rental in question.
It's bad enough to be a renter around here and deal with the sneers--but to blamed for the inequities of property taxes?
I hate to think how long I had to rent here before we could afford to buy. The only reason that Palo Alto has the economic diversity it has is because it has rentals. I mean, Stanford, alone, means that we need rentals in Palo Alto. I don't think we should expect people who are here for five years of graduate work to have to buy.
Those elderly landlords don't tend to sell for various reasons--they don't need a huge surge in income, for one thing, and they're trying to pass down assets to their kids (who do tend to sell). There's nothing new about this. It existed before Prop. 13 and will continue no doubt.
Eventually, the property comes on the market. Meanwhile, someone has a chance to live where they want to live.
Posted by Terry, a resident of the Midtown neighborhood, on Feb 27, 2008 at 12:11 am
OP, I can tell you from first-hand knowledge that similar towns to PA outside California have a fraction of its rental properties, since owners are not highly incented to hold on to properties. And, what do you know, purchase prices are lower, in part because inventory is not tied up in rental units. So fewer renters, but more happy (and resident) owners. It's a good thing.
Posted by Renter, a resident of the Old Palo Alto neighborhood, on Feb 27, 2008 at 12:37 am
Terry and OP,
What are your feelings about landlords who live in foreign countries (mostly Asia) who buy many residential properties here as investment property. I know of at least two in my neighborhood. Our landlord owns at least 9 properties in Palo Alto, as well as other properties in the Bay Area. He lives in Taiwan. He has owned most of these properties for 12 years, and keeps buying more.
We also know of another foreign based buyer who outbid us on three homes within a 12 month period. We simply cannot outbid wealthy foreign investment corporations and spec home builders.
It's sad, since this is my hometown.
We both work in Palo Alto, and are very involved in our schools and community, but we simply cannot outbid wealthy corporations.
Holding onto homes 9 homes for 12 years is not helpful to our community, city, state, and federal government. We are unsure if our landlord reports his income. The money is wired into his bank account.
Posted by common sense, a resident of the Midtown neighborhood, on Feb 27, 2008 at 7:15 am
Even with prop 13, Palo Alto has one of the highest per student funding in Silicon Valley, and one of the highest per capita spending with the City Budget.
Without prop 13, and the certainty it provides for property owners, you would either see even higher rents, or less rentals. City government, if given taxation versus using existing revenue to fund various projects, will always default towards the use of taxation. Prop 13 forces them to justify their proposed taxation increases.
Posted by Jayne, a resident of the Midtown neighborhood, on Feb 27, 2008 at 7:23 am
Ditto in my neighborhood a house was bought by a person in Hong Kong. He installed his high school kid in the house so he could go to Gunn. The kid has now graduated, and the Hong Kong owner uses the house as rental property. I have no idea if these foreign owners pay city, state and Federal taxes.
Posted by Ex-renter, a resident of Another Palo Alto neighborhood, on Feb 27, 2008 at 9:04 am
When we moved to Palo Alto, to be near work, we had property which took a while to sell on the East Coast and took on a charming rental 3 bed, 1 bath on a short term. The elderly owners had moved out and were keeping the house in case one of their kids wanted to move back to the area. We liked the area and stayed in the house longer than planned even after our EC property sold. After sometime the house was put on the market to sell and for various reasons, we did not buy it. It was bought by a Chinese family who were delighted that they already had sitting tenants who wanted to stay in the house. They only wanted it for investment/income.
Then we decided to buy and this house was no longer available for us to buy so we bought another bigger house locally.
As I stated above, it was a charming rental, mature landscaping which we had worked on ourselves. The house though small only needed painting and a few small upgrades in our opinion before it was ready for new tenants. Instead of doing the work and keeping the character, the landlord decided to rip out all the character, pulled off shutters and other extras that made the place look special, pulled out all the mature landscaping and fruit trees and painted the stark almost skeleton like house.
The house has since had a string of non-family renters and I know from contact with the neighbors that there have been problems.
Posted by Ex-renter, a resident of Another Palo Alto neighborhood, on Feb 27, 2008 at 9:07 am
(Pressed submit too soon)
From the above, I can see that renting out property can be a difficult thing.
Yes, getting a nice family who look after the house is a good thing and there should be plenty around who want that. Keep the house family orientated and a family will want to live there. Take away the charm and it will be rented by those who need a bedroom, kitchen and bathroom and little else.
Renting from seniors can work out nicely for both parties until such time as the property needs to be sold.
Renting from those who look on the house as an investment for themselves can be a very difficult thing to do as the landlord does not care about the house or about the tenants, just about his bottom line.
Posted by Change Prop 13, a resident of the College Terrace neighborhood, on Feb 27, 2008 at 1:13 pm
Ideally Prop 13 should only have been applied to someone's principal residence and not to all properties. Investment property should be taxed to reflect current market value. After all landlords charge market rent regardless of what they pay for taxes.
Posted by Been there, done that, a resident of the Midtown neighborhood, on Feb 27, 2008 at 2:00 pm
As a former landlord in Palo Alto (I live here in a primary residence, but used to have another home that I rented), I can say that I feel very liberated to get out of the landlord hassle. There was always a certain tension that I felt, like late night phone calls to fix a light bulb, change out sprinkler heads, mediate disputes with neighbors, argue about upkeep, etc.
I doubt that I will get much sympathy about this, but I do want to point out one big fact: Whenever taxes went up, I paased them through to the tennanct in increased rents. It is a fallacy that renters do not pay property taxes. These taxes may be delayed, but they are, if possible, incorporated into the rent. Some renters may THINK that they are not affected by increased property taxes, but they are deluded. Thus, to take away Prop 13 protections on non-primry residence properties would only increase the rents.
I feel SO liberated by not being a landlord, anymore!
Posted by Appalled With Public Education, a resident of Another Palo Alto neighborhood, on Feb 27, 2008 at 4:11 pm
> Don't ya think at least $350,000 in my life is a
> decent contribution to our public education system?
Actually, the PAUSD gets only 46 cents on the dollar -- so your contribution is about half of that.
> Don't ya think that $17,000/year per kid is a
> decent amount for public funding of education?
It is probably too much. There is no cost accounting going on at the PAUSD. Why shouldn't the cost per student be as low as possible--just like General Motors strives to keep the costs of its products competitive with those of other countries?
Private sector organizations are always trying to reduce costs and increase quality. The American School Systems, and their supporters, seem to revel in the fact that they increase costs and decrease quality.
The average American school system spends about $9,500 per student. Most school supports are always demanding more money -- and never producing anything for the increased funding.
Posted by 14k/yr, a member of the Jordan Middle School community, on Feb 27, 2008 at 7:48 pm
Sorry Wow, you need to relax.
I have nothing against people renting in Palo Alto to gain access to Palo Alto’s allegedly superior schools. The solution is to tax rental properties (and other commercial properties) at market rates, not prevent renting. Landlords do seem to charge market rates to renters. In response to the initial inquiry, I merely pointed out that that renting out a property that generates low revenues for the schools to family with kids is not good for the schools. Unlike the vast majority of California school districts, Palo Alto is basic district (now called an “enhanced revenue” district”). School funding in such districts is a zero-sum game, add more students and keep funding the same, spending per pupil must go down. Keep adding more students without adding funding is recipe for disaster. Unfortunately, we have a school funding system that highly dependent on housing turnover and home price increases. This is not the way “good” school district funding works outside of California.
I find the arguments that property tax increases to landlords would dramatically drive up rents unconvincing. Renting a house/apt from a landlord that is paying low property taxes costs just as much as a comparable property from a landlord that is paying high property taxes. The market is what the market is.
Gee, what would happen if we took the rental scenario to its logical extreme, and all retiree’s left the city and rented out their homes to families full of school children? Answer, Palo would cease to be a basic aid district and shift to Sacramento designated levels of per pupil spending. This change in funding just might have some impact on housing prices. Raising the numbers of students increases the need for more infrastructure. Palo Alto always welcomes yet another bond measure.
The spirited defenses of Prop 13 are not compelling. As Terry clearly points out most Prop 13 defenders rely on a false dichotomy argument. There are far more intelligent ways to control taxes and spending than Prop 13.
As for the comments that Palo Alto spends 17K/student, where are these figures coming from? I think the true figure is about 12K/student, probably less than the national average when you take into account the Bay Area’s high wages. Palo Alto’s per student spending (and school facility quality) is significantly below that of comparable “wealthy” school districts around the country.
Posted by RWE, a resident of the South of Midtown neighborhood, on Feb 28, 2008 at 1:43 pm
Appalled With Public Education: "There is no cost accounting going on at the PAUSD."
There is no cost accounting that accurately measure the benefits of public education. There are too many voices who consistently raise the specter of cost of a public service, without considering the benefits of that service.
Until we see measurements from both sides of the fiscal and social accounting spreadsheets, complaints about cost are rather one-sided.
Posted by perspective, a resident of the Midtown neighborhood, on Feb 28, 2008 at 7:46 pm
PA Mom, that $12,000/year per student is inaccurate. That is operating costs only. The total budget for this last year was $187,000,000 for ..what..11,000-12,000 students.
That runs up to about $17,000/year. Private schools charge enough to cover all expenses, facilities and staff etc, AND make a profit. Public schools play this "talk about operating expenses only" game to make it look like facilities etc aren't really part of the expensing of education ( like we educate kids in the local parks).
So, don't be fooled into believing we are spending only $12,000/year per student.
That said, not saying that all the schools in the nation don't do this, and not saying that more money isn't better, and not saying that we couldn't actually USE more money quite effectively (another hour of school with no homework in elementary school sounds good to me, for example), I simply resent the numbers game, the game that states that we are spending much less educating our kids than we actually are, that is pulled on us gullible folks.
Posted by useful books, a resident of Another Palo Alto neighborhood, on Feb 28, 2008 at 10:55 pm
I'm sorry to interupt this rental property owner lovefest.
Nolo Press writes an excellent book on lardlording and another on tenant's rights. They are inexpensive and I highly recommend them. They also have one on California Evictions that is excellent and I hope you never have to use.
If you have not already done it check out the housing wanted section on Craig's list. We got an excellent set of tenants from there.