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CA property tax increases are limited to 2% a year and only get re-assessed after a change of ownership or new construction. https://en.wikipedia.org/wiki/Cali

• Balgair 11y ago
  Bingo. Prop 13 is the elephant in the room that is not mentioned. All discussions of CA property markets have this giant red flag in them. It very much distorts the free markets.
  • ghaff 11y ago
    Not to argue in favor of all aspects of Prop 13, but the alternative of just letting valuations for property taxes float with the market means that a lot of people who own houses and have lived in them for a long time get forced out of their communities by increasing taxes. Which I don't see as generally a good thing.
    • vonmoltke 11y ago
      The alternative is to do what Florida did: cap only primary residences. Why California extended the freeze to all property is beyond me.
      • prostoalex 11y ago
        The largest non-primary residence sector is the residential property for rent. Considering that any tax increase very quickly finds its way into a rent increase, what's the rationale for punishing renters? It's almost a double whammy for someone who wants to buy a house, but can't afford the current prices or was outbid by a cash buyer going over asking price. Cheer up as we've incorporated the price increase into your rent.
        • dragonwriter 11y ago
          > The largest non-primary residence sector is the residential property for rent. Considering that any tax increase very quickly finds its way into a rent increase, what's the rationale for punishing renters? So, treat primary residences as primary residences, whether or not they are the primary residence of the property owner. For multi-unit rental properties, the total value of the property is divided among units proportionately to the rent charged for each unit to assess this.
          • prostoalex 11y ago
            Is your primary goal here to extract more revenue from timeshare owners and people who own a pied-à-terre? Don't those constitute negligible portion of California real estate market (as opposed to some places like Hawaii, where absentee ownership is significant and property taxes on timeshare / second home owners are very high)? While it's probably not a bad idea, I don't see it moving the needle much.
            • dragonwriter 11y ago
              > Is your primary goal here to extract more revenue from timeshare owners and people who own a pied-à-terre? I'm discussing ways to achieve the goal upthread of insulating people from property tax uncertainty on their primary residence. I would expect that the larger purpose of that is to allow full-value taxation on all other real property; of which non-primary-residence residential property is a subset (and a fairly small subset, at that.) Remember that Prop 13 applies to all real property, not just residential property.
              • ap3 11y ago
                Biggest issue is it applies to commercial property too
        • laurencerowe 11y ago
          > The largest non-primary residence sector is the residential property for rent. Considering that any tax increase very quickly finds its way into a rent increase, what's the rationale for punishing renters? Assuming we're talking free markets, then the rent should already be set at the maximum price the market will bear. (If not the landlord is leaving money on the table.) Increasing property taxes is to depress the price of real estate. A simple property tax could also discourage new investment, while a land value tax incentivizes owners to maximize the value of their holdings.
    • ryandrake 11y ago
      This happens to renters when the market rate rises. If you can't afford to live somewhere, you go live somewhere else. This applies to everything else governed by a market, why shouldn't it apply to property taxes? Prop 13 is a blatant wealth transfer between people who are new to the area (mostly the young) to the people who were originally here (mostly the old).
      • JoshTriplett 11y ago
        > This applies to everything else governed by a market, why shouldn't it apply to property taxes? Taxes aren't governed by a market; the same rules don't apply. Arguments against government protectionism in markets don't also apply to protection against the actions of the government itself. That said, proposition 13 doesn't seem like a good implementation of this. There's no good reason for a sudden increase upon sale; that breaks the ability to buy a home. There should be a hard cap on property taxes that doesn't change on sale. Why should taxes get to increase without bound or control on existing property? Once you've paid off your home, you should not have an ever-growing expense to keep it. (You shouldn't have an expense to keep it at all, but that's a separate argument.)
        • ryandrake 11y ago
          Property taxes are based on property values, which are governed by a market. My view is that property taxes fund the very things that make a particular neighborhood desirable, like good schools, roads, parks, and other local services. Your property's value is what it is because of these things, and you shouldn't be able to reap these benefits without paying taxes proportional to the value you've captured.
          • ghaff 11y ago
            They typically mostly fund schools, which long-time home owners generally aren't even using. One of the whole reasons to buy property is to have some long-term residential stability, which doesn't happen if property taxes can increase rapidly. If I'm holding onto my home, I've only captured value in a theoretical sense. I don't have any cash to pay for the increased property taxes until I sell.
    • JoshTriplett 11y ago
      Oregon solved this problem differently: there's a hard annual cap on property tax increases period, which doesn't change when the property changes hands. That prevents people from being taxed out of their home, without creating a situation that makes it hard for people to buy new homes.
      • presto8 11y ago
        The Oregon system started out with good intentions but ended up being devilishly complicated to understand and unfair to many people. It's probably a great case study in the long-term unintended consequences of laws intended to control real estate taxes. The Deschutes (Oregon) County Tax Assessor's office made a really good video explaining how three almost identical houses in the same location can have completely different tax bills: https://www.youtube.com/watch?v=Fo_hSySAC2A https://www.youtube.com/watch?v=Fo_hSySAC2A In addition to what the video says, I wanted to point out that the 3% hard annual cap you mention is only on the property's Maximum Assessed Value, which is only one of the many inputs into the computation for a property's tax bill. For example, one thing that can cause taxes to go up more than 3% are general bonds approved by voter measure. Portland Commissioner Steve Novick also wrote a really good article about all of the problems with Oregon's tax system and made some recommendations: https://www.portlandoregon.gov/novick/article/428020 https://www.portlandoregon.gov/novick/article/428020
  • deleted 11y ago
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  • rconti 11y ago
    Our property taxes are still actually pretty low -- around 1%. My sister just bought a house in Ohio for 20% what our Bay Area house host, but their taxes are more than half as much as ours. In fact, their taxes are half their mortgage while ours are practically negligible.
    • brianwawok 11y ago
      I mean schools need funded somehow.. many states fund them almost all through property taxes. A lot of places I have lived capped property tax at 2% of market value. In Ohio are their taxes significantly higher than 2% of property value? I wonder if they have tax missing somewhere else, like no local income tax or something... Ohio doesn't strike me as a high tax zone.
  • dreamdu5t 11y ago
    Taxation distorts the free market. Prop 13 is not an elephant in the room, everyone knows about it and it's a hot topic of public discussion even long after it was passed.
• brianwawok 11y ago
  Ah that is pretty nice if you got in a hot area before a boom. Kinda like rent-control in a NYC apartment where you pay 1/4 what your neighbor pays.
• zach 11y ago
  For those unfamiliar, you can think of Prop. 13 as an effective cartel to discourage people from selling their property. Basically, it subsidizes keeping property and never selling it. This is because every year the owner's property taxes essentially go down, presuming any normal level of inflation. And because of follow-on propositions, you can transfer that advantage from parents to children. Yes, this does let existing residents stay somewhere indefinitely. Equivalently, we can say it strongly discourages mobility. The crazy real estate prices you see are simply a result of the proposition-established cartel. This drives up prices for new arrivals, which California depends on to keep this going, which makes the people holding on to their property think two things: "I'm rich because my home is worth so much" and "I could never get by without Prop. 13 because my home is worth so much." This has made Prop. 13 untouchable — it would basically have to be overturned at the state Supreme Court level at the behest of broad popular opinion. However, this is just another bubble. California as a state has done relatively quite well in the last thirty years, so it continues to inflate. However, California and local governments have also spent a huge amount of future revenue on state workers, so it has become harder to sustain. But for the huge amount of income tax receipts from the investment class of California, things would already be in rough shape. Someday, the bubble will burst. If Prop. 13 was ruled unconstitutional tomorrow, it would cause a real estate crisis, followed by an economic crisis, that is hard to imagine. But that might be preferable to having Prop. 13 crumble in the middle of a statewide economic crisis, which is the most likely ending of this story. In the meantime, yes, it does keep grandma in her tidily-appreciating house instead of some filthy tech hipsters chasing the next gold rush.