10 ms·

Prop 13, Or, California's Progressive Blindspot Illuminated

122 points by bufordsharkley 10y ago

matt4077 10y ago
I fail to find the connection between the first half of the article criticizing Prop 13, and the second half listing the sins of supposed "progressives". I mean – you can certainly argue that people are wrong to try to protect the unique character of their neighborhood. But that argument seems to be completely separate from Prop 13, except maybe with regards to the line of "protecting incumbent residents".
- bufordsharkley 10y ago
  The connection: without Prop 13, a decision to protect neighborhood character would have an explicit trade-off for residents-- their decision not to develop would lead to scarcity in developable land and thus higher land values, and thus higher property taxes. When this is decoupled, residents (who control all zoning decisions) have every incentive to approve every anti-housing measure, insofar as they're insulated from the costs.
  - URSpider94 10y ago
    I see the author's point, but having lived in MA, which strives to keep assessed property values very accurate and very much in line with the market value, people there were just as rabid about keeping out new development. Ultimately, any increase in property tax is offset 100-fold by increases in home value, and both are probably eclipsed by the emotional desire to live in "a nice neighborhood" In short, while I would fully support the repeal of Prop 13, I don't think it would suddenly result in an about-face on zoning policy to limit home price appreciation.
    - bufordsharkley 10y ago
      Interesting point. Out of curiosity, what's the property tax rate in these communities?
      - URSpider94 10y ago
        In Wellesley, MA, its 1.183% In Cambridge, MA, its .69 percent (down from .83 percent in 2015 !!!), with an exemption on the first $277,000 in value. These are communities with top-notch schools and amenities, and a state-wide income tax rate half that of California's.
      - URSpider94 10y ago
        To elaborate ... MA is the the original home of direct democracy. Towns in the state hold annual town meetings, with a committee of the whole coming together to vote on key issues. In addition, they have a fair number of ballot referenda, but not as many as CA. MA has its own "Prop 2 1/2" which caps real estate taxes at 2.5% of assessed value, and limits annual increases in the total assessment to 2.5%. Quite literally, the cities and towns are continuously re-assessing their property base, and literally re-set the tax rate on an annual basis to deliver the revenue that they need to run the town. Thus, you see Cambridge's rate plunging by 25% year over year, presumably as property values on high-dollar properties have boomed. This gives lie to the idea that politicians would just take the increased taxes from higher property values as a windfall. In actuality, the tax burden is redistributed as real estate wealth is created.
  - ericd 10y ago
    In fact, they're not just insulated from the costs, but their house appreciates in value significantly, which means they can later sell it for much more than they would otherwise. The voters have voted themselves a huge windfall.
honkhonkpants 10y ago
Bit of a rant. The site is the mouthpiece of people who are suing the city of Lafayette, for violating state law by not building enough housing.
- bufordsharkley 10y ago
  It's an editorial, for sure. And yes, the site is connected with the Yimby Party[0] and SFBARF[1], who have been featured in HN before.[2] FWIW, I helped put together the website, which uses Armin Ronacher's Lektor CMS.[3] And as far as this has gone, it's been a tremendous success, for putting together a straightforward news site that is usable for both tech-savvy operators as well as those unacquainted with the command-line. [0] http://www.sfyimby.org/ http://www.sfyimby.org/ [1] http://www.sfbarf.org/ http://www.sfbarf.org/ [2] https://news.ycombinator.com/item?id=12310151 https://news.ycombinator.com/item?id=12310151 [3] https://www.getlektor.com/ https://www.getlektor.com/
  - mslate 10y ago
    Keep it up--you're making amazing content
    - bufordsharkley 10y ago
      I can't take any credit for the site's content (aside from the time I live-tweeted a Palo Alto City Council meeting)[0]-- my hat is certainly off to the journalism that site has come to provide, covering stories one won't find anywhere else. [0] http://sfbamo.com/news/tweets-from-the-front-palo-alto-city-council-coverage/ http://sfbamo.com/news/tweets-from-the-front-palo-alto-city-...
- dasil003 10y ago
  Good! I'm glad there's an organization out there representing my viewpoint. I'm a "tech worker" who moved here for a job, and I'm pretty sick of being the scapegoat for the housing woes while half my income goes to my landlord who enjoys the benefit of being perceived as an upstanding long-term member of the community as he grows fat suckling at my teat.
brandur 10y ago
The article comes off as a little rant-y, but I found it to be quite an enjoyable read. A lot of sources water down prop 13 as "maybe bad", but any of us who've moved to San Francisco (or even California) in the past 5-10 years should be far more outraged about the situation than we are. This guy is eminently quotable too: > “Revolt” sounds too noble to me, even “populist.” I prefer to call it feudalism. And on the popular anti-tech sentiment: > New, young computer programmers with six-figure salaries may easy to scapegoat as the emblem of the Bay Area’s 21st Century inequality, but even if they can afford real estate, their privilege is chump change compared to that of pre-1979 homebuyers and their descendants. A few key observations in there: * The power imbalance between buyers and renters in the country is already bad due to the interest rate deductions, but Prop 13 adds insult to injury. While rent control (for renters) is not widespread, owners in California (who are often the upper class stratas, especially in the Bay Area) have built-in rent control everywhere, forever. You can even pass it down to your kids! * He uses the term BMR (Below Market Rate) instead of "affordable housing". There's been a concerted attempt by politicians to conflate these terms to buy more populist votes. As noted in the article, an important aspect of BMR is that its cost is passed on to new buyers; the perfect political tool: a tax that's not called a tax! * Many of the local anti-development politicians are riding off the aforementioned "feudal" privilege. Kudos to the author for pulling information on a few of them. Of course the data is anecdotal, but it's amazing how many of these high-income people inherited their primary residence from their parents during their working lifetimes. That's very hard to imagine in most of North America.
- jmspring 10y ago
  The biggest issue with Prop 13 is the allowance for commercial properties. Prop 13 for protecting individual residential property owners on a fixed income from escalating "assessed" property values makes a good deal of sense. Especially in a state like California, if left unchecked, would be raising all sorts of taxes and fees for failed experiments. (Note - born/raised/ life long Bay Area resident) Prop 13 needs a revision to exempt commercial property...
  - Camillo 10y ago
    No. The biggest issue is the enormous and growing transfer of wealth from people engaged in productive economic activity to a caste of rentiers who extract money while producing nothing. This is what is meant by feudalism, and it manages to be bad both in terms of justice and in terms of economic efficiency. From this point of view, commercial property is at least used for economic activity. Exempting it from Prop 13 would reduce inequitable treatment of different commercial property owners, yes, but it would also impose yet another burden on productive activity, and ultimately on the overtaxed serfs. Instead of reducing feudalism, it would exacerbate it. No, the biggest problem is precisely residential property.
disposablezero 10y ago
TL;DR Prop 13 main focus was it reduced property tax increases to a fixed level because retired residents were being gentrified out of their homes when they could no longer afford to pay taxes on their increasingly valuable homes. My grandparents benefited from this enormously as they bought a home in 1968 near Los Gatos for $30,000 and it's now worth over $1,000,000 but they have Prop 13 and so are able to afford property taxes. Most anyone whom moves loses this protection, so residents tend to cling to their homes because of the fear of losing Prop 13, and so many very elderly residents in California rarely, if ever, move. Prop 13 was a half-baked, short-term solution to a terrible issue. Real-estate taxes should be scaled with both income and wealth progressive tests to prevent both obscene burdens and tax dodging, so that they are affordable, encourage people both to attract residents to the state and pay their fair shares, but knowing how Sacramento dances around hardly doing anything, it's unlikely to ever be revisited without a sustained, on-message campaign and buckets of crowdfunded cash.
- bufordsharkley 10y ago
  If you're going to ask me about what should be the case, I'd certainly want to move more towards a land value tax[0], which captures the rental value of the land, but doesn't tax the improvements on top of it. It's agreed upon by many economists and ethicists to be fair, efficient, and consistent with sustainable urban planning and finance. It's arguably the most progressive tax. Prop 13, FWIW, is almost precisely the opposite of a LVT. It's been putting more of the burden of financing California onto income, sales taxes, etc, in order to subsidize landowners. [0] https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
  - refurb 10y ago
    How does that help in the situation of a homeowner not being able to afford their tax bill because their property increased in value?
    - bufordsharkley 10y ago
      How does it help? By creating a competitive market in housing, it should ensure that the housing stock is full enough to create new affordable living for the person to move to. But... does that still mean people might be taxed out of their home? I hope it would be rare, because it is a bummer, but I am convinced that there is no sustainable system in which people wouldn't be "taxed out of their home" in some cases. However, consider that they'd still get a sizeable payout, and plenty of available options in their community. It's the sad truth about land-- if someone is using it inefficiently (which is the case with the single-family households having trouble with property taxes), it's a market signal that the land should be developed more densely...
pascalxus 10y ago
Prop 13 is one of the most Regressive Taxes (not progressive) in the history of housing. You have 2 people living next to each, both got exactly the same house, but one purchased it 20 years ago for 200K, the guy who purchases it today, has to pay 10 times more for the SAME house: 2 million dollars and then to add insult to injury has to pay nearly 10 times more taxes too. If it wanted to be fair, Prop 13 should be exactly the opposite of what it is: it should tax the one who bought the house 10 times cheaper more and the new guy less.
brianglick 10y ago
Beyond the usual "email / write / call your state congressperson," are there any effective ways to lobby for changes to Prop 13?
- tingletech 10y ago
  It only takes a simple majority vote to change it, you just need enough signature to get in on the ballot.
  - bufordsharkley 10y ago
    It's worth noting that the Howard Jarvis Taxpayer's Association[0], the group that originally passed Prop 13, fights for its continued existence as a dedicated lobby, and they're extremely well organized. [0] http://www.hjta.org/ http://www.hjta.org/
h4nkoslo 10y ago
Prop 13 and various forms of taxable money laundering (overseas money dumped into real estate, Other People's Money based VC funds, imported under-market labor...) are the only things keeping this godforsaken state from going Full Venezuela, which is about 10 years from happening anyway due to continuing demographic decline. If you allow the clowns in the state legislature to raise taxes ad infinitum they will do so, and then wail endlessly about white flight. California Secession Now; they must serve as a warning to others.
ScottBurson 10y ago
Really glad to see this. I've hated Prop. 13 ever since I moved to California in 1986. As I've argued a few times on HN [0] [1], the way it should have been done would have been simply to defer the excess tax until the property was sold, not to simply return it to the homeowner. [0] https://news.ycombinator.com/item?id=12576948 https://news.ycombinator.com/item?id=12576948 [1] https://news.ycombinator.com/item?id=12764264 https://news.ycombinator.com/item?id=12764264
- abritinthebay 10y ago
  Bad solution. You'd just encourage rental at market rate and no-one selling because of the massive tax bill. Basically you'd solve nothing and make it worse.
  - ec109685 10y ago
    People don't live forever.
    - abritinthebay 10y ago
      This is true today, under Prop 13. It doesn't help much.
  - ScottBurson 10y ago
    I take it you didn't read the second link, where I said: No, this wouldn't happen, because the lien is only on 1% of the excess gain (the amount the value increased over 2%). If, for one example, the value jumped in the first year and then went flat, the payment would continue to grow at 2% annually until it caught up to the value. The only scenario that generates a lien larger than the owner's gain is if the market has been up but then drops sharply just before the owner wants to sell -- in short, if there was a bubble. Well, bubbles produce lots of dislocation; I don't think they make for a good argument against this proposal.
    - abritinthebay 10y ago
gozur88 10y ago
California is rapacious enough without removing the one protection residents have from excess taxation.
- mikeyouse 10y ago
  The ironic thing is that if we had a sensible property tax system, sales and income taxes could be lowered quite a bit and our governments would have much more consistent funding.
  - gozur88 10y ago
    Well, I suppose that's possible. But before Prop 13 passed sales and income taxes were both high by national standards.
- ericd 10y ago
  Prop 13 makes property taxes, rent, and trying to buy a house much more rapacious for newcomers by artificially boosting property values.
  - gozur88 10y ago
    Artificially? How so?
    - ericd 10y ago
      The law restricts supply, which drives up prices.
dstainer 10y ago
There are a bunch of things that bother me with regards to the discussion against Prop 13. - There are older folks that have owned their homes for over 30+ yrs that are on fixed income that wouldn't be able to absorb increased taxes. My grandparents would've been in this case. - There are folks that are middle class folks, think central California that couldn't absorb increased taxes. - The variability year to year dealing with the assessments makes it difficult to plan for the potential increase in taxes. Look at what happened in Cook County in Illinois. Some homeowners were facing thousands of dollars of taxes none of them were prepared to pay. The argument of telling someone to just move if they can't afford the taxes doesn't fly with me. Because I would just put it back on those individuals, you don't like the housing prices... Get out of the bay area. I mean I know you can go to Bakersfield get a palace for 500-600K. Case in point, brand new construction 462k 4BR, 3BA (http://www.zillow.com/community/camden-cove-pinnacle-series/2096193763_zpid/ http://www.zillow.com/community/camden-cove-pinnacle-series/...) I think there are ways to address some of the issues without a blanket reversal of Prop 13, because this would effect more than just the bay area. So what potential changes could you make. Couple of ideas: - Transfer of property through inheritance would be subject to re-assessment. At that point the original owners have presumably passed and the new owners aren't necessarily living in the property. If the taxes were adjusted to the current property value that decreases the profit from just renting the home. - Remove the applicability to commercial properties. Other articles on the subject that I've read, describe techniques that people use to try to game the re-assessment of a property through exchanges of corporate entities, eliminate that practice, especially for homes that are zoned residential. - If the issue is around vacancy, do what Vancouver did, tax vacant properties. If there is an abundant supply of vacant homes, force rental of those homes through taxing of vacant homes. That increased the supply of available homes, depressing rent and lowered home prices within a few weeks of its enactment. I'm not saying at all that Prop 13 is perfect and no doubt there is abuse of the rules. I'd focus on closing the loopholes around transfers of property first before trying to change something that would affect every single homeowner.
- ec109685 10y ago
  You are assuming taxes would uniformally go up. If everyone was paying equally, many places would see a reduction (see the MA example elsewhere in the comments).
abritinthebay 10y ago
Can anyone tell me why a maximum tax growth isn't a better solution? Same idea but cap it at.. 2-3% a year or something? Would protect buyers from wild swings but allow growth in tax revenue over time. It's the lock-in that's the issue, surely?
- Kaizyn 10y ago
  This doesn't help fixed income home owners who Prop 13 was designed to protect.
  - abritinthebay 10y ago
    My ass it was designed that way. It was sold that way and continues to be lobbied that way because it's an easy emotional sell. But designed? No. Also then fix it just for fixed income as an exception. Or make it a tax credit you can claim from state. There are a ton of really easy and trivial solutions that any legislation that was designed to solve that problem could of used. It didn't - they knew what they were doing.
gumby 10y ago
Regardless of what I think of prop 13, this article is not mathematically sound. In a non-hyper-constrained market (consider the Central Valley for example), prop 13 also helps hold down rents; the cost of owning a rental property does not go up due to property tax rise. Thus if there is competition for renters, prices stabilize. As taxes are part of the op ex (along with fixing the roof etc), renters pay them -- they are just built into the rent. The reason this doesn't apply to a place like SF is that the tax assessment is in the noise: a severe shortage of places raises the price. If the tax assessment were adjusted normally, rents would go UP. I benefit from Prop 13 in multiple ways: not only has my property tax been largely fixed, but I live in a neighborhood of people who've mostly lived in their homes for decades. It makes for a nice mix of ages from 20s to 70s. Those on a fixed income would have been forced out, and while it's nice to have new neighbors move in the stability is valuable to me as a QoL issue. (Prop 13 has screwed up things like school funding and the like as well -- I'm quite aware of its problems. This screed simply doesn't get into them).
s0rce 10y ago
Having moved to the bay area for work Prop 13 seems like a great injustice to newcomers. However, having learned about how prop 13 was originally sold I'm particularly curious why elderly fixed income people expect to stay in large very expensive homes throughout their retirement/death. I grew up in Toronto and once people's kids grew up and left the house they would often move into much smaller affordable condos. These had fewer stairs and much less maintenance. There wasn't the same need to retire/die in the house you raised your kids in, its a ton of maintenance for too much space anyways. Why do elderly folks on fixed income in CA want to keep their homes forever, is it because there are no smaller condos in the same neighborhood (development problem) or because they expect the property value to increase enough to warrant keeping the home. The later doesn't seem to apply in Toronto as home values in Toronto have skyrocketed...

122 points by bufordsharkley 10y ago

I fail to find the connection between the first half of the article criticizing Prop 13, and the second half listing the sins of supposed "progressives". I mean – you can certainly argue that people are wrong to try to protect the unique character of their neighborhood. But that argument seems to be completely separate from Prop 13, except maybe with regards to the line of "protecting incumbent residents".

bufordsharkley 10y ago
The connection: without Prop 13, a decision to protect neighborhood character would have an explicit trade-off for residents-- their decision not to develop would lead to scarcity in developable land and thus higher land values, and thus higher property taxes. When this is decoupled, residents (who control all zoning decisions) have every incentive to approve every anti-housing measure, insofar as they're insulated from the costs.
- URSpider94 10y ago
  I see the author's point, but having lived in MA, which strives to keep assessed property values very accurate and very much in line with the market value, people there were just as rabid about keeping out new development. Ultimately, any increase in property tax is offset 100-fold by increases in home value, and both are probably eclipsed by the emotional desire to live in "a nice neighborhood" In short, while I would fully support the repeal of Prop 13, I don't think it would suddenly result in an about-face on zoning policy to limit home price appreciation.
  - bufordsharkley 10y ago
    Interesting point. Out of curiosity, what's the property tax rate in these communities?
    - URSpider94 10y ago
      In Wellesley, MA, its 1.183% In Cambridge, MA, its .69 percent (down from .83 percent in 2015 !!!), with an exemption on the first $277,000 in value. These are communities with top-notch schools and amenities, and a state-wide income tax rate half that of California's.
    - URSpider94 10y ago
      To elaborate ... MA is the the original home of direct democracy. Towns in the state hold annual town meetings, with a committee of the whole coming together to vote on key issues. In addition, they have a fair number of ballot referenda, but not as many as CA. MA has its own "Prop 2 1/2" which caps real estate taxes at 2.5% of assessed value, and limits annual increases in the total assessment to 2.5%. Quite literally, the cities and towns are continuously re-assessing their property base, and literally re-set the tax rate on an annual basis to deliver the revenue that they need to run the town. Thus, you see Cambridge's rate plunging by 25% year over year, presumably as property values on high-dollar properties have boomed. This gives lie to the idea that politicians would just take the increased taxes from higher property values as a windfall. In actuality, the tax burden is redistributed as real estate wealth is created.
- ericd 10y ago
  In fact, they're not just insulated from the costs, but their house appreciates in value significantly, which means they can later sell it for much more than they would otherwise. The voters have voted themselves a huge windfall.

honkhonkpants 10y ago

Bit of a rant. The site is the mouthpiece of people who are suing the city of Lafayette, for violating state law by not building enough housing.

bufordsharkley 10y ago
It's an editorial, for sure. And yes, the site is connected with the Yimby Party[0] and SFBARF[1], who have been featured in HN before.[2] FWIW, I helped put together the website, which uses Armin Ronacher's Lektor CMS.[3] And as far as this has gone, it's been a tremendous success, for putting together a straightforward news site that is usable for both tech-savvy operators as well as those unacquainted with the command-line. [0] http://www.sfyimby.org/ http://www.sfyimby.org/ [1] http://www.sfbarf.org/ http://www.sfbarf.org/ [2] https://news.ycombinator.com/item?id=12310151 https://news.ycombinator.com/item?id=12310151 [3] https://www.getlektor.com/ https://www.getlektor.com/
- mslate 10y ago
  Keep it up--you're making amazing content
  - bufordsharkley 10y ago
    I can't take any credit for the site's content (aside from the time I live-tweeted a Palo Alto City Council meeting)[0]-- my hat is certainly off to the journalism that site has come to provide, covering stories one won't find anywhere else. [0] http://sfbamo.com/news/tweets-from-the-front-palo-alto-city-council-coverage/ http://sfbamo.com/news/tweets-from-the-front-palo-alto-city-...
dasil003 10y ago
Good! I'm glad there's an organization out there representing my viewpoint. I'm a "tech worker" who moved here for a job, and I'm pretty sick of being the scapegoat for the housing woes while half my income goes to my landlord who enjoys the benefit of being perceived as an upstanding long-term member of the community as he grows fat suckling at my teat.

brandur 10y ago

The article comes off as a little rant-y, but I found it to be quite an enjoyable read. A lot of sources water down prop 13 as "maybe bad", but any of us who've moved to San Francisco (or even California) in the past 5-10 years should be far more outraged about the situation than we are. This guy is eminently quotable too: > “Revolt” sounds too noble to me, even “populist.” I prefer to call it feudalism. And on the popular anti-tech sentiment: > New, young computer programmers with six-figure salaries may easy to scapegoat as the emblem of the Bay Area’s 21st Century inequality, but even if they can afford real estate, their privilege is chump change compared to that of pre-1979 homebuyers and their descendants. A few key observations in there: * The power imbalance between buyers and renters in the country is already bad due to the interest rate deductions, but Prop 13 adds insult to injury. While rent control (for renters) is not widespread, owners in California (who are often the upper class stratas, especially in the Bay Area) have built-in rent control everywhere, forever. You can even pass it down to your kids! * He uses the term BMR (Below Market Rate) instead of "affordable housing". There's been a concerted attempt by politicians to conflate these terms to buy more populist votes. As noted in the article, an important aspect of BMR is that its cost is passed on to new buyers; the perfect political tool: a tax that's not called a tax! * Many of the local anti-development politicians are riding off the aforementioned "feudal" privilege. Kudos to the author for pulling information on a few of them. Of course the data is anecdotal, but it's amazing how many of these high-income people inherited their primary residence from their parents during their working lifetimes. That's very hard to imagine in most of North America.

jmspring 10y ago
The biggest issue with Prop 13 is the allowance for commercial properties. Prop 13 for protecting individual residential property owners on a fixed income from escalating "assessed" property values makes a good deal of sense. Especially in a state like California, if left unchecked, would be raising all sorts of taxes and fees for failed experiments. (Note - born/raised/ life long Bay Area resident) Prop 13 needs a revision to exempt commercial property...
- Camillo 10y ago
  No. The biggest issue is the enormous and growing transfer of wealth from people engaged in productive economic activity to a caste of rentiers who extract money while producing nothing. This is what is meant by feudalism, and it manages to be bad both in terms of justice and in terms of economic efficiency. From this point of view, commercial property is at least used for economic activity. Exempting it from Prop 13 would reduce inequitable treatment of different commercial property owners, yes, but it would also impose yet another burden on productive activity, and ultimately on the overtaxed serfs. Instead of reducing feudalism, it would exacerbate it. No, the biggest problem is precisely residential property.

disposablezero 10y ago

TL;DR Prop 13 main focus was it reduced property tax increases to a fixed level because retired residents were being gentrified out of their homes when they could no longer afford to pay taxes on their increasingly valuable homes. My grandparents benefited from this enormously as they bought a home in 1968 near Los Gatos for $30,000 and it's now worth over $1,000,000 but they have Prop 13 and so are able to afford property taxes. Most anyone whom moves loses this protection, so residents tend to cling to their homes because of the fear of losing Prop 13, and so many very elderly residents in California rarely, if ever, move. Prop 13 was a half-baked, short-term solution to a terrible issue. Real-estate taxes should be scaled with both income and wealth progressive tests to prevent both obscene burdens and tax dodging, so that they are affordable, encourage people both to attract residents to the state and pay their fair shares, but knowing how Sacramento dances around hardly doing anything, it's unlikely to ever be revisited without a sustained, on-message campaign and buckets of crowdfunded cash.

bufordsharkley 10y ago
If you're going to ask me about what should be the case, I'd certainly want to move more towards a land value tax[0], which captures the rental value of the land, but doesn't tax the improvements on top of it. It's agreed upon by many economists and ethicists to be fair, efficient, and consistent with sustainable urban planning and finance. It's arguably the most progressive tax. Prop 13, FWIW, is almost precisely the opposite of a LVT. It's been putting more of the burden of financing California onto income, sales taxes, etc, in order to subsidize landowners. [0] https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
- refurb 10y ago
  How does that help in the situation of a homeowner not being able to afford their tax bill because their property increased in value?
  - bufordsharkley 10y ago
    How does it help? By creating a competitive market in housing, it should ensure that the housing stock is full enough to create new affordable living for the person to move to. But... does that still mean people might be taxed out of their home? I hope it would be rare, because it is a bummer, but I am convinced that there is no sustainable system in which people wouldn't be "taxed out of their home" in some cases. However, consider that they'd still get a sizeable payout, and plenty of available options in their community. It's the sad truth about land-- if someone is using it inefficiently (which is the case with the single-family households having trouble with property taxes), it's a market signal that the land should be developed more densely...

pascalxus 10y ago

Prop 13 is one of the most Regressive Taxes (not progressive) in the history of housing. You have 2 people living next to each, both got exactly the same house, but one purchased it 20 years ago for 200K, the guy who purchases it today, has to pay 10 times more for the SAME house: 2 million dollars and then to add insult to injury has to pay nearly 10 times more taxes too. If it wanted to be fair, Prop 13 should be exactly the opposite of what it is: it should tax the one who bought the house 10 times cheaper more and the new guy less.

brianglick 10y ago

Beyond the usual "email / write / call your state congressperson," are there any effective ways to lobby for changes to Prop 13?

tingletech 10y ago
It only takes a simple majority vote to change it, you just need enough signature to get in on the ballot.
- bufordsharkley 10y ago
  It's worth noting that the Howard Jarvis Taxpayer's Association[0], the group that originally passed Prop 13, fights for its continued existence as a dedicated lobby, and they're extremely well organized. [0] http://www.hjta.org/ http://www.hjta.org/

h4nkoslo 10y ago

Prop 13 and various forms of taxable money laundering (overseas money dumped into real estate, Other People's Money based VC funds, imported under-market labor...) are the only things keeping this godforsaken state from going Full Venezuela, which is about 10 years from happening anyway due to continuing demographic decline. If you allow the clowns in the state legislature to raise taxes ad infinitum they will do so, and then wail endlessly about white flight. California Secession Now; they must serve as a warning to others.

ScottBurson 10y ago

Really glad to see this. I've hated Prop. 13 ever since I moved to California in 1986. As I've argued a few times on HN [0] [1], the way it should have been done would have been simply to defer the excess tax until the property was sold, not to simply return it to the homeowner. [0] https://news.ycombinator.com/item?id=12576948 https://news.ycombinator.com/item?id=12576948 [1] https://news.ycombinator.com/item?id=12764264 https://news.ycombinator.com/item?id=12764264

abritinthebay 10y ago
Bad solution. You'd just encourage rental at market rate and no-one selling because of the massive tax bill. Basically you'd solve nothing and make it worse.
- ec109685 10y ago
  People don't live forever.
  - abritinthebay 10y ago
    This is true today, under Prop 13. It doesn't help much.
- ScottBurson 10y ago
  I take it you didn't read the second link, where I said: No, this wouldn't happen, because the lien is only on 1% of the excess gain (the amount the value increased over 2%). If, for one example, the value jumped in the first year and then went flat, the payment would continue to grow at 2% annually until it caught up to the value. The only scenario that generates a lien larger than the owner's gain is if the market has been up but then drops sharply just before the owner wants to sell -- in short, if there was a bubble. Well, bubbles produce lots of dislocation; I don't think they make for a good argument against this proposal.
  - abritinthebay 10y ago

gozur88 10y ago

California is rapacious enough without removing the one protection residents have from excess taxation.

mikeyouse 10y ago
The ironic thing is that if we had a sensible property tax system, sales and income taxes could be lowered quite a bit and our governments would have much more consistent funding.
- gozur88 10y ago
  Well, I suppose that's possible. But before Prop 13 passed sales and income taxes were both high by national standards.
ericd 10y ago
Prop 13 makes property taxes, rent, and trying to buy a house much more rapacious for newcomers by artificially boosting property values.
- gozur88 10y ago
  Artificially? How so?
  - ericd 10y ago
    The law restricts supply, which drives up prices.

dstainer 10y ago

There are a bunch of things that bother me with regards to the discussion against Prop 13. - There are older folks that have owned their homes for over 30+ yrs that are on fixed income that wouldn't be able to absorb increased taxes. My grandparents would've been in this case. - There are folks that are middle class folks, think central California that couldn't absorb increased taxes. - The variability year to year dealing with the assessments makes it difficult to plan for the potential increase in taxes. Look at what happened in Cook County in Illinois. Some homeowners were facing thousands of dollars of taxes none of them were prepared to pay. The argument of telling someone to just move if they can't afford the taxes doesn't fly with me. Because I would just put it back on those individuals, you don't like the housing prices... Get out of the bay area. I mean I know you can go to Bakersfield get a palace for 500-600K. Case in point, brand new construction 462k 4BR, 3BA (http://www.zillow.com/community/camden-cove-pinnacle-series/2096193763_zpid/ http://www.zillow.com/community/camden-cove-pinnacle-series/...) I think there are ways to address some of the issues without a blanket reversal of Prop 13, because this would effect more than just the bay area. So what potential changes could you make. Couple of ideas: - Transfer of property through inheritance would be subject to re-assessment. At that point the original owners have presumably passed and the new owners aren't necessarily living in the property. If the taxes were adjusted to the current property value that decreases the profit from just renting the home. - Remove the applicability to commercial properties. Other articles on the subject that I've read, describe techniques that people use to try to game the re-assessment of a property through exchanges of corporate entities, eliminate that practice, especially for homes that are zoned residential. - If the issue is around vacancy, do what Vancouver did, tax vacant properties. If there is an abundant supply of vacant homes, force rental of those homes through taxing of vacant homes. That increased the supply of available homes, depressing rent and lowered home prices within a few weeks of its enactment. I'm not saying at all that Prop 13 is perfect and no doubt there is abuse of the rules. I'd focus on closing the loopholes around transfers of property first before trying to change something that would affect every single homeowner.

ec109685 10y ago
You are assuming taxes would uniformally go up. If everyone was paying equally, many places would see a reduction (see the MA example elsewhere in the comments).

abritinthebay 10y ago

Can anyone tell me why a maximum tax growth isn't a better solution? Same idea but cap it at.. 2-3% a year or something? Would protect buyers from wild swings but allow growth in tax revenue over time. It's the lock-in that's the issue, surely?

Kaizyn 10y ago
This doesn't help fixed income home owners who Prop 13 was designed to protect.
- abritinthebay 10y ago
  My ass it was designed that way. It was sold that way and continues to be lobbied that way because it's an easy emotional sell. But designed? No. Also then fix it just for fixed income as an exception. Or make it a tax credit you can claim from state. There are a ton of really easy and trivial solutions that any legislation that was designed to solve that problem could of used. It didn't - they knew what they were doing.

gumby 10y ago

Regardless of what I think of prop 13, this article is not mathematically sound. In a non-hyper-constrained market (consider the Central Valley for example), prop 13 also helps hold down rents; the cost of owning a rental property does not go up due to property tax rise. Thus if there is competition for renters, prices stabilize. As taxes are part of the op ex (along with fixing the roof etc), renters pay them -- they are just built into the rent. The reason this doesn't apply to a place like SF is that the tax assessment is in the noise: a severe shortage of places raises the price. If the tax assessment were adjusted normally, rents would go UP. I benefit from Prop 13 in multiple ways: not only has my property tax been largely fixed, but I live in a neighborhood of people who've mostly lived in their homes for decades. It makes for a nice mix of ages from 20s to 70s. Those on a fixed income would have been forced out, and while it's nice to have new neighbors move in the stability is valuable to me as a QoL issue. (Prop 13 has screwed up things like school funding and the like as well -- I'm quite aware of its problems. This screed simply doesn't get into them).

s0rce 10y ago

Having moved to the bay area for work Prop 13 seems like a great injustice to newcomers. However, having learned about how prop 13 was originally sold I'm particularly curious why elderly fixed income people expect to stay in large very expensive homes throughout their retirement/death. I grew up in Toronto and once people's kids grew up and left the house they would often move into much smaller affordable condos. These had fewer stairs and much less maintenance. There wasn't the same need to retire/die in the house you raised your kids in, its a ton of maintenance for too much space anyways. Why do elderly folks on fixed income in CA want to keep their homes forever, is it because there are no smaller condos in the same neighborhood (development problem) or because they expect the property value to increase enough to warrant keeping the home. The later doesn't seem to apply in Toronto as home values in Toronto have skyrocketed...