4 ms·

It might be easier for residents and elected officials to welcome growth if the city received more tax dollars for doing so. But the opposite is true. Because

by Mz 9y ago

It might be easier for residents and elected officials to welcome growth if the city received more tax dollars for doing so. But the opposite is true. Because of tax limits established in 1978 by Proposition 13, local governments generally receive more revenue from sales and hotel room taxes than property taxes. Proposition 13 limited property tax rates to 1% of a home’s taxable value and restricted how quickly that taxable value could increase after a purchase. Last year, Brisbane hired a consultant who found that the city would net $1 million a year in tax revenue by approving the Baylands. But if the city instead approved a project with lots more commercial space, a larger hotel and no housing, Brisbane would gain $9 million annually — an amount equivalent to more than half the city’s current day-to-day operating budget. I have suggested before that tax incentives are part of why we have this issue. This isn't exactly the way I figured it was screwing things up, but it is evidence that tax structures are part of the problem.

dragonwriter 9y ago
Low fixed property taxes means cities rely on sales and use tax, which means retail is favored and housing disfavored. Prop 13 ruins everything.
- kqr2 9y ago
  Prop 13 is the big elephant in the room. Repealing Prop 13 and rent control would probably align everybody's incentives to keep housing "affordable". Owners would probably welcome higher density housing to help keep property taxes down. Renters would likewise welcome more housing to increase the rental supply. However, there doesn't really seem to be a way to actually repeal any of these laws.
  - s73ver 9y ago
    Problem being, a lot of people would get absolutely screwed by that, and end up losing their home. There needs to be a way to fix that, without going back to the original problem Prop 13 was intended to fix, which was people being unable to afford the property tax on homes that they had been living in forever.
    - true_religion 9y ago
      Why wouldn't phasing it out across 10 to 15 year period to mitigate the effects, not take care of the bulk of the problem? If we'd begun a phase out in 2000, during the height of the tech boom, then by now Prop 13 would be gone and the housing situation would be much different.
    - dragonwriter 9y ago
      > Problem being, a lot of people would get absolutely screwed by that, and end up losing their home. Would there be many? Certainly, there were some cases pre-prop 13, but prop 13 wasn't narrowly focussed on protecting homeowners. Those were exploited as pretext, they weren't the motivation. And you could make it protect homeowners while fixing the local government incentives by providing a refundable state income tax credit for 100% of the property tax due to assessed value increases beyond the existing Prop 13 limits. You could do this without or without, modifying the 1% fixed rate. If you don't want that big of a subsidy, you could just allow homeowners to defer without penalty the excess amount until transfer of the property. Still stops people from being priced out of their homes.
      - getemback 9y ago
        In retrospect, even the pretext was bunk. It turns out that turfing old people out of their giant, valuable houses is a benefit rather than a problem. Today, thanks to Prop 13, Boomers are massively over-housed.
    - ericd 9y ago
      You can phase it in over time, and you can give a property tax exemption to the elderly. The current structure is a large windfall for a lot of people that it wasn't meant to be a windfall for.
    - thephyber 9y ago
      It's fine to examine the negative effects of repeal, but you also have to consider the negative effects of not repealing. Prop13 is a monster that will continue to exacerbate inequality. Families that owned homes in affluent areas pre-1970 will continue to pay artificially suppressed property tax rates in perpetuity, so long as they only transfer the house within their immediate family. In that way, Prop13 is a perverse incentive to suppress real estate transactions, which exacerbates the real estate issues we already have.

by Mz 9y ago

dragonwriter 9y ago

Low fixed property taxes means cities rely on sales and use tax, which means retail is favored and housing disfavored. Prop 13 ruins everything.

kqr2 9y ago
Prop 13 is the big elephant in the room. Repealing Prop 13 and rent control would probably align everybody's incentives to keep housing "affordable". Owners would probably welcome higher density housing to help keep property taxes down. Renters would likewise welcome more housing to increase the rental supply. However, there doesn't really seem to be a way to actually repeal any of these laws.
- s73ver 9y ago
  Problem being, a lot of people would get absolutely screwed by that, and end up losing their home. There needs to be a way to fix that, without going back to the original problem Prop 13 was intended to fix, which was people being unable to afford the property tax on homes that they had been living in forever.
  - true_religion 9y ago
    Why wouldn't phasing it out across 10 to 15 year period to mitigate the effects, not take care of the bulk of the problem? If we'd begun a phase out in 2000, during the height of the tech boom, then by now Prop 13 would be gone and the housing situation would be much different.
  - dragonwriter 9y ago
    > Problem being, a lot of people would get absolutely screwed by that, and end up losing their home. Would there be many? Certainly, there were some cases pre-prop 13, but prop 13 wasn't narrowly focussed on protecting homeowners. Those were exploited as pretext, they weren't the motivation. And you could make it protect homeowners while fixing the local government incentives by providing a refundable state income tax credit for 100% of the property tax due to assessed value increases beyond the existing Prop 13 limits. You could do this without or without, modifying the 1% fixed rate. If you don't want that big of a subsidy, you could just allow homeowners to defer without penalty the excess amount until transfer of the property. Still stops people from being priced out of their homes.
    - getemback 9y ago
      In retrospect, even the pretext was bunk. It turns out that turfing old people out of their giant, valuable houses is a benefit rather than a problem. Today, thanks to Prop 13, Boomers are massively over-housed.
  - ericd 9y ago
    You can phase it in over time, and you can give a property tax exemption to the elderly. The current structure is a large windfall for a lot of people that it wasn't meant to be a windfall for.
  - thephyber 9y ago
    It's fine to examine the negative effects of repeal, but you also have to consider the negative effects of not repealing. Prop13 is a monster that will continue to exacerbate inequality. Families that owned homes in affluent areas pre-1970 will continue to pay artificially suppressed property tax rates in perpetuity, so long as they only transfer the house within their immediate family. In that way, Prop13 is a perverse incentive to suppress real estate transactions, which exacerbates the real estate issues we already have.