9 ms·

Not one mention of Prop 13? Poor reporting. It's basically the rent control story writ large. Everyone who bought in the 20th century has such an "amazing deal

Not one mention of Prop 13? Poor reporting. It's basically the rent control story writ large. Everyone who bought in the 20th century has such an "amazing deal" that they won't give it up unless you a) entice them with a better deal or b) gore their oxen and repeal 13.

closure 8y ago
How does prop 13 cause a housing crisis? It certainly entices people to hold and rent properties they own rather than sell, but those units are still part of the housing stock. I think repealing prop 13 for commercial properties makes sense as a way to raise tax revenue, but don’t see doing so for residential property having an impact on housing costs.
- surfmike 8y ago
  One way: it discourages people from moving to a downsized home when that's appropriate.
- chroma 8y ago
  > How does prop 13 cause a housing crisis? Because it heavily discourages people from selling their houses, reducing turnover and with it the potential for redevelopment. Without prop 13, houses would be re-assessed every few years. The owners' taxes would increase (or decrease) as the value of their home changed. If property values increased enough, the taxes would encourage them to sell the property for a tidy sum and move someplace cheaper. A new buyer is much more likely to demolish and redevelop than the existing owner.
- bufordsharkley 8y ago
  Let's say that your town is considering whether to preserve a zoning policy of all single family homes with a large minimum lot size, or is looking to allow density. What would prevent you from supporting the lower-density option? One reason may be that you are concerned that restricting the development of land would drive scarcity, leading land values to rise (which would cause your property tax to rise). You're effectively forced to pay for the cost of rising land prices. ...Now, if you are sheltered from rising land values, as per Prop 13, you now suffer no repercussions from a downzoning, and in fact may be completely indifferent to how the land market is behaving. Many homeowners are now free to act in their own best interest (which means downzoning), instead of being incentivized to create capacity for more housing.
- tedivm 8y ago
  There's a guy on my street that owns 27 houses, all bought in the 90s. While that guy is getting subsidized income by paying less taxes on high value property he is less likely to sell that property to developers who will build higher density housing. The same can be applied to the people who own vacation or retirement homes out here (there's a surprising amount of vacant property out here). The taxes that aren't being paid by all those people has to be made up for somewhere, so the taxes on new property owners are higher (as are the number if different fees and things like sales tax).
  - dragonwriter 8y ago
    > The taxes that aren't being paid by all those people has to be made up for somewhere, so the taxes on new property owners are higher No, they aren't. Prop 13 limits maximum property tax rates to very low amounts as well as limiting assessment increases, so no jurisdiction is able to make up for artificially low assessments by jacking up the nominal rate. > (as are the number if different fees and things like sales tax). Mostly, it's state income tax, though state and local sales tax are also affected (there are general and program-specific revenue sharing mechanisms by which state revenue goes into local coffers to pay for local programs.)
    - acchow 8y ago
      Property value is reassessed on change-of-ownership. Lower housing stock leads to inflated home prices, causing higher taxes paid by more-recently-purchased homes.
      - dragonwriter 8y ago
        > Property value is reassessed on change-of-ownership. Actually, it's reassessed annually, there is just a limit to annual assessment increases except with qualifying events. Which doesn't change the fact that Prop 13 limited nominal rates to lower values than many jurisdictions (including core Bay Area ones) were before Prop 13; jurisdictions aren't making up with artificially low assessments on long-held properties with higher taxes on other properties. Yes, those other properties are assessed closer to full value, but it's not offsetting anything. If you cut the food you eat on weekdays by 50% and that on weekends by 66%, you aren't making up for the reduced weekend calories by eating more during the week.
- babaganoosh89 8y ago
  Higher property taxes makes housing allocation more efficient as people not using the house, retired people in high cost areas, etc would be incentivized to either sell or rent their house out.
  - zapita 8y ago
    Note that repealing prop13 would probably not raise property taxes overall. It would spread them more fairly across all owners, instead of the current arrangement of newcomers subsidizing established owners.
    - dragonwriter 8y ago
      > Note that repealing prop13 would probably not raise property taxes overall. A straight-up repeal of Prop 13 would repeal rate limits on property taxes as well as assessment increase limits (both are part of Prop 13) and probably lead to jurisdictions, over time, increasing property tax rates and overall property taxes. It would probably reduce increases in sales, income, and other taxes, which currently are used in place of property taxes because they have no Constitutional rate limits.
      - zapita 8y ago
        That's a good point, your comment led me to research a bit more, and I learned that prop13 did in fact caused local governments to rely more heavily on sales taxes. Ironically this has contributed to the perverse incentives against building housing inventory, since commercial zoning is more likely to generate sales tax and other business-related tax revenue.
    - curun1r 8y ago
      Not necessarily. Prop 13 also gutted California's funding for schools. They lost 1/3 of their funding overnight when Prop 13 passed. One would hope that repealing Prop 13 would also undo at least some of that underfunding, considering California is 41st among states in CoL-adjusted per-pupil spending.
- kqr2 8y ago
  Prop 13 creates bad incentives for existing property owners since the rising cost of services can be passed onto future home owners. If all home owners had to bear the true market cost of services they would either have to settle for less or reduce per home owner cost by allowing more density.
- dragonwriter 8y ago
  > How does prop 13 cause a housing crisis? Because it discourages owners of existing residential real estate from upgrading it to higher density to meet new demand, since doing do would trigger full-value assessment and decrease the returns; this means even discounting NIMBYism and zoning issues, market response to demand is slower and involves more rent increase to source the same level of redevelopment as would be the case without Prop 13. Also, it subsidized people mstsying in their currently-owned single family homes, which makes the unwilling to (and thus demanding a higher premium to) move out of a place in-demand for working people when they retire, even if they are over housed. (This is, in fact, just a slightly different view of the retirees-being-forced-out-by-property-tax image that was used to sell Prop 13.)
bradlys 8y ago
On top of this, you can continue to give large multi-million dollar estates down indefinitely to your children without the estates being reassessed for tax purposes. That was an expansion of prop 13 which I definitely think shouldn't exist. So many people I have met here get to live here because of these ridiculous laws that basically keep the 1% the 1%. It props up real estate prices and only benefits wealthy individuals. Even now, you need something like 400k+/yr income to buy a house in quite a few areas. Not realistic for single income! Difficult for dual income if one of them isn't a software engineer at a big tech company. I've always had to be in these as a tenant. Current one, lady inherited this old 1930's property decades ago and the taxes are less than $6,000/yr for a $1.8mil property. She's making a cool $5k/month off us in profit. I live in the in-law unit and another person rents the house itself. She plans to pass it down to her children so that they can have the rental income too. Last unit I was in was a 9 unit apartment building. It applies to those too and I think that's bonkers! Guy bought the place back in the 1970's. As you can imagine, it was also about 10-15% of the tax it would be if the property was reassessed. Again, their kids are going to get that for practically free and have tens of thousands of dollars in income with very minimal tax. I am fiercely against prop 13 but I know it'll never hit the ballot. It would likely send a hell of crushing wave in real estate prices for California. Other states would hate California even more for the mass influx of Californians.
- nontechdude1 8y ago
  I feel like your whole perspective is skewed towards you, as a newcomer, feeling entitled to everything here. Your industry (tech) is causing values to skyrocket. Which is fine, but not everyone in a single area is going to work in one industry. If a bunch of wealthy people want to live in one place (this happens in CA a lot) why should your taxes go up punitively? That's why prop 13 was put in place. It really puts a value on homeownership--investment in an area, and investment in the state. As a renter, you have far less invested in CA than a property owner. A property owner who has been in place since the 70s has paid decades of taxes (all: income, property, etc), utility bills, etc, that have made the state the way it is--for all its problems, CA has some of the best public higher education in the world. This system has helped silicon valley out tremendously as a viable competitor to the ivy league system for an extremely talented workforce. You have probably been here for some time, but not decades. Why should you get to tell these people they don't deserve what they've earned? If the tech economy crashed tomorrow, would you still be here? I doubt it. I got in-state UC tuition but my parents paid decades of income taxes. I own one of those pieces of real estate you probably look askance at. I understand that housing is sorta a pain for you, but for many people these pieces of real estate represent a lot of value: sentimental, and a sizable chunk of their net worth. If you're going to advocate for redistribution, there are MUCH better targets for your ire in this day and age. Otherwise, pay up, and then in 20 years run your mouth on some out-of-state carpetbagger or teenager who thinks they're entitled to something you put 30 years of mortgage payments towards.
bluedino 8y ago
I don't get how Prop 13 was ever passed. If you own something that's taxable (like property in CA), shouldn't you have to pay tax on the value of the damn thing? If you're paying tax on the value of your house/land, it only makes sense to pay a tax based on the current value, not the one 30 years ago. Typically your house/land is going to go UP in value, and so do your taxes.
- jon_richards 8y ago
  The idea that people would get kicked out of their family homes due to increasing taxes without increasing someone's ability to pay them. Not to mention people on fixed income. Then add the fact that most people who voted already had their California home and were just voting for a tax cut for themselves. What's the alternative? Maybe the discounted tax could be collected when the house is sold? Put in a limit where the total backlog of tax is capped by the amount the house has appreciated in value to avoid making selling the house impossible.
- jjav 8y ago
  The tax is not based on the current value nor on the value 30 years ago. It is based on a value which goes up 2% every year. The taxes go up every year but in a predictable way, it is damping function on the wild swings of the bubble/crash/repeat housing market. So it is very easy to see how prop 13 was passed. The real estate tax is one the major yearly budget items for most families. Having it vary wildly and unpredictably year to year is not something most families [who don't earn tech bubble salaries] can handle.

closure 8y ago

How does prop 13 cause a housing crisis? It certainly entices people to hold and rent properties they own rather than sell, but those units are still part of the housing stock. I think repealing prop 13 for commercial properties makes sense as a way to raise tax revenue, but don’t see doing so for residential property having an impact on housing costs.

surfmike 8y ago
One way: it discourages people from moving to a downsized home when that's appropriate.
chroma 8y ago
> How does prop 13 cause a housing crisis? Because it heavily discourages people from selling their houses, reducing turnover and with it the potential for redevelopment. Without prop 13, houses would be re-assessed every few years. The owners' taxes would increase (or decrease) as the value of their home changed. If property values increased enough, the taxes would encourage them to sell the property for a tidy sum and move someplace cheaper. A new buyer is much more likely to demolish and redevelop than the existing owner.
bufordsharkley 8y ago
Let's say that your town is considering whether to preserve a zoning policy of all single family homes with a large minimum lot size, or is looking to allow density. What would prevent you from supporting the lower-density option? One reason may be that you are concerned that restricting the development of land would drive scarcity, leading land values to rise (which would cause your property tax to rise). You're effectively forced to pay for the cost of rising land prices. ...Now, if you are sheltered from rising land values, as per Prop 13, you now suffer no repercussions from a downzoning, and in fact may be completely indifferent to how the land market is behaving. Many homeowners are now free to act in their own best interest (which means downzoning), instead of being incentivized to create capacity for more housing.
tedivm 8y ago
There's a guy on my street that owns 27 houses, all bought in the 90s. While that guy is getting subsidized income by paying less taxes on high value property he is less likely to sell that property to developers who will build higher density housing. The same can be applied to the people who own vacation or retirement homes out here (there's a surprising amount of vacant property out here). The taxes that aren't being paid by all those people has to be made up for somewhere, so the taxes on new property owners are higher (as are the number if different fees and things like sales tax).
- dragonwriter 8y ago
  > The taxes that aren't being paid by all those people has to be made up for somewhere, so the taxes on new property owners are higher No, they aren't. Prop 13 limits maximum property tax rates to very low amounts as well as limiting assessment increases, so no jurisdiction is able to make up for artificially low assessments by jacking up the nominal rate. > (as are the number if different fees and things like sales tax). Mostly, it's state income tax, though state and local sales tax are also affected (there are general and program-specific revenue sharing mechanisms by which state revenue goes into local coffers to pay for local programs.)
  - acchow 8y ago
    Property value is reassessed on change-of-ownership. Lower housing stock leads to inflated home prices, causing higher taxes paid by more-recently-purchased homes.
    - dragonwriter 8y ago
      > Property value is reassessed on change-of-ownership. Actually, it's reassessed annually, there is just a limit to annual assessment increases except with qualifying events. Which doesn't change the fact that Prop 13 limited nominal rates to lower values than many jurisdictions (including core Bay Area ones) were before Prop 13; jurisdictions aren't making up with artificially low assessments on long-held properties with higher taxes on other properties. Yes, those other properties are assessed closer to full value, but it's not offsetting anything. If you cut the food you eat on weekdays by 50% and that on weekends by 66%, you aren't making up for the reduced weekend calories by eating more during the week.
babaganoosh89 8y ago
Higher property taxes makes housing allocation more efficient as people not using the house, retired people in high cost areas, etc would be incentivized to either sell or rent their house out.
- zapita 8y ago
  Note that repealing prop13 would probably not raise property taxes overall. It would spread them more fairly across all owners, instead of the current arrangement of newcomers subsidizing established owners.
  - dragonwriter 8y ago
    > Note that repealing prop13 would probably not raise property taxes overall. A straight-up repeal of Prop 13 would repeal rate limits on property taxes as well as assessment increase limits (both are part of Prop 13) and probably lead to jurisdictions, over time, increasing property tax rates and overall property taxes. It would probably reduce increases in sales, income, and other taxes, which currently are used in place of property taxes because they have no Constitutional rate limits.
    - zapita 8y ago
      That's a good point, your comment led me to research a bit more, and I learned that prop13 did in fact caused local governments to rely more heavily on sales taxes. Ironically this has contributed to the perverse incentives against building housing inventory, since commercial zoning is more likely to generate sales tax and other business-related tax revenue.
  - curun1r 8y ago
    Not necessarily. Prop 13 also gutted California's funding for schools. They lost 1/3 of their funding overnight when Prop 13 passed. One would hope that repealing Prop 13 would also undo at least some of that underfunding, considering California is 41st among states in CoL-adjusted per-pupil spending.
kqr2 8y ago
Prop 13 creates bad incentives for existing property owners since the rising cost of services can be passed onto future home owners. If all home owners had to bear the true market cost of services they would either have to settle for less or reduce per home owner cost by allowing more density.
dragonwriter 8y ago
> How does prop 13 cause a housing crisis? Because it discourages owners of existing residential real estate from upgrading it to higher density to meet new demand, since doing do would trigger full-value assessment and decrease the returns; this means even discounting NIMBYism and zoning issues, market response to demand is slower and involves more rent increase to source the same level of redevelopment as would be the case without Prop 13. Also, it subsidized people mstsying in their currently-owned single family homes, which makes the unwilling to (and thus demanding a higher premium to) move out of a place in-demand for working people when they retire, even if they are over housed. (This is, in fact, just a slightly different view of the retirees-being-forced-out-by-property-tax image that was used to sell Prop 13.)

bradlys 8y ago

On top of this, you can continue to give large multi-million dollar estates down indefinitely to your children without the estates being reassessed for tax purposes. That was an expansion of prop 13 which I definitely think shouldn't exist. So many people I have met here get to live here because of these ridiculous laws that basically keep the 1% the 1%. It props up real estate prices and only benefits wealthy individuals. Even now, you need something like 400k+/yr income to buy a house in quite a few areas. Not realistic for single income! Difficult for dual income if one of them isn't a software engineer at a big tech company. I've always had to be in these as a tenant. Current one, lady inherited this old 1930's property decades ago and the taxes are less than $6,000/yr for a $1.8mil property. She's making a cool $5k/month off us in profit. I live in the in-law unit and another person rents the house itself. She plans to pass it down to her children so that they can have the rental income too. Last unit I was in was a 9 unit apartment building. It applies to those too and I think that's bonkers! Guy bought the place back in the 1970's. As you can imagine, it was also about 10-15% of the tax it would be if the property was reassessed. Again, their kids are going to get that for practically free and have tens of thousands of dollars in income with very minimal tax. I am fiercely against prop 13 but I know it'll never hit the ballot. It would likely send a hell of crushing wave in real estate prices for California. Other states would hate California even more for the mass influx of Californians.

nontechdude1 8y ago
I feel like your whole perspective is skewed towards you, as a newcomer, feeling entitled to everything here. Your industry (tech) is causing values to skyrocket. Which is fine, but not everyone in a single area is going to work in one industry. If a bunch of wealthy people want to live in one place (this happens in CA a lot) why should your taxes go up punitively? That's why prop 13 was put in place. It really puts a value on homeownership--investment in an area, and investment in the state. As a renter, you have far less invested in CA than a property owner. A property owner who has been in place since the 70s has paid decades of taxes (all: income, property, etc), utility bills, etc, that have made the state the way it is--for all its problems, CA has some of the best public higher education in the world. This system has helped silicon valley out tremendously as a viable competitor to the ivy league system for an extremely talented workforce. You have probably been here for some time, but not decades. Why should you get to tell these people they don't deserve what they've earned? If the tech economy crashed tomorrow, would you still be here? I doubt it. I got in-state UC tuition but my parents paid decades of income taxes. I own one of those pieces of real estate you probably look askance at. I understand that housing is sorta a pain for you, but for many people these pieces of real estate represent a lot of value: sentimental, and a sizable chunk of their net worth. If you're going to advocate for redistribution, there are MUCH better targets for your ire in this day and age. Otherwise, pay up, and then in 20 years run your mouth on some out-of-state carpetbagger or teenager who thinks they're entitled to something you put 30 years of mortgage payments towards.

bluedino 8y ago

I don't get how Prop 13 was ever passed. If you own something that's taxable (like property in CA), shouldn't you have to pay tax on the value of the damn thing? If you're paying tax on the value of your house/land, it only makes sense to pay a tax based on the current value, not the one 30 years ago. Typically your house/land is going to go UP in value, and so do your taxes.

jon_richards 8y ago
The idea that people would get kicked out of their family homes due to increasing taxes without increasing someone's ability to pay them. Not to mention people on fixed income. Then add the fact that most people who voted already had their California home and were just voting for a tax cut for themselves. What's the alternative? Maybe the discounted tax could be collected when the house is sold? Put in a limit where the total backlog of tax is capped by the amount the house has appreciated in value to avoid making selling the house impossible.
jjav 8y ago
The tax is not based on the current value nor on the value 30 years ago. It is based on a value which goes up 2% every year. The taxes go up every year but in a predictable way, it is damping function on the wild swings of the bubble/crash/repeat housing market. So it is very easy to see how prop 13 was passed. The real estate tax is one the major yearly budget items for most families. Having it vary wildly and unpredictably year to year is not something most families [who don't earn tech bubble salaries] can handle.