5 ms·
Proposition 13 provides an incredibly strong incentive not to sell property you own. This drives up prices in two ways. First, it reduces supply, since fewer pe
by ubernostrum 8y ago
Proposition 13 provides an incredibly strong incentive not to sell property you own. This drives up prices in two ways. First, it reduces supply, since fewer people will be willing to take the property-tax hit of selling their existing property and buying something else. Second, it causes people who do sell to ask a higher price, in compensation for the tax benefit they're giving up by selling.
Ending, or strongly reducing, the tax benefit for holding property would knock out both of these factors. If there's no massive tax penalty for selling, people will be more willing to sell, and if selling doesn't cost you a huge tax benefit, you don't feel as much need to inflate the price as compensation.
When the supply of property increases, prices will go down. And when people no longer feel a need to ask inflated prices to make up for lost tax benefits, prices will go down.
Additionally, the shock of the initial implementation and its effects would probably also have the additional effect of causing a smaller-scale 2008-style housing market crash, since many people currently rely on the "prices always go up, and always go up by a lot" model. This would initially be extremely harsh on people who paid $1m+ for small houses in not-particularly-great parts of the bay, and would certainly put them underwater on their mortgages, but any real solution to the bay area's housing crisis is going to involve that on some scale.
- jcoffland 8y agoHouse prices are not determined solely by the seller's feeling of what they ought to get. Demand matters. Assuming demand is either constant or increasing, thus the current problem, then supply must go up for prices to go down. Supply can be increased in two ways. First, by building more houses and second by people leaving the area. Prop 13 only reduces supply if it discourages people from leaving the area. If people move within the same area then supply stays the same. So, are you saying that you want to repeal prop 13 to drive people out of the Bay so that others can move in?
- ubernostrum 8y agoHouse prices are not determined solely by the seller's feeling of what they ought to get. Lucky for me I didn't make that claim, then!
- jcoffland 8y agoYou did say: > Second, it causes people who do sell to ask a higher price, in compensation for the tax benefit they're giving up by selling. To me this implies that the seller can increase the sale price if they think they deserve more money.
- ubernostrum 8y agoYou inserted the word "solely", which is utterly unsupported by what I said, and seems pretty clear evidence of your intent not to engage with what I actually said. So I'm not going to bother trying to explain to you.
- jcoffland 8y agoWow, that got combative quickly. I think if you could have heard my tone you wouldn't have been offended.
- TheCoelacanth 8y agoSomething that decreases the willingness of sellers to sell will increase the price. That is basic supply and demand. If a retired couple downsizes from a three bedroom house to a one bedroom apartment because their kids have grown up, that frees up housing for someone else to use. Prop 13 discourages them from doing that because the property taxes on a one bedroom apartment at a 2018 assessment can easily be many times higher than the property taxes on a three bedroom house at a 1970 assessment+2%/year.