6 ms·

> The infamous Proposition 13, a 1978 ballot initiative that capped property taxes, meant that new housing could cost cities more in services than it would brin

by rcpt 7y ago

> The infamous Proposition 13, a 1978 ballot initiative that capped property taxes, meant that new housing could cost cities more in services than it would bring in through taxes. In response, cities privileged much more lucrative commercial development—setting the stage for the state’s severe jobs/housing imbalance—and tacked hefty fees on new housing construction. Good take right here but it's not the main reason that prop 13 is making housing expensive imo. The insane market distortions causing landowners to never sell and instead stay put and NIMBY like mad is a larger reason that Prop 13 makes housing more expensive.

xivzgrev 7y ago
This. There are some random plots of land in very desirable areas that would never be left like that without prop 13. Why yes I’ll keep paying $5000 per year in property taxes while my multi million dollar plot keeps appreciating at 8% per year...
- usaar333 7y ago
  Why would someone leave the plot empty and forgo potential rent?
  - refurb 7y ago
    Too much hassle to build and it limits your options in the future. If you're only paying $5000 per year in property taxes on a plot of land worth $2M and going up, why not?
  - xyzzyz 7y ago
    Imagine it is you that own such a plot. Can you think of reasons why you yourself might forgo potential rent? To fetch rent, you typically need to build something, which requires capital. Even if you have capital, opportunity cost might make it more profitable to invest it in something else. Even if building something is best alternative at the moment, expectations of change in future market conditions might make the risk-adjusted return too low to justify the opportunity cost. If you don’t have capital, you need to take a loan, which might not be possible depending on your personal financial situation and credit worthiness, but even if it is, it makes the whole business even more risky. Now, given it’s California, even if you have capital and actually want to build something, it might as well turn out that your development efforts might be stuck in a local planing and zoning committee limbo for a decade, and often be ultimately unsuccessful, which results in lots of money lost and opportunity cost paid. As you can see, there are plenty of reasons why you might forgo potential rent.
    - JMTQp8lwXL 7y ago
      Building will also trigger a re-assessment (which is why you'll see lot with existing structures stripped to the studs to avoid reassessment).
      - refurb 7y ago
        I'm sure the rules are complex, but even if you stripped to the studs you'd get reassessed on the improvement to the structure, correct? Not a reassessment of the whole property? Say your property tax should be $10,000 per year, but you're paying $1,000 because of Prop 13. If you were to put an addition on, with a value of $200,000, you'd have to pay property tax on that ($2,000 per year), but they wouldn't reassess the whole property and make you pay $12,000, I assume?
        svachalek 7y ago
        Property assessment is a single value, not a room-by-room piecemeal kinda thing.
        refurb 7y ago
        Apparently not in SF.
        ping_pong 7y ago
        No you get reassessed on the entire thing.
        fortran77 7y ago
        You will get re-assessed even if you left the frame (or one wall standing). And new construction is reassessed. And even under prop 13, tax can increase 2% / year. Prop 13 is not why California doesn't have enough housing. This is a lie propagated by teachers unions who flood internet forums with falsehoods. California's problem is there are hundreds and hundreds of little "cities" each with their own restrictive zoning laws. They need the state to overrule zoning laws and allow denser housing. These local cities also cut "sweetheart deals" for companies and give them property tax breaks. So Apple or Facebook or anyone building a new campus pays bargain rates -- not because of Prop 13, but because the local cities have the ability to negotiate tax rates for these companies to encourage them to move in.
  - epistasis 7y ago
    This is extremely common, people will forgo $4k/month because they don't want the hassle of finding a contractor to fix a house, for example. It's extremely frustrating to see all the vacant houses in my city that are in family trusts and sit on the housing market for 12 months because they are inappropriately priced, or because the family has extra stuff going on and can't find the time to get a property manager. These houses alone aren't enough to solve the housing crisis, but they are a symptom of the disastrous tax policy. It's enough to make me into a full Georgist, and hope for all land rents to be taxed away.
    - rcpt 7y ago
      It still amazes me that Henry George put all those ideas together in San Francisco
  - JMTQp8lwXL 7y ago
    The most obvious answer, not suggested yet, is not having to put with the California Coastal Commission. Slap a high price on the land, sell the dream, and make the permitting and construction someone else's problem. An unimproved plot in an area under the jurisdiction of the CCC is in some ways a liability.
  - Decade 7y ago
    Another reason to forgo rent is in hope of a higher payoff. Especially in California with Prop 13 of 1978, if the property owner has had a property for a long time, they can be paying taxes as if it were a depression while charging rents (or taking out commercial loans) as if it’s a gold rush. A single property with a long-term lease signed during an economic boom can pay the taxes for many vacant properties. That’s my guess as to why property owners insist on charging high rents even if it contributes to the epidemic of vacant storefronts in my neighborhood.
harikb 7y ago
They have it backwards too > meant that new housing could cost cities more in services than it would bring in through taxes. New or resold houses reset tax to current rate. Yes, there is this provision to transfer low prop tax to another house elsewhere in the state/county if you are above 55, but that is unrelated to Prop 13 Prop 13 is evil, it helps prop owning businesses mainly and makes it slightly more affordable for a bunch of folks to keep the house as a rental unit instead of selling. But in the end, state/schools lose the most.
- jpollock 7y ago
  Resale just resets to the current value, but then freezes it again. Cities have to plan for the value in perpetuity, which means it's at valuation at year zero, and then negative from then on. Which means the house is taxed appropriately 1 year in 13. The rest of the time? The city's underwater. https://www.valuepenguin.com/how-long-homeowners-stay-in-their-homes https://www.valuepenguin.com/how-long-homeowners-stay-in-the...
  - omgwtfbyobbq 7y ago
    It doesn't freeze it again. The assessed value, and annual tax, still increases, albeit at a max of 2% per year, which does lag inflation over time. The biggest limitation of prop 13 is that it caps the tax rate at 1%.
- JMTQp8lwXL 7y ago
  We wouldn't need to pass these special school bonds if property tax rates reset annually, like they do in virtually every other state. We're simply redistributing who's responsible for paying the bills.
  - rcpt 7y ago
    It's not quite every other state. Several have some form of limitations California is just unusually strict. https://www.lincolninst.edu/research-data/data-toolkits/significant-features-property-tax/access-property-tax-database/property-tax-limits?field_tl_limit_type_value%5B%5D=No+Limit https://www.lincolninst.edu/research-data/data-toolkits/sign... I believe we have the most powerful notion of direct democracy which is why our voting demographics get the biggest tax cuts
YoyoyoPCP 7y ago
Another fun feature of Prop 13 is the corporate landlords' ability to avoid the "changing hands" reset of the property tax: https://www.sandiegouniontribune.com/opinion/commentary/sd-utbg-prop13-taxpayers-loopholes-20170525-story.html https://www.sandiegouniontribune.com/opinion/commentary/sd-u...
- foogazi 7y ago
  I thinks this is one of the main features of prop 13 and should have been rescinded a long time ago No reason to give corporations preferential treatment on property taxes
ping_pong 7y ago
This is the biggest problem with people who oppose Prop 13. They claim that owners "never sell", however if you look at the number of sales, there's nothing to suggest Prop 13 stops house sales. It's basically a lie, and there's no actual data to suggest that California house sales are drastically lower because of Prop 13. California has 39,512,223 people and 441,900 homes sold in 2018. https://journal.firsttuesday.us/home-sales-volume-and-price-peaks/692/ https://journal.firsttuesday.us/home-sales-volume-and-price-... Texas has 28,995,881 people and 344,030 homes sold in 2018. https://www.prnewswire.com/news-releases/texas-housing-market-breaks-record-for-home-sales-median-price-in-2018-300799910.html https://www.prnewswire.com/news-releases/texas-housing-marke... Florida has 21,477,737 people and 277,827 homes sold in 2018. https://www.prnewswire.com/news-releases/flas-housing-market-sales-new-listings-median-price-up-at-end-of-2018-300793508.html https://www.prnewswire.com/news-releases/flas-housing-market... New York State has 19,453,561 people and 134,066 homes sold in 2018. https://www.democratandchronicle.com/story/news/politics/albany/2018/01/24/ny-just-had-record-year-home-sales/1062216001/ https://www.democratandchronicle.com/story/news/politics/alb... I used 2018 data because I couldn't find consistent 2019 data for all those states. California has 1 house sold for every 89 people and Texas has 1 house sold for every 84 people, Florida has 1 house sold for every 77 people and New York state had 1 house sold for every 145 people. Per capita, the rate of housing sales in California is not so disparate compared to the other large states, so anti-Prop 13 people need to come up with real data to show how Prop 13 is actually affecting things instead of whining about how existing home owners don't pay their fair share. There's nothing to suggest that Prop 13 has affected real estate transactions in California. And especially in the Bay Area, the amount of turnover is healthy. In my city alone, I used Redfin to calculate that about 50% of the homes changed hands over the last 10 years. That means that the property tax was getting reset to more current levels. If you look at the property tax rate that California pays, it's higher than Florida and New York, but less than Texas. However, Texas doesn't have state income tax, so overall the taxes being paid in California are exorbitant compared to other states.
- foogazi 7y ago
  Thanks for the links - I’ve heard the bit about prop 13 causing people to never sell

by rcpt 7y ago

xivzgrev 7y ago

This. There are some random plots of land in very desirable areas that would never be left like that without prop 13. Why yes I’ll keep paying $5000 per year in property taxes while my multi million dollar plot keeps appreciating at 8% per year...

usaar333 7y ago
Why would someone leave the plot empty and forgo potential rent?
- refurb 7y ago
  Too much hassle to build and it limits your options in the future. If you're only paying $5000 per year in property taxes on a plot of land worth $2M and going up, why not?
- xyzzyz 7y ago
  Imagine it is you that own such a plot. Can you think of reasons why you yourself might forgo potential rent? To fetch rent, you typically need to build something, which requires capital. Even if you have capital, opportunity cost might make it more profitable to invest it in something else. Even if building something is best alternative at the moment, expectations of change in future market conditions might make the risk-adjusted return too low to justify the opportunity cost. If you don’t have capital, you need to take a loan, which might not be possible depending on your personal financial situation and credit worthiness, but even if it is, it makes the whole business even more risky. Now, given it’s California, even if you have capital and actually want to build something, it might as well turn out that your development efforts might be stuck in a local planing and zoning committee limbo for a decade, and often be ultimately unsuccessful, which results in lots of money lost and opportunity cost paid. As you can see, there are plenty of reasons why you might forgo potential rent.
  - JMTQp8lwXL 7y ago
    Building will also trigger a re-assessment (which is why you'll see lot with existing structures stripped to the studs to avoid reassessment).
    - refurb 7y ago
      I'm sure the rules are complex, but even if you stripped to the studs you'd get reassessed on the improvement to the structure, correct? Not a reassessment of the whole property? Say your property tax should be $10,000 per year, but you're paying $1,000 because of Prop 13. If you were to put an addition on, with a value of $200,000, you'd have to pay property tax on that ($2,000 per year), but they wouldn't reassess the whole property and make you pay $12,000, I assume?
      - svachalek 7y ago
        Property assessment is a single value, not a room-by-room piecemeal kinda thing.
        refurb 7y ago
        Apparently not in SF.
      - ping_pong 7y ago
        No you get reassessed on the entire thing.
        fortran77 7y ago
        You will get re-assessed even if you left the frame (or one wall standing). And new construction is reassessed. And even under prop 13, tax can increase 2% / year. Prop 13 is not why California doesn't have enough housing. This is a lie propagated by teachers unions who flood internet forums with falsehoods. California's problem is there are hundreds and hundreds of little "cities" each with their own restrictive zoning laws. They need the state to overrule zoning laws and allow denser housing. These local cities also cut "sweetheart deals" for companies and give them property tax breaks. So Apple or Facebook or anyone building a new campus pays bargain rates -- not because of Prop 13, but because the local cities have the ability to negotiate tax rates for these companies to encourage them to move in.
- epistasis 7y ago
  This is extremely common, people will forgo $4k/month because they don't want the hassle of finding a contractor to fix a house, for example. It's extremely frustrating to see all the vacant houses in my city that are in family trusts and sit on the housing market for 12 months because they are inappropriately priced, or because the family has extra stuff going on and can't find the time to get a property manager. These houses alone aren't enough to solve the housing crisis, but they are a symptom of the disastrous tax policy. It's enough to make me into a full Georgist, and hope for all land rents to be taxed away.
  - rcpt 7y ago
    It still amazes me that Henry George put all those ideas together in San Francisco
- JMTQp8lwXL 7y ago
  The most obvious answer, not suggested yet, is not having to put with the California Coastal Commission. Slap a high price on the land, sell the dream, and make the permitting and construction someone else's problem. An unimproved plot in an area under the jurisdiction of the CCC is in some ways a liability.
- Decade 7y ago
  Another reason to forgo rent is in hope of a higher payoff. Especially in California with Prop 13 of 1978, if the property owner has had a property for a long time, they can be paying taxes as if it were a depression while charging rents (or taking out commercial loans) as if it’s a gold rush. A single property with a long-term lease signed during an economic boom can pay the taxes for many vacant properties. That’s my guess as to why property owners insist on charging high rents even if it contributes to the epidemic of vacant storefronts in my neighborhood.

harikb 7y ago

They have it backwards too > meant that new housing could cost cities more in services than it would bring in through taxes. New or resold houses reset tax to current rate. Yes, there is this provision to transfer low prop tax to another house elsewhere in the state/county if you are above 55, but that is unrelated to Prop 13 Prop 13 is evil, it helps prop owning businesses mainly and makes it slightly more affordable for a bunch of folks to keep the house as a rental unit instead of selling. But in the end, state/schools lose the most.

jpollock 7y ago
Resale just resets to the current value, but then freezes it again. Cities have to plan for the value in perpetuity, which means it's at valuation at year zero, and then negative from then on. Which means the house is taxed appropriately 1 year in 13. The rest of the time? The city's underwater. https://www.valuepenguin.com/how-long-homeowners-stay-in-their-homes https://www.valuepenguin.com/how-long-homeowners-stay-in-the...
- omgwtfbyobbq 7y ago
  It doesn't freeze it again. The assessed value, and annual tax, still increases, albeit at a max of 2% per year, which does lag inflation over time. The biggest limitation of prop 13 is that it caps the tax rate at 1%.
JMTQp8lwXL 7y ago
We wouldn't need to pass these special school bonds if property tax rates reset annually, like they do in virtually every other state. We're simply redistributing who's responsible for paying the bills.
- rcpt 7y ago
  It's not quite every other state. Several have some form of limitations California is just unusually strict. https://www.lincolninst.edu/research-data/data-toolkits/significant-features-property-tax/access-property-tax-database/property-tax-limits?field_tl_limit_type_value%5B%5D=No+Limit https://www.lincolninst.edu/research-data/data-toolkits/sign... I believe we have the most powerful notion of direct democracy which is why our voting demographics get the biggest tax cuts

YoyoyoPCP 7y ago

Another fun feature of Prop 13 is the corporate landlords' ability to avoid the "changing hands" reset of the property tax: https://www.sandiegouniontribune.com/opinion/commentary/sd-utbg-prop13-taxpayers-loopholes-20170525-story.html https://www.sandiegouniontribune.com/opinion/commentary/sd-u...

foogazi 7y ago
I thinks this is one of the main features of prop 13 and should have been rescinded a long time ago No reason to give corporations preferential treatment on property taxes

ping_pong 7y ago

This is the biggest problem with people who oppose Prop 13. They claim that owners "never sell", however if you look at the number of sales, there's nothing to suggest Prop 13 stops house sales. It's basically a lie, and there's no actual data to suggest that California house sales are drastically lower because of Prop 13. California has 39,512,223 people and 441,900 homes sold in 2018. https://journal.firsttuesday.us/home-sales-volume-and-price-peaks/692/ https://journal.firsttuesday.us/home-sales-volume-and-price-... Texas has 28,995,881 people and 344,030 homes sold in 2018. https://www.prnewswire.com/news-releases/texas-housing-market-breaks-record-for-home-sales-median-price-in-2018-300799910.html https://www.prnewswire.com/news-releases/texas-housing-marke... Florida has 21,477,737 people and 277,827 homes sold in 2018. https://www.prnewswire.com/news-releases/flas-housing-market-sales-new-listings-median-price-up-at-end-of-2018-300793508.html https://www.prnewswire.com/news-releases/flas-housing-market... New York State has 19,453,561 people and 134,066 homes sold in 2018. https://www.democratandchronicle.com/story/news/politics/albany/2018/01/24/ny-just-had-record-year-home-sales/1062216001/ https://www.democratandchronicle.com/story/news/politics/alb... I used 2018 data because I couldn't find consistent 2019 data for all those states. California has 1 house sold for every 89 people and Texas has 1 house sold for every 84 people, Florida has 1 house sold for every 77 people and New York state had 1 house sold for every 145 people. Per capita, the rate of housing sales in California is not so disparate compared to the other large states, so anti-Prop 13 people need to come up with real data to show how Prop 13 is actually affecting things instead of whining about how existing home owners don't pay their fair share. There's nothing to suggest that Prop 13 has affected real estate transactions in California. And especially in the Bay Area, the amount of turnover is healthy. In my city alone, I used Redfin to calculate that about 50% of the homes changed hands over the last 10 years. That means that the property tax was getting reset to more current levels. If you look at the property tax rate that California pays, it's higher than Florida and New York, but less than Texas. However, Texas doesn't have state income tax, so overall the taxes being paid in California are exorbitant compared to other states.

foogazi 7y ago
Thanks for the links - I’ve heard the bit about prop 13 causing people to never sell