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Not in California. Prop 13 keeps property taxes at the value when you purchased your home. IMO this is a massive contributor to inflated property values, now l

Not in California. Prop 13 keeps property taxes at the value when you purchased your home. IMO this is a massive contributor to inflated property values, now leaking into other state economies.

adolph 5y ago
What is your theorized mechanism for the freezing of property tax rates at the purchase price causing inflated property values? I could see it making an upward or downward trend worse. In an upward trend buying before increase would be tax advantaged. In a downward trend buying after anticipated decreases would have the advantage. All in all, more people would be advantaged by just staying in place. Maybe that reduces total inventory, making the remaining properties on the market cost more?
- jayd16 5y ago
  Its way more simple than you think. Lower taxes just lower the yearly cost of a house. That means you can get a bigger loan instead.
- chasebank 5y ago
  It's really simple. California has a housing supply problem. If taxes are never raised, housing supply is even more suppressed. Owners have zero incentive to sell. Here's an example. My mother inherited a beach house in Carpinteria. My grandparents purchased it for $14k in 1924. It's worth north of $10M. Annual taxes are under $5k. She can rent this out during summer months for over $50k/mo. Why on earth would she ever sell? She has an asset that appreciates at or above index funds and pays amazing dividends. This is an extreme example but it works the same at every level. Prop 13 encourages people to accumulate housing / property and removes basic market economics. Artificially low housing supply leads to artificially inflated housing prices.
mcguire 5y ago
I remember Prop 13 from a case study in a government class. I had totally forgotten about it until you mentioned it. Prop 13 was pushed by rental property owners---primarily apartment complexes, because they don't change hands very often. It's one thing to enjoy the value increase on a house you own for 5-10 years and another the increase on an apartment complex that you own for 20-30.
ac29 5y ago
> Prop 13 keeps property taxes at the value when you purchased your home. That's a myth. Prop 13 limits assessed value from increasing by more than inflation rate and is limited to 2%/year overall. So yes, property taxes stay artificially low, especially over long times, but they do go up every year.
- imtringued 5y ago
  The fact that Prop 13 applies to everyone by default is the mistake. It should be something you can apply for when your tax burden increases unreasonably quickly and even then the freeze would only last 10 years so that you can plan to leave if the tax rate becomes unaffordable.

Not in California. Prop 13 keeps property taxes at the value when you purchased your home. IMO this is a massive contributor to inflated property values, now leaking into other state economies.

adolph 5y ago

What is your theorized mechanism for the freezing of property tax rates at the purchase price causing inflated property values? I could see it making an upward or downward trend worse. In an upward trend buying before increase would be tax advantaged. In a downward trend buying after anticipated decreases would have the advantage. All in all, more people would be advantaged by just staying in place. Maybe that reduces total inventory, making the remaining properties on the market cost more?

jayd16 5y ago
Its way more simple than you think. Lower taxes just lower the yearly cost of a house. That means you can get a bigger loan instead.
chasebank 5y ago
It's really simple. California has a housing supply problem. If taxes are never raised, housing supply is even more suppressed. Owners have zero incentive to sell. Here's an example. My mother inherited a beach house in Carpinteria. My grandparents purchased it for $14k in 1924. It's worth north of $10M. Annual taxes are under $5k. She can rent this out during summer months for over $50k/mo. Why on earth would she ever sell? She has an asset that appreciates at or above index funds and pays amazing dividends. This is an extreme example but it works the same at every level. Prop 13 encourages people to accumulate housing / property and removes basic market economics. Artificially low housing supply leads to artificially inflated housing prices.

mcguire 5y ago

I remember Prop 13 from a case study in a government class. I had totally forgotten about it until you mentioned it. Prop 13 was pushed by rental property owners---primarily apartment complexes, because they don't change hands very often. It's one thing to enjoy the value increase on a house you own for 5-10 years and another the increase on an apartment complex that you own for 20-30.

ac29 5y ago

> Prop 13 keeps property taxes at the value when you purchased your home. That's a myth. Prop 13 limits assessed value from increasing by more than inflation rate and is limited to 2%/year overall. So yes, property taxes stay artificially low, especially over long times, but they do go up every year.

imtringued 5y ago
The fact that Prop 13 applies to everyone by default is the mistake. It should be something you can apply for when your tax burden increases unreasonably quickly and even then the freeze would only last 10 years so that you can plan to leave if the tax rate becomes unaffordable.