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.
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.
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.
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.
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).
> 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.)
> 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.
This is an outlandish argument to make. Prop 13 contributes to shortage of housing stock. Shortage of housing stock causes prices to rise. In the event of any sale (existing property or new), the price will be higher than it would have been without Prop 13 in place. The same marginal tax rate on the new (or transferred) home now amounts to a larger amount than it would have otherwise.
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.
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.
> 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.
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.
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.
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.
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.)
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.
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.
"Sorta a pain"? Are you shitting me? I have to make 400k/yr to buy a house here. The area is beyond approachable. Just because your parents paid their utility bill for 30 years doesn't mean they should be entitled to paying 15% of the tax rate of a new home owner. That's obscene and only increases the issue here. Prop 13 gives great incentive for you to fight any kind of increase in density or affordability.
If real estate is where all your net worth is: SELL AND DIVERSIFY
There are a number of ways that property taxes could be handled so as to not force people out of their homes as property values fluctuate. Just one example, there could be a maximum on percentage of income that can be charged as property tax. Pegging those taxes to prices that are literally decades old seems like the least efficient and most distortionary method. Nevermind that handing that benefit down generation after generation is the surest way to create a form of aristocracy.
Oh and let's not forget the many, many problems it has caused for the education system you so respect. Prop 13 is often named as one of the reasons why CA's public education system is under such financial duress at every level.
Why can't we just admit that we need far, far more housing stock, far, far better public transportation systems, far, far better infrastructure and that CA's unique property tax system has essentially stymied all of those efforts. I find if hard to believe CA wouldn't be better off without Prop 13.
On another note, this post strikes me as incredibly hostile toward anyone moving to California. "Stay away, this place is ours, and if you come and can't buy, then don't complain, because this place was ours first." "Oh, and you're a tech person, so bugger off, we don't need your kind anyway!"
Is the person who just bought property at market rate today more entitled to complain according to your metric? They will have paid more in taxes than the person who bought in the 70's cumulatively paid over all those decades within just a couple of years. Would they then be more Californian somehow? Entitled to more of the state's resources? How about those people who have rented here for 30 years? If you don't/can't own property are you less Californian?
I totally agree with more housing stock. I am a huge fan of Wieiners bill, except with the exception that some cities should not have an 8 story maximum. He is modeling it after Boston, and I've lived there, and huge complexes near transit stations is not a good thing in small cities with 1 railway station.
But do that and keep prop 13 in place, please. We don't need the state to hire a bunch of new tax assessors; it's doing just fine destroying itself financially already.
How, exactly, is denying the state access to revenue supposed to improve its financial situation? If you want better use of money, you've got to vote for it.
tax assessment would raise money but it would cost money. by costing money some businesses may leave. for example, amgen just put a new plant in RI instead of california.
Businesses are also going to leave when they have to pay workers several times what they would in other regions because of our insane housing prices.
I don't understand how you're supposed to get a financially healthy state when it's starved of funds compared to states like MA that have reasonable and equitable property tax laws.
nontechdude1, I think I can blame both tech companies of this current generation for their sins AND people of generations past for theirs, and that includes their exclusionary housing policies. It’s not an either-or situation.
Regardless, after the declining baby boomer population finally loses their political influence, millennials will step in and fix the problem themselves —and they will, it’s not like any of us can afford those houses (even the ones who grew up in the city and aren’t in tech, which you seem to imply are more important or valid).
That’s just democracy, after all.
[this comment was originally made in response to one of nontechdude1’s now-deleted comments]
sorry, i deleted that comment because it was..a little too much.
i would caution anyone with the resources to purchase a home to be cautious right now. there are too many political unknowns that could easily make it a poor financial choice.
or you can go all-in knowing that if you become underwater, you can just walk away (CA is a non-recourse state) as long as you don't have a HELOC on the property.
Family is in real estate— we would never purchase a property in San Francisco this late in the game (and I love that city!). The writing’s on the wall: that same law homeowners voted for to artificially lower their tax burden will also be the law that sends California into a bona fide housing crisis that makes the 2008 subprime mortgage crisis look like peanuts in comparison. It’s artificial, unsustainable, and shows a complete disregard for how markets work.
The current, very real housing shortages and homeless epidemic is just the tip of the iceberg.
>Regardless, after the declining baby boomer population finally loses their political influence, millennials will step in and fix the problem themselves
The millennial children of the 1% will inherit those houses and once the boomers are gone they will find another scapegoat to blame while they try to justify their parasitic streams of rental income.
Americans are weirdly susceptible to being divided along identity politics lines.
The whole "boomer vs. millenial" thing is just the 1% engaging in a game of scapegoat, divide and rule. By blaming your mom, you're helping them.
The thing is though, many, many baby boomers own their homes.
Many, many millennials don’t. Even for the small minority that inherits them, new housing is out of their reach. Studies show millennials, even ones’ whose parents own property, by and large don’t want to live in the same suburb/house they grew up in (though, with the current state of affairs, many still live with their parents).
In any event, even if all of that small minority wanted to stay in their exact house, the rest of the disenfranchised would be so numerous as to overwhelmingly outvote them.
Here’s a very enlightening article to the current plight of the millennial. I recommend setting aside some time to read it today.
If housing is only for people who've already been in a place, why do we allow children? Your argument is patently absurd. Especially in a growing state like California, accommodating newcomers is good if not necessary. I was born here, and I want to live in a place that welcomes outsiders and is affordable for all who want to live here. Don't you see you're just the beneficiary of a pyramid scheme?
A tax raise is not punitive if your taxes were not commensurate with what you need to contribute to society in the first place. A homeowner in California for the past 30 years has paid drastically less than what a homeowner in basically any other place would have, while probably getting more in terms of public services.
You got lucky. You got in early and now you get to benefit from the massive unfairness of Prop 13. I will also graduate in-state from a UC. What will I inherit? Will I ever be able to afford a decent home in the metro area I grew up in? I doubt it — and even if I did, how much less would the guy next door be paying than me every year?
i don't want california to grow. the traffic is too bad and people are less happy. in fact, i've been cheering trump deporting all 3 million illegal immigrants here because it's a legal way to alleviate the housing crisis.
CA was an environmental gem and still is to an extent. i don't want to invite the whole world here. i dont want immigrants, rich and poor, coming here and forcing out people who were born here.
i believe there are too many people here. unfortunately my voicing of this opinion is confined to a niche web forum for tech nerds.
i have a different opinion than you about whether CA growing is a good thing. however, i think wieners bill allows for growth without increasing traffic--i'll take it.
>the traffic is too bad
>CA was an environmental gem and still is to an extent
If the traffic is bad, vote to build public transit. Germany and Japan are almost identical to California in size and both have preserved most of their natural beauty and have comparatively few problems with congestion. They do this by investing in rail, because it takes cars off the road and increases physical and economic mobility.
>i've been cheering trump deporting all 3 million illegal immigrants
I see no reason to kick people out who want a shot at the American Dream, and whom Americans like you and I have invited into this country with our insatiable desire for cheap labor, food, and construction. Instead we could let them legalize (not even necessarily become citizens, though I'd like to see that) and build housing and other infrastructure to accommodate them while growing our economy and tax base. That has been a proven success in this country for the last several hundred years.
>i dont want immigrants, rich and poor, coming here and forcing out people who were born here.
And yet, by continuing to support Prop 13 and other policies that reduce the housing supply and place an undue burden on those who wish to purchase housing, you are forcing people like me — who were born in this state — to leave.
>i believe there are too many people here
There aren't too many people here. There's too little housing at too low a density with too little public infrastructure. All of those problems are solvable — we just need to gather the political will to make investments for the continued prosperity of our state. We need to act like grown-ups living in a society: we must pay our taxes, elect responsible leaders, help those less fortunate than us, and fight for our collective interest.
Or are we just going to scapegoat the most vulnerable, dodge paying our fair share of taxes on our ever-appreciating assets, kick the ladder out beneath us, and cower behind walls? Most in my generation seem sick of this free-for-all past generations have created. I want a society where we do our share, help those less fortunate, restore civil society, embrace community support structures, and give everyone a shot at a happy existence. That's what I'll be fighting for. What about you?
There are cities in the US with housing at $20/square foot. There is plenty of space for people who can't afford to live here.
That is literally 100 times cheaper than the most expensive real estate in CA.
Why won't Google put some satellite offices in York, PA? York, PA isn't 100 times worse than Atherton.
Most people in CA feel the same way I do and our voices matter. There are big forces at play: third-world illegal immigration, third-world legal immigration, tech's reluctance to spread out across America, driving up costs for all of us natives. Rather than lower the value of housing here by overbuilding, I'd rather stand up for myself and eliminate those negative forces. In case you didn't know, being nativist is in vogue these days. I'm not the only one! And I'm happy and unashamed to vote this way.
Vancouver did something like this, rather than overbuild. It's not racist and it's not immoral. It's just making your voice heard.
Then allow prop 13 to stay but only for a primary residence. Maybe even limit it to native born citizens if you want. The benefit should definitely not be available to landlords or foreign buyers.
The current situation is bad enough that it's actually driving away people who were born here and have regular jobs, and causing a lot of the traffic problems you mention by increasing commuting.
The technology-based economy extracts value from the rapid information exchange that takes place in cities full of highly-educated people. That doesn't exist in York, PA. Google et al. know that if they moved, their rate of innovation would falter, along with their revenue.
>Most people in CA feel the same way
What? Citation?
>being nativist is in vogue these days
You're not a nativist. If you were, you'd want a place for people like me who were born here. Instead, you're more than willing to kick us out for the sake of your own financial well-being. You're just a selfish beneficiary of the pyramid scheme that is the American housing market.
I was trying to be provocative. I'm just saying, politics is a sensitive subject, and to you, "equalizing property taxes" might seem righteous, but in reality it could mean someone else losing their home. I think prop 13 is grounded in sound principles.
There are ways to dramatically increase the housing supply that I think we should be working on and it seems like the state is doing that.
The newcomers themselves and their parents by and large contributed to other parts of the country. You, as a citizen of the US, are allowed to move there and take advantage of that infrastructure. The fundamental unit of analysis is the nation-state.
And as it happens the bay area turned out to be too important as an engine of growth for the nation-state as a whole to allow nostalgia about pseudo-Victorian homes filled with hippies or greed for unearned wealth to be the tail that wags the dog. The incumbent power structures there, which represents narrow local interests can and should be overruled by higher levels of government for the good of the state and country.
I don't personally care about newcomers all that much, but I was born in California and the housing shortage caused by prop 13 made it impossible for me to stay without severe sacrifices to quality of life compared to what is possible in other states. That I may someday inherit real estate from one of my parents doesn't really change the fact that I need a home to live and raise children in the meantime, while my parents are still alive.
So I left.
Except that I can't help but feel that there is something deeply dysfunctional about a society/culture/place (CA) which makes propagation of the next generation not really possible. And whose children get pushed out in favor of extremely wealthy outsiders. I'm not complaining, I've simply accepted that in order to be able to raise a family, I have to join the long tradition of Americans migrating elsewhere inside of the country in search of a better future.
But it sure as hell isn't how I would have things work if I were designing them from scratch.
Just wait for the economy to crash. You'll have the CA gov looking for new income streams. It'll either be modify prop 13, modify the pension plan, or declare bankruptcy.
so basically rent control for homeowners, or better put tax control. if anything the law needs to be fixed but before doing so there needs to be protection put in place so that jurisdictions cannot force people out by having punitive real estate tax rates. This usually can be done with a large deduction for the primary home. In my case; I am not in California; my home is worth X. Well the deduction in place drops its stated value by 40k which lessens any taxation.
We must understand that California was very different when laws like this were passed, they were abhorrent to a growing government. As we can see now they lost that fight and you can be sure the politicians would love prop 13 to be gone but before doing so something needs to be in place
> 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.
Correct me if I’m wrong. Doesn’t this scenario also describe handing down family farms? If so, repealing this law could be a terrible double-edged sword. Lots of families could lose the farm when mom and pop die, unable to afford the tax bill.
I could be mistaken but I believe that’s the scenario this law is intended to protect.
I have heard this argument advanced against the estate tax. But even if you eliminate the reassessment loop hole the property tax rates are still cappped at the 1-ish percent level.
A family farm that can't afford 1% of its assessed value doesn't sound like a very viable business.
So if they're scraping by maybe due to lean years such as during the recent drought, you would be comfortable with the family business being shut down? Farming is typically a low-margin business.
Over taxation is one of the primary stated reasons some rural Californians are proposing to split the state.[1] So perhaps a solution is to allow farmers to govern themselves and tax land owners appropriately, and big city dwellers to govern themselves, taxing land owners appropriately.
(Note that I don't live in CA so I am neither for nor against. Simply stating facts.)
Are we talking about real agribusiness in the Central Valley or are we talking about a couple "family farms" in Cupertino or wherever?
In the former case, are these people are at any competitive disadvantage relative to rural areas of other states?
As for the latter case....well how much sentimentality are you going to attach to land uses from the past? Sure, Silicon Valley is built on some of the highest quality farmland in the country but most of the farms are gone now. If you want to keep whatever few are left there are probably more targeted ways of doing that.
I see. I'm just not sure they have so much of a dog in the Prop 13 fight per se. Land values there haven't risen to nearly the levels as in coastal communities. And there are all sorts of special rules for ag taxes that I'm not really familiar with. The Central Valley farming community definitely leans very rightward and sees themselves as a somewhat aggrieved minority in California.
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.
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.
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.
Ah, I don’t mind the new housing developments, what does become frustrating is having to deal with all the traffic generated by the kids going to school in the morning. Are there alternatives to mandatory school buses, any research into this?
A self-centered desire to preserve an environmentally unfriendly suburbia at the expense of others who wanted to share in the region's prosperity contributed the shortage.
In the article the polls cited say that people think it was profit seeking developers and "technology companies who add jobs". Clearly instead of accommodating these desirable jobs we should give ample incentive for them to go elsewhere.
The XXth century's “American way of life” myth, with individual homes in suburbs and a car to go to work. That just doesn't scale well, espacially with the geography of the Bay Area.
And if you're really looking for a “who”: the car manufacturers who fuelled this myth through advertising.
I dont understand whats the outrage is about.
Bay Area / San Francisco housing market is tough because that area is special. Its special because its home to world's most innovative companies that pays its staff world's highest salaries. So it basically became an exclusive neighborhood for the wealthiest and most talented (demanded) people. And it stay special because those who are not in demand cant afford to live there. You think it will be better if housing became cheaper and all those who could not afford to live there now would be able to move there and turn the place into a shit show like Queens and Brooklyn have become? Overcrowded houses with too many cars on the street, all the double parking and chaos not to mention filth on the streets and the noise? You cant afford it for a reason, if you were needed there Google would offer you a salary high enough for you to be able to afford it. Everybody is basically in outrage that they cant get into and live in this exclusive, high class neighborhood but if everybody could afford to live there it would not be exclusive and high class anymore and those things that attracted you there back then would not be in place any more and the area would become into a place that you run away from in the first place.
I live in New York and unfortunately have to be in Queens and Brooklyn regularly. if circling the neighboring blocks for 20 minutes every night to find a parking spot is what you call a livable residential community then ok.
Interesting that you think SF is special because Google is there. What made it special before Google existed? What made it special before computers existed?
It's geography, climate, and culture make it special. Tech companies don't get to show up and stake an ownership claim on this stuff. If the hippies told the hipsters "we were here first!", they wouldn't be entirely wrong.
tech companies are not the only thing making SF special but they are the main reason behind raise in housing cost of recent decades and turning the area into even more exclusive than they were before.
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[ 2.9 ms ] story [ 146 ms ] threadIt'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.
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.
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.
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.
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.)
Lower housing stock leads to inflated home prices, causing higher taxes paid by more-recently-purchased homes.
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.
It is reassessed at market value after a non-family sale.
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.
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.)
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.
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.
If real estate is where all your net worth is: SELL AND DIVERSIFY
Oh and let's not forget the many, many problems it has caused for the education system you so respect. Prop 13 is often named as one of the reasons why CA's public education system is under such financial duress at every level.
Why can't we just admit that we need far, far more housing stock, far, far better public transportation systems, far, far better infrastructure and that CA's unique property tax system has essentially stymied all of those efforts. I find if hard to believe CA wouldn't be better off without Prop 13.
On another note, this post strikes me as incredibly hostile toward anyone moving to California. "Stay away, this place is ours, and if you come and can't buy, then don't complain, because this place was ours first." "Oh, and you're a tech person, so bugger off, we don't need your kind anyway!"
Is the person who just bought property at market rate today more entitled to complain according to your metric? They will have paid more in taxes than the person who bought in the 70's cumulatively paid over all those decades within just a couple of years. Would they then be more Californian somehow? Entitled to more of the state's resources? How about those people who have rented here for 30 years? If you don't/can't own property are you less Californian?
But do that and keep prop 13 in place, please. We don't need the state to hire a bunch of new tax assessors; it's doing just fine destroying itself financially already.
I don't understand how you're supposed to get a financially healthy state when it's starved of funds compared to states like MA that have reasonable and equitable property tax laws.
Regardless, after the declining baby boomer population finally loses their political influence, millennials will step in and fix the problem themselves —and they will, it’s not like any of us can afford those houses (even the ones who grew up in the city and aren’t in tech, which you seem to imply are more important or valid).
That’s just democracy, after all.
[this comment was originally made in response to one of nontechdude1’s now-deleted comments]
i would caution anyone with the resources to purchase a home to be cautious right now. there are too many political unknowns that could easily make it a poor financial choice.
or you can go all-in knowing that if you become underwater, you can just walk away (CA is a non-recourse state) as long as you don't have a HELOC on the property.
The current, very real housing shortages and homeless epidemic is just the tip of the iceberg.
The millennial children of the 1% will inherit those houses and once the boomers are gone they will find another scapegoat to blame while they try to justify their parasitic streams of rental income.
Americans are weirdly susceptible to being divided along identity politics lines.
The whole "boomer vs. millenial" thing is just the 1% engaging in a game of scapegoat, divide and rule. By blaming your mom, you're helping them.
Many, many millennials don’t. Even for the small minority that inherits them, new housing is out of their reach. Studies show millennials, even ones’ whose parents own property, by and large don’t want to live in the same suburb/house they grew up in (though, with the current state of affairs, many still live with their parents).
In any event, even if all of that small minority wanted to stay in their exact house, the rest of the disenfranchised would be so numerous as to overwhelmingly outvote them.
Here’s a very enlightening article to the current plight of the millennial. I recommend setting aside some time to read it today.
https://highline.huffingtonpost.com/articles/en/poor-millenn...
A tax raise is not punitive if your taxes were not commensurate with what you need to contribute to society in the first place. A homeowner in California for the past 30 years has paid drastically less than what a homeowner in basically any other place would have, while probably getting more in terms of public services.
You got lucky. You got in early and now you get to benefit from the massive unfairness of Prop 13. I will also graduate in-state from a UC. What will I inherit? Will I ever be able to afford a decent home in the metro area I grew up in? I doubt it — and even if I did, how much less would the guy next door be paying than me every year?
[Edit: grammar]
CA was an environmental gem and still is to an extent. i don't want to invite the whole world here. i dont want immigrants, rich and poor, coming here and forcing out people who were born here.
i believe there are too many people here. unfortunately my voicing of this opinion is confined to a niche web forum for tech nerds.
i have a different opinion than you about whether CA growing is a good thing. however, i think wieners bill allows for growth without increasing traffic--i'll take it.
If the traffic is bad, vote to build public transit. Germany and Japan are almost identical to California in size and both have preserved most of their natural beauty and have comparatively few problems with congestion. They do this by investing in rail, because it takes cars off the road and increases physical and economic mobility.
>i've been cheering trump deporting all 3 million illegal immigrants
I see no reason to kick people out who want a shot at the American Dream, and whom Americans like you and I have invited into this country with our insatiable desire for cheap labor, food, and construction. Instead we could let them legalize (not even necessarily become citizens, though I'd like to see that) and build housing and other infrastructure to accommodate them while growing our economy and tax base. That has been a proven success in this country for the last several hundred years.
>i dont want immigrants, rich and poor, coming here and forcing out people who were born here.
And yet, by continuing to support Prop 13 and other policies that reduce the housing supply and place an undue burden on those who wish to purchase housing, you are forcing people like me — who were born in this state — to leave.
>i believe there are too many people here
There aren't too many people here. There's too little housing at too low a density with too little public infrastructure. All of those problems are solvable — we just need to gather the political will to make investments for the continued prosperity of our state. We need to act like grown-ups living in a society: we must pay our taxes, elect responsible leaders, help those less fortunate than us, and fight for our collective interest.
Or are we just going to scapegoat the most vulnerable, dodge paying our fair share of taxes on our ever-appreciating assets, kick the ladder out beneath us, and cower behind walls? Most in my generation seem sick of this free-for-all past generations have created. I want a society where we do our share, help those less fortunate, restore civil society, embrace community support structures, and give everyone a shot at a happy existence. That's what I'll be fighting for. What about you?
That is literally 100 times cheaper than the most expensive real estate in CA.
Why won't Google put some satellite offices in York, PA? York, PA isn't 100 times worse than Atherton.
Most people in CA feel the same way I do and our voices matter. There are big forces at play: third-world illegal immigration, third-world legal immigration, tech's reluctance to spread out across America, driving up costs for all of us natives. Rather than lower the value of housing here by overbuilding, I'd rather stand up for myself and eliminate those negative forces. In case you didn't know, being nativist is in vogue these days. I'm not the only one! And I'm happy and unashamed to vote this way.
Vancouver did something like this, rather than overbuild. It's not racist and it's not immoral. It's just making your voice heard.
The current situation is bad enough that it's actually driving away people who were born here and have regular jobs, and causing a lot of the traffic problems you mention by increasing commuting.
>Most people in CA feel the same way
What? Citation?
>being nativist is in vogue these days
You're not a nativist. If you were, you'd want a place for people like me who were born here. Instead, you're more than willing to kick us out for the sake of your own financial well-being. You're just a selfish beneficiary of the pyramid scheme that is the American housing market.
What is wrong with you? What destroyed your empathy, compassion, and hope?
There are ways to dramatically increase the housing supply that I think we should be working on and it seems like the state is doing that.
And as it happens the bay area turned out to be too important as an engine of growth for the nation-state as a whole to allow nostalgia about pseudo-Victorian homes filled with hippies or greed for unearned wealth to be the tail that wags the dog. The incumbent power structures there, which represents narrow local interests can and should be overruled by higher levels of government for the good of the state and country.
So I left.
Except that I can't help but feel that there is something deeply dysfunctional about a society/culture/place (CA) which makes propagation of the next generation not really possible. And whose children get pushed out in favor of extremely wealthy outsiders. I'm not complaining, I've simply accepted that in order to be able to raise a family, I have to join the long tradition of Americans migrating elsewhere inside of the country in search of a better future.
But it sure as hell isn't how I would have things work if I were designing them from scratch.
I was born here too but your arguments sound a lot like special pleading.
Do you really think that a tax loophole is "earned"?
It doesn't support property ownership anymore because it incentivizes people to hang onto and rent out properties that haven't been reassessed.
The outcome of which will be determined by which side gains the upper hand in this class war.
We must understand that California was very different when laws like this were passed, they were abhorrent to a growing government. As we can see now they lost that fight and you can be sure the politicians would love prop 13 to be gone but before doing so something needs to be in place
Correct me if I’m wrong. Doesn’t this scenario also describe handing down family farms? If so, repealing this law could be a terrible double-edged sword. Lots of families could lose the farm when mom and pop die, unable to afford the tax bill.
I could be mistaken but I believe that’s the scenario this law is intended to protect.
A family farm that can't afford 1% of its assessed value doesn't sound like a very viable business.
Over taxation is one of the primary stated reasons some rural Californians are proposing to split the state.[1] So perhaps a solution is to allow farmers to govern themselves and tax land owners appropriately, and big city dwellers to govern themselves, taxing land owners appropriately.
(Note that I don't live in CA so I am neither for nor against. Simply stating facts.)
[1] https://img1.wsimg.com/blobby/go/720c6a07-3594-44b7-8098-94f...
In the former case, are these people are at any competitive disadvantage relative to rural areas of other states?
As for the latter case....well how much sentimentality are you going to attach to land uses from the past? Sure, Silicon Valley is built on some of the highest quality farmland in the country but most of the farms are gone now. If you want to keep whatever few are left there are probably more targeted ways of doing that.
Why so fatalistic? California is probably the most open state in the union in terms of citizens having the ability to place ballot measures.
That's how Prop 13 got passed in the first place :)
https://ballotpedia.org/Signature_requirements_for_ballot_me...
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.
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.
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.
In the article the polls cited say that people think it was profit seeking developers and "technology companies who add jobs". Clearly instead of accommodating these desirable jobs we should give ample incentive for them to go elsewhere.
And if you're really looking for a “who”: the car manufacturers who fuelled this myth through advertising.
It's geography, climate, and culture make it special. Tech companies don't get to show up and stake an ownership claim on this stuff. If the hippies told the hipsters "we were here first!", they wouldn't be entirely wrong.