[closure]

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.

[tedivm]

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]

> 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.)

[thephyber]

Prop 13 limits increases while a property remains within the ownership of the same immediate family.

It is reassessed at market value after a non-family sale.

[acchow]

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]

> 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.

[chiggins]

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.

[dragonwriter]

> 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.)

[chroma]

> 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.

[babaganoosh89]

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]

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.

[curun1r]

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.

[zapita]

I did not know about that. Do you have a reliable, unbiased resource to recommend where I could learn more?

[curun1r]

There this: http://www.kpbs.org/news/2010/mar/26/prop-13s-impact-schools...

[zapita]

Very useful, thank you.

[dragonwriter]

> 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]

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.

[bufordsharkley]

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.

[kqr2]

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.

[surfmike]

One way: it discourages people from moving to a downsized home when that's appropriate.