[Lazare]

There's certainly some things to be skeptical of with regard to Prop 13, but:

1) Property taxes are not the only way cities can function. In California, property taxes represent about 70% of local government revenues, which is in line with the US average (72%) and higher than many states[1], with no clear correlation to housing prices or per capita GDP to be seen. And prior to Prop 13 it was 84%, which is still pretty middle of the road and not that much higher.

2) You seem to take it as a given that the reason cities like Menlo Park aren't allowing more houses to be built are financial; that they literally can't afford to change the zoning code. I find this preposterous, and I'd love to see any evidence you have to support it (studies, not plausible stories that happen to match your biases).

3) You say "they impose a negative externality on their neighbors, who suffer in the form of higher housing costs". Given than Menlo Park will see the sharpest increase in housing costs, then by your logic Menlo Park suffers most. That's the opposite of an externality.

I won't argue that prop 13 is a good law, but I think it's at most a sideshow, if not outright irrelevant, when it comes to the housing crisis, and I don't think you're offering a coherent argument otherwise. Houses aren't being built because key voters (and campaign contributors) want high housing prices, while no one influential wants low housing prices. If Menlo Park (and similar cities) were driven purely by revenue, rather than votes, they'd allow tons of housing to be built; even low-ish Prop 13 property taxes are better than nothing.

[1]: https://www.taxpolicycenter.org/statistics/local-property-ta...

[curun1r]

The part you're ignoring about prop 13 is how much it incentivizes nimbyism. If rising property values were accompanied by resultant higher property taxes, homeowners would be incentivized to work with renters to get new housing built rather than working against those that need a healthy housing market. But as it stands, prop 13 means the more they can block new construction, the higher the value of their homes.

[Lazare]

> If rising property values were accompanied by resultant higher property taxes, homeowners would be incentivized to work with renters to get new housing built

I don't think the math works out.

Let's say your house is $500k, assessed at $500k, taxed at 2% (which is a pretty high rate; national average is more like 1.2%, and of course, California caps it at 1%). If you can finangle a 10% increase in property value per year, then in around 8 years your property will more than double in price, and you can cash in on $570k of additional equity. Meanwhile, you'll have paid an extra $46k in taxes.

Conversely under a vaguely prop 13 like regime (1% property taxes, 2% appreciation per year), you'll pay an extra $7.2k in taxes. That's obviously much better; you pay 1.3% of your gains in extra taxes instead of 8%. But...

...we're still only talking about 8%. Of the total value. Weighted towards the end of the period. On the margins a few people may be dissuaded from pursuing a maximal house price support strategy, but 8% is not a lot; if you own a large, massively appreciating, highly leveraged asset, most people can happily find the cash flow to cover the tax bill when it's that tiny.

In short: On an asset like a house, the capital appreciation overwhelms the property taxes.

(Also don't forget that the tax base can be re-assessed on sale. That part of Prop 13 actually suppresses house prices and discourages people flipping houses to profit from rising values, although I think that, like all the impacts of prop 13 on the housing crisis, it's very minor.)

[curun1r]

The math only works like that if you realize the gain from the appreciation of your home's value. But on a primary residence, people don't want to sell. Selling, while realizing the gain, means either sinking most, if not all, of that gain back into another house, renting or moving out of the area. So for someone who doesn't sell their house, increasing property taxes can become problematic.

From your example, paying an extra $46k over 8 years per $500k of home value is much more significant when you're paying for it with income from working rather than an increase in your home's value. Nimbyism only works because you can both remain a homeowner and not have a significant increase in property taxes. You stop being a nimby when you sell your back yard. Higher property taxes would force homeowners to choose between their objections to new building, which increases the value of their home in some distant future sale, and increased property taxes in the immediate future. The time horizons are different, which makes the kind of comparison you're making problematic.

[stale2002]

It could still be an externality.

For example, let's say you put all your garbage out in the street in front of your house, blocking the road. This hurts BOTH you, because you can't get to work, AND other people who have to drive around the blocked street.

Even though the trash in the street hurts you the most, it is still an externality, because it is ALSO, hurting other people.