[pchristensen]

California has structural obstacles that don’t fit into partisan politics. Proposition 13 limits property tax collection, which warps housing development and many other factors. Also, California has high incomes, which means Californians pay more federal income tax, and the state receives less back in federal benefits, to the tune of almost $100 billion a year. Those are significant headwinds that the state would still have to deal with even if it was governed well.

[Melatonic]

Prop 13 is brought up a lot but it never made any sense to me that it also applies to commercial real estate used for businesses. I can see an argument for single family homes (primary dwellings) but property that large corporations own ? It makes no sense.

[pchristensen]

It was created by and for homeowners, but businesses aren't going to pass up a gift like that. It's actually worse for commercial property - building are owned by separate single purpose corporations, and if you want to sell the building, you sell fractions of the ownership in the corporation over time so there's never a big enough change to trigger a tax reassessment.

[irishcoffee]

Occams razor: it was never about the SFH owners...

[encoderer]

You really think california localities have a revenue problem? Prop 13 dos not limit property tax collection: it changes the distribution of it. It means I pay 40x more than my neighbor and that is very dumb, but whenver the city needs more revenue they just raise the rates.

[triceratops]

The problem with Prop 13 is not about its effect on tax revenue.

Prop 13 is no different from rent control. It distorts the market and limits supply.

If a property owner can't afford the tax on their land, it means the land is under-utilized. SFHs should be replaced by townhomes which should be replaced by multi-family buildings and so on. That doesn't happen because people who bought a house 50 years ago for a few beads and pieces of gum don't have this market signal in the form of a higher property tax bill.

[encoderer]

Yeah it distorts the property market. It doesn’t create a budget crisis as suggested.

[triceratops]

Where was it suggested that it caused a budget crisis? This started from https://news.ycombinator.com/item?id=47938121 which said "Proposition 13 limits property tax collection, which warps housing development and many other factors."

[pchristensen]

Low turnover, political and financial opposition to building, and structurally higher costs. It's a tangled mess.

1. People are disincentivized to move - the longer you've lived in a home, the larger the effective subsidy (vs average property tax payer) becomes.

2. New homes are on the other end of that - you pay much more in taxes than the average. So the cost of new homes is higher.

3. The average home pays less than it costs the local government. This is largely true everywhere because of the cost of public schools, but Prop 13 makes it more pronounced in CA. So local governments have a huge disincentive to approve any housing, especially larger apartments or condos where school aged children could live.

4. Govs make up for the lower tax per home by charging very high development fees for new construction, which raises prices and lowers rates.