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by pydry
2 hours ago
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That's partly the effect of prop 13. When land (or its proxy, property) is detaxed then property becomes a valuable commodity to hoard and guard the value of jealously. So, it attracts the foreign investors looking for stores of value and encourages NIMBYism. If the tax bill of properties in high value locations went up with land value then it would encourage people to stop hoarding and to sell up and have their properties redeveloped. So, blame Howard Jarvis and his taxpayer's foundation. |
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This doesn't make a lot of sense for two reasons.
The first is that real estate is more the exception than the rule in being subject to property tax to begin with. If foreign investors want a store of value that minimizes "property tax" then they could just buy stocks or bonds etc. Which is why "foreign investors" are a red herring that pundits keep bringing up because it's clickbait or because they want a scapegoat to divert attention from the real problem (which is zoning).
The second is that if you have a place where taxes are lower than other places, that's the place people should be lobbying to build things. Who wants their lower taxes to be on a $1M single family home when they could be on a $100M skyscraper? The main reason this isn't happening is that the effective property tax rate in California is ~0.7% compared to the national average of ~0.9%, which isn't enough different to make a dramatic difference.
The real problem with prop 13 is that it resets on sale transactions or if you build anything, which does provide a major deterrent to construction because then existing property owners neither want to sell to a developer and use the money to buy something else nor build anything on their property themselves since either one would result in a huge tax hike.