I've never understood the objection to prop 13 - your property taxes can and do go up every year by a reasonable amount (2%?). The only thing they don't track is the insane bubble prices that happen every decade or so but who cares? If people sell then, they either are taxed or buy inflated property prices as replacement. When prices crash, the gov't shouldn't depend on bubble prices for revenue.
> If people sell then, they either are taxed or buy inflated property prices as replacement.
Oh, sweet summer child. In California, you can transfer your below-market rate to a new property. You can also create an LLC for each property so that it need never be sold (change of control of the LLC owning the property does not trigger reset of the tax rate). And your children can inherit your property tax rate, too.
> When prices crash, the gov't shouldn't depend on bubble prices for revenue.
Most rates are so far below the real value of a property that most people still saw (and complained about) the maximum 2% annual increase during massive housing crashes like 2008.
Correct but it's an expansion of Prop 13 protections. There are a bunch of laws around rent control in California and "Prop 13" is just shorthand for "property tax control".
the objection is that, even after looking at longer timeframes to smooth bubbles, california real estate has appreciated by much more than 2%/yr over the last several decades. this is a policy that favors people who bought houses a long time ago over people who have bought more recently or are looking to buy for the first time. why/whether that's a problem depends on your perspective on what the purpose of a property tax is.
a simple way of looking at it is that property tax is just one of many ways that a city raises funds. it seems unfair that two people/families living in similar houses, consuming similar amounts of public services, might pay wildly different amounts of tax depending on how recently they bought their houses.
a more nuanced view is that taxes are not only about revenue collection, but also incentivizing or disincentivizing certain behaviors. high property taxes discourage people from living in highly demanded areas without having a strong reason to do so. a pair of empty nesters living in a detached 3/4BR home in SF is not an efficient use of the limited housing stock. if they really want to do that, they should be allowed to, but imo they should not be insulated from the economic consequences.
of course, this is all in conflict with the american ideal that you can lock in a fixed rate mortgage, pay it off, and have your heirs monopolize a particular plot of land in perpetuity. this has always seemed to me a promise that should never have been made, but at this point it would be very painful to unwind all the policy that props this up.
2% is not a reasonable amount when housing prices are regularly going up by 3x-5x that percentage.
There has never been a bubble crash that brought housing prices anywhere down to the Prop 13 valuations, so it's pretty strong evidence that it's not a bubble.
I think that we need to start charging a huge capital gains tax on local property transaction, assessed by the local government, not the federal government. Maybe 25%-50% of the capital gains. Or maybe 2% per year if ownership, with a max of X%.
Long time property holders have been exploiting the economy of California, taking in unearned profits, and taking that money out of poorer, more productive, people.
> 2% is not a reasonable amount when housing prices are regularly going up by 3x-5x that percentage.
Let's examine these numbers. If housing prices are regularly going up by 6% to 10% it means that a property purchased for $250K in 1995 is worth 1.2M to 3.3M today. While you can probably find such an example, that's not the norm by far.
I can say that all the houses in my neighborhood (outskirts of Silicon Valley) have gone up about 4% averaged over the last 30 years. Yes that's more than the 2% valuation increase, but way below 6-10%. It's one thing to criticize prop13, but let's keep the numbers factual, no need to exagerate.
> There has never been a bubble crash that brought housing prices anywhere down to the Prop 13 valuations
That's very much not true. The dot.com crash brought many houses (mine included) below the prop 13 valuation. The 2008 crash did the same for a very large amount of home owners.
There hasn't been a crash since 2008 so it might feel like prices can only ever go up, but there will be another crash. Perhaps soon.
> I think that we need to start charging a huge capital gains tax on local property transaction, assessed by the local government, not the federal government. Maybe 25%-50% of the capital gains.
What does this accomplish exactly? It is a huge incentive to never ever sell. Is that your preferred goal?
In case you haven't been paying attention, millions have already been leaving California, due meret to being priced out. It's the lower income folks, not the rich folks.
IMHO you could say due to the transplants, or you could say due to not enough vacant homes to house them.
If you focus on "these people are the problem" then you get results like what's happening in California. If you focus on "we don't have enough vacant homes" then there's a chance of actually solving the problem.
As a Californian, I devote a huuuuge amount of unpaid time to trying to shift the conversation to housing the people that need housing, rather than shipping people to whereever it is you live. I have not been terribly successful, but if you also shape your conversation towards "we need to house people" rather than "these people are problems," then it will be faaaar easier to convince my neighbors to also accept people. Because Californians are hypocrites, but they hate being proven to be hypocrites when other states are more welcoming and accepting. But if, say, Austion or Boise folks are like "we don't want you either" then it just encourages our NIMBYs as feeling justified.
Californians voted themselves two massive boons in the 70s.
1. Prop 13. This was in response to rising inflation in the 70s that had a knock-on effect to property taxes. The argument of kicking old people out of their homes was used as a stalking horse for giving the likes of Disney a massive tax break.
But there have been periods of high inflation since and some massive growth in property values. So you have a house that might've sold for $60,000 in 1975 with tax set accordingly, now being worth $3,000,000 and being taxed at twice that rate (1-2% per year capped cumulatively). So someone who buys an identical house now might be paying 20x the property tax rate.
This was further expanded by allowing people to inherit their low tax rates so you really have a two-tier system where long-term residents and corporations aren't paying anywhere near their fair share of property taxes.
2. Rent Control. This turned out to be another massive boon to incumbents. Inflation created issues with rents going up too fast. The solution? Cap the increases, just like Prop 13. And give tenants the right to stay. These too can be inherited.
So you might have someone in SF living in a $3,000,000 house that's paying $400/month in rent.
This hasn't really helped anyone since.
NYC had this too but steadily moved away from it. The last rent control lease was created in the early 1970s. There's a greater (but shrinking) pool of rent stabilized units that tend to have more reasonable rents.
Anyway, as you can imagine this creates a bunch of bad incentives. Under the table payments for leases. Illegal subletting. Properties remaining vacant because rather than be rented (I saw one estimate that 1 in 8 units in SF was vacant). The only recourse for evicting a rent controlled tenant was really an Ellis Act eviction.
Price caps only work in the very short term. They are not a long term solution.
Higher property taxes would actually help with the housing crisis in California because it's too cheap to park money in Californian property plus you could do something useful with those funds, not the least of which should be reducing state income taxes at the lower brackets.
