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It creates a built in incentive for NIMBYs to not block development, lest they feel the pain of increased 'rent' too. If the bay area built as many units at the rate of texas or seattle for example, none of this would of been a big deal.

Imagine old people viciously fighting for increased development lest their property tax bill goes up, unlike the opposite today at most city council meetings. The elderly drive most housing policy in many ways because they have the free time, general boredom and incentive to participate in the political process this way.

Property tax is also almost never approaching %3. The range can be %0.5 to %2.5. A high property tax rate actually helps modulate the value of houses in a market since the price of housing is based on the monthly payment. This is what contributes to texas being a cheap housing state, since the high property tax prevents housing values from going up too quickly.

Unoccupied properties also cause the supply to go down without a person or family inside it contributing to the local economy. Idle assets should be put to productive use, it's half the point of a property tax already.

This. If anyone wants to see what a real estate market looks like without property tax, come to China. Even a good property in a first tier city is 40% vacant. It acts to inflate property bubbles as housing becomes just another asset.

> If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house?

I shed exactly zero tears for someone whose $250k property quadruples in value to $1m in five years. Sell the house and dance with joy at your (untaxed!) $750k capital gain.

The only argument for freezing tax assessments is to soak the new residents in favor of the current residents. It's a result of the absolute worst kind of democracy: voting to make other people pay more taxes.

Technically you would pay capital gains taxes on around 250k of the gain, and 500k if you're not married. You can deduct improvements/maintenance from the gain, but capital gains from owner-occupied real estate are taxed in the US if they're large enough.

Ah, I did not realize that. Thanks for the info! Still, $250/500k untaxed is nothing to sneeze at. And long-term capital gains are taxed at a lower rate than income for someone who's making $100k.

>I shed exactly zero tears for someone whose $250k property quadruples in value to $1m in five years. Sell the house and dance with joy at your (untaxed!) $750k capital gain.

Ok, now where are they supposed to live? All the other properties cost just as much, so now they're forced to not only move out of the city, but now they have to quit their job too! How is this productive? You're penalizing someone for living in a housing bubble and not taking advantage of it. Even worse, you're penalizing current residents for having their house values driven up by a bunch of out-of-state (or out-of-country) investors and speculators.

Being priced out of their home is one option.

The other option is to ease pressure on home prices by laying down the NIMBYism and letting more housing be built in your community in a sustainable way!

This is the whole the point of self-corrective market forces: sure, you can choose to keep your low-density housing in a region that is attracting demand with great weather and strong industry, but prices are going to appreciate if you keep your doors closed to newcomers. Keep the door closed long enough and your self-defeating actions will force yourself out as well (see palo alto, where they now need to subsidize housing for anyone making under $250k/yr so they can have people like teachers and firefighters still live in the community).

The fact that taxes DON'T increase with demand distorts the self-corrective market forces that would otherwise stop people from closing the door to affordability.

>The other option is to ease pressure on home prices by laying down the NIMBYism and letting more housing be built in your community in a sustainable way!

That doesn't actually work in the real world. If you live in a desirable area, and you increase the housing supply in such a way that the area is still desirable, as soon as the price drops a tiny bit people move in from the outside and drive it back up again.

That can happen at the small scale - neighborhoods or suburban villages. It doesn't really happen at the city or metro area scale.

(If you have evidence of urban areas that have allowed lots of construction during periods of high population and job growth - cities like Dallas, Houston, or Atlanta - and have also seen high housing prices, please share it; I'm genuinely curious).

Part of the problem in the bay area is that there is minimal cooperation between the dozens of municipal governments to allow more housing. None of them want to be the first or only one to do it out of fear that they'll just end up with more density and high prices. It's a bit of a prisoner's dillema.

It happened in Southern California. In the area where I grew up the cities allowed developers to build hundreds of homes at a time - it's probably four times as dense as it was when I lived there.

Orange groves and strawberry fields and outdoor movie theaters and old military bases were all leveled and turned into housing tracts. But housing didn't get any cheaper - the state added 20 million people from 1970 to 2010, because there were jobs and it had the reputation of being a nice place to live.

This is the problem with for lack of a better term, millennial analysis of historical decisions on current markets.

Prop 13 was put into place because the state and municipalities were raising taxes left and right without consideration of things like fixed income individuals being able to stay in their homes.

There was good and bad in the measure. Good - to a point - raising the need to add taxes above 50%+1 vote, the bad, it applied property tax issues to both commercial and residential properties equally.

It's much easier to set up a business entity to span generations and avoid taxes than it is a private home.

The measure also masked an issue of use. A single individual who bought a house for $500k would pay more in taxes than a family who bought a house in the same neighborhood for $350k, yet if the family has children in the schools, they are paying less in taxes and getting more out. Most property taxes have multiple assessments for schools.

It does need to be fixed, but the conversation so far has fixated on residential and ignored the commercial impacts of prop 13.

Right just move your kids somewhere new and cheap like Fresno because there happened to be a housing bubble where you lived. Houses provide a stable environment for raising families. Why should you be forced out by taxes?

Don't worry, families have little opportunity to own a house anymore, much less suffer the tragedy of unrealized capital gains. The most accessible housing market for urban or suburban California families is renting from the Prop. 13 aristocracy.

> Tax reassessments during the boom of 2001 to 2007 were on track to price a lot of people out of their houses based on their current economic status. Proposition 13 and other bills passed across the country allowed individuals to avoid being "taxed out" of their house.

Proposition 13 was passed in 1978. The housing boom of 2001-2007 had jack shit to do with its passage.

(Yes there, is a Prop 13 in 2010 that also has to do with property taxes, but only about seismic retrofitting of existing buildings).

Firstly, California property taxes are limited by Prop 13 to being 1% of assessed value, so your $30k tax bill can only happen if your property went to $3 million. A $1 million house cannot have a tax higher than $10,000.

There are well-established solutions to your issue about people being forced out of housing with rising demand. Massachusetts allows tax deferrals up to 50% of a property value. (If you want to get technical, Massachusetts allows towns/cities to allow tax deferrals; if your city does not want to offer it, they do not have to)

So, your $250,000 -> $1 million dollar house allows up to $500,000 in tax deferrals, so you've got a lot of years you can live in that house without paying taxes. When you sell the house, you pay the taxes and also pocket a pretty sum on the appreciation in the value of the house.

It's a bit more than 1% in SF, getting close to 1.2%

http://sftreasurer.org/online-property-tax-payment-faq#taxam...

Also possibly relevant for comparison, DC rate is 0.85... so there is already a 40% premium for enjoying the Cali weather :-]

http://otr.cfo.dc.gov/page/real-property-tax-rates

> In your example, the building you describe is a condominium? If so, then what does it matter what your tax bill is and if they are absentee owners; if the owner maintains the property, pays their bills and taxes, then you should be happy to have them.

The owner may not care, but the city as a whole should: it makes poor use of the scarce housing supply if sales are discouraged due to tax artifacts.

> why would you want the market fluctuations to be able to force an individual to leave their house?

To make room for newcomers with higher-paying jobs who, in some sense, 'deserve' to live there more than you do. Unpopular opinion, but that's how we ration every other limited resource; it goes to the highest bidder, not the first mover.

> that's how we ration every other limited resource; it goes to the highest bidder, not the first mover

This is the opposite of the truth. The core of property rights is that just because someone will offer you a "good" price for your trinket, doesn't mean you have to sell it to them. (That would be a chaotic world!) Limited resources are held by their owners, who had them first.

You can argue that housing is fundamentally different from every other kind of property, which justifies forcing people to give theirs up if somebody else wants it more -- but there is no room to argue that that's how we handle other limited resources.

> If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house?

Because it ties housing prices to economic viability. If a person's housing value increases 10x, they should move if they can't afford to maintain it so that another more economically productive person can live in it.

It sounds evil on the surface, but the reality is that it will keep housing prices in line with the economic growth of the area. As it stands now, fixing the assessment value only encourages people to hold onto the house even longer because taxes eventually become a minuscule amount compared to the appreciation of the house.

If taxes are a fixed $10,000/yr on a house that is growing 10% in value every year, then it makes sense to hold onto the house indefinitely. However, if the property taxes increase proportionally each year, there comes a point in time where the calculus no longer works out and it makes sense to sell the property and cash out. Since this happens to everyone simultaneously, the growth in housing prices will also decrease (thus, reducing the growth in property tax).

>If you have a job that pays $100,000 and the taxes on your $250,000 house is $7,500 (3% property tax) and the tax quadruples to $30,000 in five years; why would you want the market fluctuations to be able to force an individual to leave their house?

A simple solution (for the elderly at least) would be to roll up all the debt until death, payable by the estate.

> A simple solution (for the elderly at least) would be to roll up all the debt until death, payable by the estate.

Simple until the next housing crisis.

That's exactly what people did before Prop 13. The idea that granny was getting tossed out on her ear by the tax collector wasn't ever literally true.

It's not the market fluctuation that's forcing people to leave the house, it's the tax and the state's enforcement of it. If taxes are pricing people out, lower the rate!

well, Prop 13 was passed way before 2001-2007, its an artifact of the late 70s. Still that's true that people can become priced out by tax increases (this was/is a problem in DC).

And you're right... as owners now we don't care and only benefit from the absentee neighbors. That's a major part of the problem. Now that we're invested, we are naturally opposed to anything that would untether our tax rates. If our neighbors (who mostly bought in the 80s/90s) were paying tax on the current valuations they would be encouraged to either sell or rent thus creating more inventory and helping bring prices toward equilibrium.