I think the logic is that if you're a local, the primary purpose of the residence is for living, not speculation. If prices drop your illiquid asset # drops, but you still have a place to live and you're going to pay less property tax. Of course, people could end up underwater, but that's all dependent on how crazy a mortgage they were able to get (I think there is less craziness here than there was in the run up to 2008 amurica).

Yes, some people will get screwed. Hopefully this will result in less locals being screwed than if nothing was done.