Comment by ScottBurson | Hacker News Reader

Comment by ScottBurson | Hacker News Reader

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A complete repeal is politically impossible, but there are two changes that should be made. One, as mentioned above, is to restrict it to owner-occupied residences only. The other is to change the 2% annual increase limit from a limit on the amount of tax assessed to a limit on the amount due in a given year. If the assessed tax exceeds that limit, the locality would receive a lien for the difference, this lien becoming due only when the property is sold.

This accomplishes the original goal of the initiative — to keep fixed-income seniors in their homes — without starving localities of property tax money and disincentivizing them from allowing new housing to be built.

Politically, passing these changes would still be hellishly difficult, particularly the second one, which is not so easy to understand. One way of putting the problem is that Prop. 13 represents a massive transfer of wealth from future California residents to present ones. Of course, the future ones can't vote against it since they don't live here yet.

Personally I think we should just go for the first one, which is why I didn't mention anything else. Proposition 13 limits should be for owner occupied residences only. This would go a long way to fixing the financialization of real estate problem, which is an often under-discussed contributing factor.

You'd get a lot less resistance there. You're not messing with cost of living for owner occupied homes, just second properties, investment properties, and of course all those foreign cash buyers using our real estate as a money laundering vehicle.

As a renter, that would be very painful for me, as my landlord would simply pass the cost of higher property taxes directly to me. (My building isn't subject to rent control.) For buildings subject to rent control, I would expect this would just cause landlords to spend less on improvements to the properties.

If your landlord gets a property tax cut, would they pass on the savings to you? No.

They are leasing you your place at market rate. The market rate is affected by supply / demand of rental units, not landlord costs. The only way they could pass the extra tax onto you is if you are not market rate and there is a law that allows them to do this, or if increasing property taxes on apartment buildings decreases the supply of rental units - an unlikely scenario.

> The only way they could pass the extra tax onto you is if you are not market rate and there is a law that allows them to do this

Not sure what you mean by this: my landlord can raise my rent for whatever reason (or no reason), by any amount they desire.

I can choose whether or not I want to pay it, of course. But I imagine moderate increases to cover at least some (and maybe all?) of the cost of a property tax increase would be swallowed by most renters, given that moving is also a cost, and often a large one.

> If your landlord gets a property tax cut, would they pass on the savings to you? No.

In fact, we have empirical evidence for this. The campaign for Prop. 13 claimed that landlords would pass on the savings, but after it was passed, no corresponding drop in rents was observed.

Rents are set by market supply and demand, not arbitrarily.

They are. The caveat here is that in the long run, the attractiveness of owning rental property is affected by the ROI, which is affected, to some extent, by property tax rates. A case could be made that Prop. 13 has expanded the rental supply by increasing the returns to property owners. So even though rents at any given time are determined by supply and demand, over time there should be some tendency for the system to self-correct.

The question, though, is the magnitude of this effect compared to the other forces acting on supply. I think it's small. The value appreciation being enjoyed by rental property owners greatly outweighs the small increase in property taxes they would pay without Prop. 13.

One of the reasons Prop 13 happened was to go hand in hand with rent control and help offset the negative costs of rent control. (An advantage for the owner and renter). So I think you'd need to get rid of rent control to get rid of Prop 13 for a large group of people and that would be very hard.

Prop 13 preceded rent control in San Francisco and in most (maybe even all) California cities that have rent control.

That's how I heard it. Turns out Berkeley got rent control in 1972 while Prop 13 was passed in 1978. But generally you're right.

It's still my understanding that landlords of multiple units who have tenants in rent control would have a massive problem with the repeal of Prop 13. It's one of the things that go hand in hand with rent control and keep costs low. They would have a strong argument for being unable to maintain their buildings and run a business without Prop 13.

> It's one of the things that go hand in hand with rent control and keep costs low.

Prop 13 doesn't keep total costs low for landlords, it just shifts costs from property taxes to other things.

A number of landlords skimp on maintaining their buildings when they have a number of people on rent control. The buildings become quite dated and unkempt. However Prop 13 does make the business sustainable for those receiving very little rent from tenants of 30+ years.

They should change the 2% limit to change according to the CPI. Interest rates were crazy high in the years when it passed, now that rates are low it's rewarding those who bought when rates were high (and prices were low). Prop 13 just defies all sense

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