Comment by onlyrealcuzzo | Hacker News Reader

Comment by onlyrealcuzzo | Hacker News Reader

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Prop 13 to me seems to be at the root of all these problems.

I'm almost finished with Picketty's Capital in the 21st Century, and Prop 13 seems to be a godsend for rentiers seeking the inequality of 1900-1910.

Overturning Prop 13 isn't realistic since voters are selfish. Prop 13 has GOT to be the biggest reason behind NIMBY-ism. If the little old lady in the 3 bedroom $2M house had to pay $20K a year in taxes, she'd have sold a long time ago. But because of Prop 13, her taxes are likely less than $1K a year.

But the sick thing about Prop 13 is that it applies to landlords. You know why LA is filled with all these single-story rental properties from the 70s in prime locations? Because the taxes hardly budge, so they're paying about $1 per year per square foot in taxes. Even if they sold for the huge premium, it'd be impossible to re-invest that money into something with a higher rate of return.

It also applies to businesses. It's why you see a lot of car washes making < $1M/year sitting on land worth $20M.

We could potentially modify Prop 13 to eliminate the benefits for rental properties and have the benefits only apply to the first $1M of real estate. That'd only affect the top 5%, and only marginally.

But it could eliminate a lot of NIMBYism, I think.

This. Prop. 13 created incentives to never move out, and thus killed dynamism in CA. Young people need homes near work. Older people need cheaper homes and can be further from city centers.

Homesteading tax breaks are one thing, but applying them to all property is absolutely insane. This is easily the worst thing about it, and it has to go.

As to homesteading, even for homesteading the property taxes need to be able to go up with housing inflation somewhat at least.

It would be quite different if it was only the actual percentage tax rate that was limited in growth. I'd want that for income taxes too.

A brake on one kind of tax will spill into another kind. Thus, e.g., in TX property taxes function as an income tax via the Robin Hood school funding plan. It would be better to have a proper income tax, but no one will vote for such a thing without a hard constitutional brake on rates.

> Older people need cheaper homes

Why do older people need cheaper homes? Older people have paid off their mortgages and have 100% equity.

Property taxes and home repairs on fixed incomes.

Older people are on average on fixed incomes, sure. They're also on average the wealthiest age demographic in the US.

> They're also on average the wealthiest age demographic in the US.

That's true, but it's a bit misleading IMO. Older folks might have accrued more wealth than younger demographics, but they're not really adding to it each year.

For example, the 65-69 age range has a median net worth of ~$194k[0]. However, somebody in that age range is likely retired and will be living off of that $194k for the remainder of their life. Conversely, somebody under 35 might only have a net worth of $6.6k but will likely be bringing in ~$4,000 each month. Were an individual in the 65-69 age range to withdraw $4,000 per month, they'd be out of money in 4 years. Realistically, most might withdraw around $2,000 per month (before or after Social Security). That's where my parents are at. They really have much less to spend even though they have a lot saved up.

If you take into consideration home equity, it's more apparent why property taxes and such are a big deal to older folks: upwards of 80% of their assets are in their house[1].

[0]: http://www.businessinsider.com/heres-the-average-net-worth-o... [1]: https://amp.businessinsider.com/images/593580d679474c17018b6...

Great explanation.

Retirement starts to get scary when your parents are thinking about it. You start asking them just how much they have saved, and you start thinking about how much more income you'll need if you end up having to supplement theirs.

If you retire at 72 today you might well live twenty more years. That's a lot of time to live of fixed income. You'll get sicker as you get older, so you know your healthcare costs will go up. That expensive house with high property taxes (if you don't have prop 13 to have made them close to zero for you over 40 or 50 years) starts looking like a burden, and also a source of funds.

Easy solution is to make it such that Prop 13 only applies to primary residences of people that are on social security.

I think the premise is that "older people" don't "need" as much space (interior or exterior) as they did when they presumably were raising children in the home.

Then again, few people "need" SUVs.

They need less space. Having too much space is a cost of opportunity, since presumably a big house is more valuable than a small one. Selling one's big house and buying a smaller house, then investing the difference, may well be better than holding on to the house -- for society as a whole that's almost certainly true since now someone who needs more space can use that particular house's extra space.

And at some point many elderly people start needing to tap their equity. Sure, you can use a reverse mortgage to do that, but downsizing works too, so some do that.

In any case, "we're retiring and moving to the middle of nowhere, where land and homes are cheap" is a common thing I see. Property taxes are a big reason for this, because even with senior homesteading property tax breaks, it can be a big savings to live farther out, and that's a big deal when your retirement savings aren't as big as you might have hoped.

California's old people are already paying 10% income tax which they can easily avoid by moving to Oregon. Lower property taxes is a result of higher taxes.

Also property taxes are not there to decide who leaves and who stays. The only reason why we have property taxes is to pay for Police, Public schools and other bare minimum public services.

Prop 13 is such garbage, especially for rentals. My landlady was charging me $2500/mo and paid $650/year in property taxes. I think she used that property tax transfer for 55+ older from an even older place she must have purchased a long time ago, because the assessed value is now $60k, but the property is worth at least 500k. Bullshit. Not to mention the insane appreciation on the property. It was a poorly maintained dump of a place. She had no interest in fixing it or taking care of it, but had every incentive to hang onto it because it cost her NOTHING.

Even just removing it for commercial properties, and residential properties that are not owned by an occupant would fix 80% of the problem from an overall tax revenue perspective, while retaining the most support with voters. How does it make sense that a regular McDonalds pays less in property taxes than a single family home, while being larger and in a more desirable location?

Proposition 13 as a whole needs to go, it has horribly distorted the market, and moved the property tax burden onto those who own the least land. Meanwhile, schools, towns and counties are desperately revenue starved due to Prop 13.

> Proposition 13 as a whole needs to go

Well, the limitation on increases in tax basis value probably needs to go, but I think the case is less clear for the tax rate limits and other parts of it.

The tax rate limits have also turned out to be problematic. They limit how much taxes can be, relative to property value, but they haven’t limited taxes overall. We now have a whole lot of parcel taxes, and Mello-Roos taxes, where a stick hut pays just as much as a mansion, to pay for a lot of city services. It’s incredibly regressive.

Do you know of studies of what the effect would be if it was removed? I think it's a third-rail sort of thing... but also, I think the larger issue is really the supply problem.

More relevant, it has made it economically unattractive for municipalities to zone for or approve housing construction (housing is a net loser generally because of school district costs, and Prop 13 just torpedoes future school funding) and only allow commercial or office development. That's why cities with market power in the Valley (Palo Alto, Mountain View, Sunnyvale) have 3+ jobs per resident.

  Overturning Prop 13 isn't realistic since voters are selfish.

Overturning Prop 13 for everything but one's legitimate primary residence would be a lead-pipe cinch. Yet neither the legislature nor any deep-pocket funder for a relevant initiative constitutional amendment (cough Tom Steyer cough) has come forward.

Agreed. Prop 13 is also the reason municipalities zone more commercial. Ever wonder why so many hundred thousand sq ft office space is going up around transbay terminal without a balance of housing? Don’t think that’s the dreaded straw man”NIMBY”. Its the city trying to make sure the services are financially solvent 20 yrs from now.

Prop 13 has many, many pernicious effects but it doesn't drive NIMBYism. The pernicious effects are a slowdown in the velocity of the housing market (keeping your low taxes) and pushing local governments to very strongly prefer commercial over residential development. Every new house is a net loss to local government on a long term budget basis.

One of Prop 13s benefits from a planning perspectives is that your property taxes are isolated from the decisions of your neighbors. So if adjacent properties turn into condos or commercial, you won't see your taxes rocket, so you have less of an incentive to oppose development.

CEQA and the California Coastal Commission are weapons that NIMBYs use, but what drives NIMBYs in CA is the same as everywhere else. The hippy/champagne communists of SF just make it stronger (damn those evil developers making a profit! boo hiss!!!!) and elect malevolent local politicians, but it's the same drivers as anywhere else.

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