What do low property taxes have to do with high rent and lack of housing? Higher property taxes would result in higher rent and property prices...
No, they just don’t want their neighborhoods to change (read: poor people, more traffic). I don’t think most of them are frankly thinking about their property values because it’s just not super relevant, thanks to prop 13.
> For another example, there is no incentive to renovate/tear down/rebuild bigger because now you will pay significantly higher property taxes. Single family homes don't get turned into denser properties.
There is a ton of incentive to build more units: for one, you could sell them for a ton more in aggregate! But there is also a huge disincentive that is not prop 13: zoning laws that prevent basically any increase in density in some absurd fraction of California, especially absurd in central areas and inner ring suburbs.
Prop 13 is definitely an issue, but it’s not the dominant one for the effects you describe.
The history of exclusionary zoning is a history of replacing restrictive racial covenants (binding agreements on property titles that prevent sales to certain groups) and redlining (which rendered unavailable mortgage loans to anyone for properties in neighborhoods that were not majority-white), both of which were invalidated by the Fair Housing Act in 1968, triggering the wave of exclusionary zoning intended to keep out the same people.
The history is clear that this type of zoning is explicitly designed to keep properties expensive, to keep them out of the hands of "undesirables". Prop 13 then insulates longtime residents from that same increase in cost. They go hand in hand, but I'm not sure it's fair to say that Prop 13 contributes to zoning.
[0]: https://lao.ca.gov/reports/2012/tax/property-tax-primer-1129...
Prop 13 shields NIMBYs from negative externalities of their desire for their neighborhoods not to change. Housing is in short supply which inflates property values, but they don't have to worry about that because they don't want to sell and property taxes continue to remain low due to Prop 13. They can either pass down their property to their children (taxes remain unchanged) or they sell and cash out on their uber expensive property and move out of state sometime later in life. As I alluded in other comments, I suspect it is more often the former rather than the latter since it doesn't make sense to sell.
The incentive to build is low because most existing property owners want to continue living somewhere in the Bay Area and if they move, their taxes reset. Building more units on the same property is a non-starter for that reason. Yes, zoning is also a factor, and goes hand-in-hand with the same agenda that Prop 13 came out of. It's multiple cuts from the same cloth.
This is a really good point, and this framing helps me understand your argument much better, thanks!
> The incentive to build is low because most existing property owners want to continue living somewhere in the Bay Area and if they move, their taxes reset.
I don't think this is right, though -- the incentive to move is low, but the incentive to build is high. Since people do move, even though there is a strong counterincentive, we find that properties do come on the market, and overwhelmingly the reason they are not bought by developers to build larger structures with more units is zoning.
If developers could buy a SFH for $2m and build a 4-plex, selling each unit for $1m (numbers that are pretty common in wealthy Bay Area neighborhoods), then they absolutely would and we'd see this all over the place. In my neighborhood this happens every time edge cases in zoning allow it. (Large enough lot that it can be split? Developer buys it, builds two units. Weird commercial conversion with higher floor limits? Developer buys it, builds three units.)
I agree that prop 13 has an impact here, but zoning in most neighborhoods literally prohibits new construction -- so I don't think a prop 13 repeal would have nearly as much of an impact on new housing construction as upzoning or other zoning mitigation. Of course, from an economic perspective both are highly problematic distortions of pricing (along with rent control!), and both need to be reevaluated -- but if I had to pick one, I'd pick zoning!
Convincing retort there, I should have realized my argument is idiotic! Consider my mind changed.
And I bet you’ve convinced everyone else reading this thread too.
I think Texas got this right. Higher property taxes are assessed every year on the current property value. This has the positive effect to keep the real estate market within reason. Home owners have no incentive to see their taxes explode, unless they plan to sell and move.
CA is a mess! And don't get me started on the fact that property taxes pay for public schools, so if I buy a property today say at $1M whereas my neighbor bought 10y ago and payed $100k guess who is paying the most to finance schools ? It is utterly unfair!
Hence, after almost a decade in SF, I and my finally finally moved on, I kept my job and bought a nice, modern, luxury house in Austin! I and my family are super happy now.
I voted democrats my entire life, I have now realized how wrong I was! SF and CA turned me into a republican! And that's what I vote now.
And yet density is anathema, single family home zoning is everywhere, and new development construction happens on the edges, and traffic and cost gets worse every year. Just a little more slowly than in the current CA bubble. But make the TX bubble hotter, and watch the prices then!
Republicans who haven't yet had to deal with the same level of bubble-driven rapid inequality growth don't have some better policies in mind - they just haven't hit the breaking point yet. I'm sure things will get there in another decade or two, but I guess perpetually running away from self-induced problems is a pretty good strategy for folks with the money.
And maybe America and certainly California don't need half the country moving to just one state.
None of the people I’ve encountered who oppose housing construction seem to see things this way. Most of them seem to be economic conservatives who see themselves as having won a “fair game” and the fact that they’re using the government to strip others of their property rights - rights to build, rights to house - is lost to them. There’s a lot of cognitive dissonance and post-hoc rationalization in this group.
Thus there is no right to build: an 80-story apartment tower, a supervised injection place for IV drug users, an organometalic peroxide production plant, a hog farm, and a tire recycling plant.
The demand is there for even more restriction. In many areas, new housing is exclusively in home owner associations or in condominiums.
NIMBYism and zoning exists in SO many places without Prop 13, and does the same thing. It keeps the poor people (denser housing) out. It keeps the transit stops away. It keeps the power station away.
"Bad policy" it may be, if your goal is "the cheapest aggregate housing for everyone," but talking about getting rid of Prop 13 without all the other causes of NIMBYism will just get your expensive houses slowly replaced with expensive condo buildings and do next to nothing for the poor and homeless. We have exactly zero politicians or parties in this country who are telling us what "good policy" would look like on this issue.
These tax savings pass to homeowner families who stay in one location for multiple decades, especially as land values rise.
Homeowners are very opposed to being displaced, since moving means their taxes would reset to a higher level.
Renters are excluded from these savings.
Source: just bought my first home in CA. Taxes were surprisingly reasonable
Also your property taxes start out at 1% of assessed value, which is very low compared with many other high-wealth states.
Not exactly. It is more complex than that. The tax base is supposed to be the market value but if the market value raises, the tax base is allowed to follow only up to a certain margin. With CA and especially Bay Area prices skyrocketing for a while, the effect has been than the tax base lags very far from the actual market value, and for people who bought in the 80s the tax base may be a fraction of their current market value.
When you buy the house your tax rate is 1% (+ local fees) of your purchase price. Every year thereafter, it goes up by at least 2%.
The assessed value will go up by 2% (that's prop13) so the base tax will go up by 2%. However, local city and county can add their own fees on top of that (so they do), therefore in many years the actual dollar amount increase will be more than 2%.
(Source: my property tax bill over the last 23 years.)
edit: added more
Imagine property tax is 0. Why would anyone ever sell? All the land would effectively be owned by hereditary feudal lords.
Texas has higher property taxes than California but more affordable housing. Makes you think.
You'd sell for the usual reason, i.e. you'd prefer having money rather than that particular piece of land? That money would be then spent on either consumption or an investment with higher yield than land-holding.
In my home country Poland the land tax is negligible and yet the market for land exists, it's not held forever by "feudal lords".
I suspect if you pick apart of the BA housing market you'll see some very large landlords with huge property portfolios. While they're not literally "feudal lords" they might as well be in terms of their self-serving influence on housing policy.
Perhaps not coincidentally, some of them are FAANGs.
https://www.mercurynews.com/2019/11/03/meet-silicon-valleys-...
Whether or not you think efficient land use is a good thing is up to you. The question of what taxes accomplish is separate from the question of if a policy objective is "good".