patrick.net

I honestly don't understand why people get so charged up about prop 13. All it does is allow the govt to raise prop tax by 2% per year. Considering that real estate has historically risen with inflation which is 3.1% per year, it's not like people are getting away with murder with prop 13 rates!

@dh,
Courtesy of Socketsite:
The sale of 2901 Broadway closed escrow on Friday with a reported contract price of $28,250,000 to become the third most expensive single-family home to have ever sold in San Francisco.
... the annual property tax bill will now be around $330,000 a year, a little more than the $7,900 paid last year thanks to Proposition 13.

dublin hillz says

I honestly don't understand why people get so charged up about prop 13. All it does is allow the govt to raise prop tax by 2% per year. Considering that real estate has historically risen with inflation which is 3.1% per year, it's not like people are getting away with murder with prop 13 rates!

My parents bought in Cambrian (part of San Jose) in 1981. Their property tax payment is $2425 per year. If they were to sell that house, the new owner would pay $10625 per year based on the current Zestimate. Over an entire year, the difference is not all that significant for a working family that buys an $850k house, but it is still an $8k difference. I'd say that a lot of people are in fact saving lots with Prop 13.

I think that Prop 13 needs serious adjusting. Its application to commercial and rental properties is sort of bullshit. Honestly, it should just be drafted so as to apply to people ages 65 and over, and it does not carry with inheritance. I am fine with leaving some elements that help fixed-income folks, especially since ZIRP is basically raping them right now.

It seems a little fallacious to assume that house prices will fall as a result of repealing Prop 13. Current buyers already expect to pay taxes on today's property values and generally budget for it. Unless there are actually throngs of people like my parents that somehow cannot afford to pay their property tax and walk away, I don't see how prices will come down. It would require lots of long-time owners to sell and buy smaller, cheaper properties. House prices will only move from comps since we all know that the government and Fed are making sure that ANYONE can borrow whatever it takes to maintain current pricing. As of now, all of the less expensive properties out there are being taken by investors, so there is nowhere for people benefiting from Prop 13 to go. If you think that they will just pack up and leave CA, you are dreaming.

dublin hillz says

Considering that real estate has historically risen with inflation which is 3.1% per year, it's not like people are getting away with murder with prop 13 rates!

The apartment I lived in 1991-92 has Prop 13 protection.

The LA county assessor website says it has a $3.7M Prop 13 valuation, for a total tax burden of $3700/mo.

Divided by the 80 units, that's $46 per unit per month.

The cheapest rent for these units is $1400/mo I believe.

You, sir, are factually incorrect about that.

This was perhaps a $2M property 30 years ago, but rent-producing real estate has gone up a lot more than 3% a year over this time.

Rents have (nationally) tripled since then:

http://research.stlouisfed.org/fred2/series/CUUR0000SEHA

and gone up by a factor of 5-7 in the major job areas like LA and SF.

My parents rented a 3B in El Cerrito for $300/mo when Prop 13 was passed. That unit rents for $1600/mo today.

Seriously, you (Quigley) deleted SFace's post? Uugh, Patrick should have kept the moderation privileges to himself.

What did SFAce say?

If there's a huge spread between what new buyers will pay in property tax and what prop 13 protected payer pays it reflects the fact that most likely that neighboorhood rose a lot more than the average of 3.1%. Perhaps there are other issues such as lack of developable land and presence of high paying jobs in the area which will inevitably result in the select few bidding up price of housing in recent years either via their regular salary means or stock options. And yes, I do agree that lending requirements should be tightened. At times, 3.5% down is ridiculous.

bmwman91 says

Honestly, it should just be drafted so as to apply to people ages 65 and over, and it does not carry with inheritance.

Assuming Prop 13 was killed, extending it for those > 65 just extends the benefits to baby boomers who have realized massive tax benefits from Prop 13 over the past few decades. And lets not forget that many of those folks will walk away with $500k in tax free capital gains on their houses when they sell.

I would vote for those 65+ being able to defer their property tax payments, with the state getting a lien on the property until the balance is paid.

tax policy shouldn't fuck with people like that.

if people want to live in their home, they should be allowed to live in their home.

security of tenancy is a pretty basic human right.

taxing non owner-occupied (rentals, perhaps vacation places) like Genghis Khan would is all that is needed.

Quigley says

3) land barons decide to cash out which means: a) land development into housing, b) rental properties coming into the market

This can only happen if cities liberalize their planning and zoning process to allow more construction.

Here's the link I was going to post earlier.

http://mobile.businessweek.com/news/2012-11-08/californians-approve-brown-tax-plan-averting-school-cuts

California democrats have big plans for making California a workers paradise (TM) with free money for border runners and baby dumpers. They need the vast money tied up in prop 13 to make this work.

For the older crowd, yes they will have to pay more taxes. If they can't afford it on a fixed income, will the land somehow magically become available for others to use? Will streets and schools that depend on the money pay for themselves or will they fall into disrepair as has already happened in most of the state? We can't even keep our national parks open.
Sure there's corruption and salary and pension padding. That needs reform for sure, but the biggest source of drain on the budget is the give away to the wealthiest that is called prop 13.

I'd think about staying in California if they got rid of or modified prop 13. As of the last 5 years my plan has been to milk as much out of high tech as I possibly can, and then run away from this financially crippled state as fast as I can. I know I am not alone here.

RentingForHalfTheCost says

I know I am not alone here.

my plan too, LOL.

This state IS screwed.

Not enough power in DC to swing money our way. 2 piddly senate votes, LOL. Wyoming is the population of Fresno but gets an entire House vote, by the "Wyoming Rule" the state should have another 14 Representatives in DC.

Every government from pet control district on up is on the road to BK.

Even if we raise taxes to pay for everything, that will push jobs out of the state.

Buying here is a real gamble. Good place to visit, but mebbe WA or OR would be a better bet.

OR doesn't get any respect, LOL.

And the creed of envy has taken over CA, beating anyone and everyone into equal poverty.

If Prop 13 goes, so will the state. And the only winners will be the government unions and politically connected as always, since everyone else will be burdened with too much taxation straight into poor house.

Quigley says

1) prop 13 is legislated into impotence.
2) seniors decide to leave and put their houses on the market
3) land barons decide to cash out which means: a) land development into housing, b) rental properties coming into the market
4) the inventory rises dramatically
5) the tipping point is reached quickly and prices begin to fall again.
6) the market over corrects and ends up lower than average price.
7) localized crashes of bubbled real estate
8) stabilization

7) crash of the California economy.
8) widespread misery and poverty for a long long time while average American has to either live in complete poverty or move out of the state.

I think it's wrong that only one company makes the game Monopoly. -- Steven Wright

The root problem is the absurdity of taxing property at all. Why not eliminate it and replace with a flat tax? That way everyone who benefits from what prop tax pays for contributes, "owners" and renters alike. And retired grandmas can be exempted.

pdg says

Why not eliminate it and replace with a flat tax

flat tax on what?

They can modify prop13 to properly assist those that need the help. Perhaps make the tax based on income vs land value and it gets phased out as income can support the new taxes.

The real problem is that inflation in the bay area and probably LA rose at about 5-6% a year for the last 30 years, and many of the cities in the bay area that were cities unto themselves, became one large city. So those people with "cheap" houses on the fringes of mountain view, or redwood city, or sunny vale are now all connected and metropolitan housing, which has a significantly different valuation than rural land would.