And, to add insult to injury: the ones paying 3000 a year in taxes rather than 30k, are the ones who made millions of dollars in equity off the gain. That's extremely Regressive and completely the opposite of what CA supposedly stands for: Progressive income taxes.
What I don't understand is why they can pocket that appreciation. When you sell the taxman should come knocking for all the abatements you've received over the years.
Not sure why CA doesn't do what a lot of cities do. Tell homeowners they can either pay the higher property tax or put a lien on the property, payable when the house is sold (take it out of the appreciation).
I agree it's ridiculous when the people getting tax breaks are the ones that made $1M on their home in a decade.
That is a fascinating point that is obvious but until you said it outloud it hadn't crystallized for me.
The problem for the retirees is quite often they have a fixed income - solution to "unlock" that equity is maybe it's held as a liability against the equity @ the eventual sale price.
I think the problem is that you're thinking of it in purely economic terms. Ending Prop 13 will increase home turnover because it prices people out of their homes but I don't think that's really what we want in our housing market.
Telling people to think of their homes as a commodity upon which market forces should be brought to bear in order to ensure production of housing services at competitive prices is obtuse. People purchase property, rather than renting, largely to gain security and control, to escape the vicissitudes of the market.
(It's actually a really good article, I would encourage others to read it for a contrarian view on housing deregulation.)
People want to be able to buy a home and raise their kids or grow old in it. If your ideal market structure doesn't allow for that then you're missing the point.
You cannot escape the vicissitudes of the market - you can only externalize the costs onto other people. In Prop 13's case, it was largely a one-time benefit to property owners at the time of passage, at the expense of both future residents and the economy in general.
>you can only externalize the costs onto other people.
For a marketeer this seems quite a lot like zero-sum thinking.
Besides you absolutely can escape the market. Not everything has to be a market, for example healthcare can be provided using market or non-market logic. You can also shrink the impact of markets, for example look at this [1] example of food-banks run using a market-ish system. They removed the parts of the market that they didn't want ie. everyone starts from a level playing field and cash is distributed regularly based on need but then they kept the price discovery system. We have this same power over markets, we can just get rid of the parts we don't want through laws. In homeownership we want to get rid of most of the frictions of the market that rub up against long-time asset holders. In investment securities we don't mind a structure that compels people to sell to produce market liquidity because most people don't have an attachment to their shares of $VTI. In home ownership people have as strong an attachment as you can have to a physical commodity so we don't want a structure which compels people to sell.
>Not everything has to be a market, for example healthcare can be provided using market or non-market logic.
There's still physical limitations on resources available; picking a different distribution doesn't lift the limit of how much stuff we have.
>we can just get rid of the parts we don't want through laws
Successful market design is quite a bit more complex than that. Every market intervention has all sorts of second-order effects.
>In homeownership we want to get rid of most of the frictions of the market that rub up against long-time asset holders.
I'm still quite aggrieved that homeowners in 1978 decided to vote themselves a structure that enriches themselves at the expense of newcomers to the area. More generally, it's a mistake to focus on the benefits of a policy without considering the costs - prop 13 does good for long-time homeowners in the region, but at the expense of literally everyone else. I don't think that's a tradeoff worth making, especially given the dead-weight losses from restricting sales and price communication.
