Prop 13 does play a part in housing costs in CA, but I suspect it contributes less than limited supply in California metros and low interest rates.
Some of the limited supply is due to building restrictions, but addressing those requires more than just issuing building permits. We can't build high density housing and ignore transportation and infrastructure, and upgrading those tends to be more difficult than building more units.
Prop 13 also contributes to the limited supply because existing property owners don’t pay their fair share toward transportation and infrastructure. The property taxes rise slower than inflation, while the cost of living (important for paying for infrastructure maintenance, let alone new infrastructure) increases faster than inflation.
Therefore, California cities charge outrageous impact fees on construction. The time of construction is the only time the property can contribute its full share toward transportation and infrastructure. These impact fees are passed to the consumer in the cost of new housing. Thus, new housing does not get built until the shortage has inflated the cost of all housing enough to cover the fees. The vast majority of that increase becomes homeowner windfall profits.
In this respect, low interest rates are actually good because they raise the cost of existing housing high enough to make new housing worth the extortionate impact fees. Even better would be the repeal of Prop 13.
“The vast majority of that increase becomes homeowner windfall profits.”
I see this sentiment a lot in these threads, that somehow the fat cat homeowners are laughing all the way to the bank. For most of these homeowners this property is their home, just because it goes up in value quickly over 5-10 years doesn’t net them any “windfall”, and it could all vanish as quick as it came.
As somebody mentioned in response to a similar article, individual homeowners aren’t in it for the increased property value. They’re in it for lower taxes and a safety net against change. Just like (individual) “NIMBY”s aren’t in it for property values, they’re in it because they don’t want change.
It does, but I doubt it contributes as much as low interest rates. The difference in current mortgage rates and the long run average rate is something like 40% of a homes current value IIRC. Assessed value increasing at 2% per year instead of 3% per year does make a difference, but a 1% difference in the rate of increase of taxes that are 1% of the assessed value is a 1 hundredth of a percent difference per year.
I'm in a state without anything like Prop 13. If someone wants to build some development nearby which drives up demand for land and housing in my area, and so drives up property values, and so drives up my property taxes then I've got an incentive to oppose that development.
If we had something like Prop 13 so I didn't have to worry about that development driving up my property taxes wouldn't I then have less incentive to oppose the development?
There is a significant amount of just plain NIMBYism, but I think some of the resistance is deserved because people know the developers just want to get in, sell the units, and get out leaving everyone else to deal with all the effects of way more people using the same infrastructure.
Now, if the developers are willing to pay for the infrastructure improvements to handle all the people, that's great, but I haven't seen that happen often, although it admittedly does happen.
We don’t need developers to pay for infrastructure - we have owners of the new building paying property taxes. That’s what funds city infrastructure. Prop 13 is what limits those revenues, it shouldn’t be on the developers back.
My feeling is it's better to have something paid for up front than hope it'll be paid for later.
We could repeal prop 13 and increase property taxes, but there's nothing requiring that increase in revenue be spent on improving the infrastructure related to the new development. Local government could spend it on something else.
There's also Mello-Roos for the specific improvements that need to be made, but that hurts demand for new housing because it's another cost tacked on, which developers don't like.
The fact of the matter is, as we build more housing, we also need to build more infrastructure to support more people. Developers don't want to do this, but requiring them to do it insures it gets done.
Some of the limited supply is due to building restrictions, but addressing those requires more than just issuing building permits. We can't build high density housing and ignore transportation and infrastructure, and upgrading those tends to be more difficult than building more units.