It's the life-long renters who will be mainly impacted by this negatively. I do have sympathy for them. Many of them rented not because they were opposed to buying, but because they couldn't afford to buy even in the 80s. Granted, you might argue that if you can't buy a home then that's a sign you shouldn't stay in the area long-term, precisely because of this risk. But try telling that to all the new college graduates rushing off to Silicon Valley with incomes that are less than a 10th of home values around them. They'll possibly be subject to the same fate.
Not to mention the people who would normally have bought within the next few years who've just become life-long renters because housing prices have shot up out of reach.
I live in Vancouver, and hey, I even work in tech, but the housing princes here are out of reach. If I'd made ten years ago what I made now I'd own my own home, but now it just seems like an unreasonable course of action.
Don't ask questions that other people know the answer to.
I'm not saying they have a right to tell anyone else where to live or not live, but I do sympathize with them.
[0] http://dor.myflorida.com/dor/property/resources/limitations....
Property taxes are a controlling factor on house price inflation to an extent. As property values and taxes increase in an area, residents who can no longer afford that (often times lower-income or fixed-income residents) are forced out. While that sucks for them, this ultimately puts more homes on the market and increases the inventory. Increased inventory means a downward factor on house prices. Probably not enough to prevent them from increasing, but it may slow them nonetheless.
The Bay Area seems to be missing this critical market factor. I'm now seeing townhomes in MV list at 1 or 1.1 and go for 1.3. How depressing is that.
I'm not sure how true this is. If you're on a fixed income, for example, an increase in the value of your property doesn't do you much good unless you sell it. You could take out a mortgage... but then it's just a matter of time before you have to sell. Meanwhile the overall cost of living in your area is increasing due to the influx of wealthy residents.
EDIT: I think that if I were retired and found myself living in a neighbourhood which I could no longer afford, I would sell my house and buy a nice place in the countryside with the profits. But I can understand why some people might resist moving.
I am equally unsympathetic, but is that statement true? A teacher buys a house in 1982 for $125,000. That house is now worth $800,000, but while her salary has increased according to cost of living (ideally), it has definitely not accounted for the massive increase in property tax that her new values command.
There's a difference of around $500 a month, just in property taxes between her home in 1982 and 2015, and that doesn't even account for the increase in cost of goods and services as the rest of the economy thrives around her.
In most places, if your $200,000 house now has a value of $1 million, you cannot stay since property taxes will increase. So, you can sell and leave, but staying is often not an option particularly for people on a fixed income.
That said, the 5x increase in property taxes from 200k to 1 mill may really mean going from 2k a year to 10k a year.
That is probably not at the "can't stay" level for most people, not to mention it being tax-deductible
Tax-duductible doesn't cover it for fixed income folks.
The median income California resident (even a dual-income household of such residents) is unlikely to have had a $200,000 home in the 1980s, or, if they managed it, to have its property value increase to $1 million in the intervening 30 years while remaining a median income California resident.
Heck, by a common guideline (reasonable house price = 2.5 times annual household income), a dual-median-income family at the current median level can't afford a $200,000 house today.
// it is a bit off-putting to down vote everyone not up on CA law.
So, given the prop 13 maximum tax rate of 1% and maximum increase in tax basis value of 2% per annum, a property that was fully taxed at a basis value of $200,000 in 1985($2,000 annual tax) that increases in value to $1 million -- or even $10 million -- in 2015 would have a tax basis value of $362,272 and a total annual property tax bill of about $3,623.
It's just another thing that creates artificial scarcity.
Note this also affects commercial real estate!
http://en.wikipedia.org/wiki/California_Proposition_13_(1978...
The problem is not with Prop 13. It's with property taxes at all. I'm not fundamentally against a wealth tax of some kind, or against cities raising income, but if you base this on assessed values of real-estate, a highly illiquid asset for most people, you are guaranteed to generate these problems, not to mention undermining the very notion of property.
The problem is not prop 13. It is that something else should be taxed instead of property.
In many places property tax can increase after you purchase a property without California-style Constitutionally-imposed limits; there's very little evidence that this actually makes it reasonably likely for anyone to actually be priced out of property due to value increases in other-than-highly-unusual circumstances.
Property taxes in the US typically vary between 0.5% and 1% of market value; even in the absence of Prop 13 style limits on increases, that means an increase of property tax of between $4,000 ($1,000 to $5,000) and $8,000 ($2,000 to $10,000) per annum, and, regardless of rate, represents about a 5.5% annual increase in value (and, thus, tax costs for ad valorem taxes.)
With the posited increase having increased over ~30 years (GP's scenario had a house purchased in the 1980s), that's only about double the rate of inflation, so even with no increase in real income over the time, you'd have to have been fairly tight initially to be priced out of the home by tax increases.