Prop 13
I was listening to some "housing advocate" give a talk and she suddenly mentioned Prop 13 (which limits growth in property tax). It was the same old stuff about California schools needing the repeal of Prop 13. It was totally irrelevant to her point so I guess it was just "virtue-signaling" to the crowd ("I am one of you"). It suddenly hit me that if there were no Prop 13 things would change dramatically - possibly against the build-build-build crowd.
Prop 13 Limits Voter Anger at Rising Density
Right now property owners look at their house doubling in value in 7 years (from Sep-2011 to Sep-2017 in blue line in chart below) and think "Wow! (But I don't like the traffic)."
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| SF House Price Doubles from Sept. 2011 to September 2017 (7 years) https://www.paragon-re.com/trend/san-francisco-home-prices-market-trends-news |
And things would get even worse for renters than it is now since the property tax on apartment buildings would increase dramatically as well and that would be passed on in the form of even higher rents. As it is now, only renters feel the pain of rising property values and they don't vote much.
Eliminating Prop 13 might favor the build-build-build crowd if people could be convinced that more housing would lower property values (and thus taxes). In that case, home owners might favor increasing density and accepting worse traffic.
But what if instead, people realized that increased housing density is just serving local tech companies to bring in and house more employees which in turn raises the cost of housing? In that case, there would be a big backlash against development as serving only the interests of the tech giants. Many already make that connection as seen in many comments from around the country on SF Bay housing costs in the NY Times found here (under "Readers' Favorites"):
http://meetingthetwain.blogspot.com/2017/12/readers-comment-on-nyt-article-on-sf.html
In that case, instead of giving anodyne talks to the public, the "housing advocate" might need an unlisted number and gated housing.
In a sense, Prop 13 is 'rent control' for homeowners and ultimately protects the companies that feed the SF Bay area growth. It mitigates the effects of development on homeowners and thus disengages the most politically active voters from vigorously protesting the increase in traffic and congestion, that currently drives renters out of the area. Instead of protesting, homeowners pack up and leave, made easier by the increased value of the property they sell - sort of a relocation package. If it weren't for immigration via H1-B visas and other means, California would have been losing population since the 1970's. C.f., http://meetingthetwain.blogspot.com/2017/04/limits-to-growth.html
Moving On
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Prop 13 and School Funding and Student Performance
One could fill volumes about Prop 13 and schools but I will limit myself to a few items.
First of all, the CA courts ruled in Serrano vs. Priest that depending mainly on property taxes to fund schools was inherently unfair to poorer kids since their neighborhoods had less money from property taxes. (https://en.wikipedia.org/wiki/Serrano_v._Priest)
This put the burden on the state. So even if Prop 13 were repealed entirely, more tax money for schools wouldn't come primarily from property taxes anyway, per the courts. If you want more money for schools, the state legislature needs to do some shifting around of priorities or ask for more money from the voters. Google Prop 98 (guaranteed percentage goes to schools) and Prop 111 (complexifies Prop 98 a lot) for more on that.
Second, more money may not mean higher educational achievement. NY City and Washington, DC spend roughly 2 times and 1.7 times as much per pupil, respectively, as CA. (click on graphic to enlarge):
Spending per Student
NYC = $20,000
Washington, DC = $17,000
Chicago = $13,000
Los Angeles = $11,000
New York City spent $20,226 per pupil, CA about $10,000
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| http://www.latimes.com/local/education/la-me-school-tests-20151028-story.html |
The demographics of California school children have changed a lot in the last few decades. The percentage of white children in schools has gone from slightly above 50% down to about 25% while Hispanics have gone from about 28% to over 50% of the school population. See chart below:
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| Dramatic Change in Demographics http://www.bipps.org/getting-test-results-wrong-leads-to-bad-education-decisions/ |
Red line (below) = scores if CA demographics hadn't changed.
Blue line = scores with current demographics.
As another example, from 1992 to 2011, Black students in CA improved from below the national average to slightly above the national average for Black students although both groups improved considerably. (click on graph to enlarge).
CA black students catch up with and pass black students nationwide.
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| http://www.bipps.org/getting-test-results-wrong-leads-to-bad-education-decisions/ |
Prop 13 - Home Owners vs. Commercial Property Owners
Turning to other effects of Prop 13, the California Legislative Analyst's Office published an exploration few years ago titled "Common Claims About Proposition 13". This is available at http://lao.ca.gov/Publications/Report/3497
Some interesting charts from that LAO report below:
Increase in property taxes when changing houses makes it harder to move.
Commercial and Residential Properties turn over at similar rates
Residential and Commercial Properties Reassessed Relatively Similarly
There's more in the LAO document cited above.
CA Taxes vs. Other States
How do CA property taxes as a percentage of state taxes compare to other states? A little less than average (seen below) but this is made up for by the above average state income tax: |
Excerpt from
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Addendum 1/7/2018: Dan Walters points out that revenues have soared the last 10 years despite prop 13.
"The most eye-popping number, however, is the immense growth in property tax revenue — well over 50 percent during the last decade alone and about 1,000 percent since 1978, when Proposition 13 was overwhelmingly passed by voters.
"The Legislature’s budget analyst, Mac Taylor, points out that “the property tax has grown faster than the economy” since then."
...
"The Proposition 13 debate will continue, but arguing that it has undermined vital tax revenue is disingenuous, as the latest data prove."
More here:
https://ww2.kqed.org/news/2017/07/18/despite-proposition-13-california-property-tax-revenue-has-soared/
End Thoughts
What do I think about Prop 13? The same thing I think about gravity. I don't have an opinion about gravity and I don't have an opinion about Prop 13. Every year there is some discussion about repealing or modifying it. Whenever anyone raises it, I answer "you have my permission to change it." Nothing ever happens. I doubt anything ever will happen. I focus on other things.
