I believe that the changes were because higher inflation means higher prices, not due to Prop 13 or other tax code changes. How does the Prop 13 affect prices to the upside? I would argue that Prop 13 suppresses prices by reducing a potential pool of buyers.

Prop 13 probably translated into immediate increases that got built-into the prices of houses that were selling at the time — just like tax breaks get priced-into asset prices. Therefore we are better off letting the market do its own things and forget the tax incentives.

If people don’t sell their houses, that reduces inventory. Old-time owners would require a bigger windfall to be coaxed into buying a new house with a higher tax basis. How would that depress prices?

I’m reluctant to sell my house because of my lower property tax basis. I’d have to sell at a proportionately higher price to be persuaded to pay higher property taxes. $600/mo increase in property taxes means one extra nice vacation each year. I wouldn’t want to give that up by moving to a house that isn’t at least $600/mo better.