Proposition 13.2

[paramount]

The crooks in Sacramento are at it again….

http://www.youtube.com/watch?v=wLumw_TWAn0

[CA renter]

You mean they are trying to undo the damage wrought by Howard Jarvis and his scheme to increase profits for landlords and other large-scale land owners…all at the expense of taxpayers.

You take money from one place, it has to come from another. One of the main reasons (I would argue THE main reason) why state income taxes are so high in California is because of Prop 13.

Prop 13 protection should only be allowed for a SINGLE, PRIMARY residence (possible exemption for a granny flat or guest house on the same property if under a certain size). Landlords should not force taxpayers to subsidize their profits, nor should owners of large tracts of land (like Pardee), or owners of large commercial/industrial properties.

The guy in the video is a simpleton. The reason the owned/rented ratio for residential properties has gone down so much is because of Prop 13, as this tax break makes rental “investments” (especially those held over many years) very profitable…thanks to the taxpayers who subsidize these profits.

I would also consider giving a break to owners of a SINGLE commercial/industrial property, up to a certain size, IF they were using the property to run their own business (no leases).

[an]

[quote=CA renter]The reason the owned/rented ratio for residential properties has gone down so much is because of Prop 13[/quote]
Sorry but I have to call BS on that made up statement. Here’s the data from the Census: http://www.census.gov/hhes/www/housing/census/historic/owner.html Data doesn’t show any such correlation.

[EconProf]

States tend to have four major tax sources: Sales taxes, individual income taxes, corporate income taxes, and property taxes, (locally imposed). In the first three categories, CA is highest in the nation, or very close to it.
Only in property taxes are Californians about in the middle of states, measured in absolute dollars paid.
The politicians won’t be happy until they eliminate Proposition 13, and succeed in making our property taxes near or at the highest among states. They will likely succeed.

[CA renter]

[quote=AN][quote=CA renter]The reason the owned/rented ratio for residential properties has gone down so much is because of Prop 13[/quote]
Sorry but I have to call BS on that made up statement. Here’s the data from the Census: http://www.census.gov/hhes/www/housing/census/historic/owner.html Data doesn’t show any such correlation.[/quote]

Those numbers in your chart mute the real effects of Prop 13 on the owner-occupied/rental housing ratio, particularly in desirable areas with older housing stock (which is where the benefits of Prop 13 are the greatest). The fact so much of California’s newer housing developments were built in “lizard land”– making it more affordable for younger buyers — is what has kept the *statewide* owner-occupied numbers fairly stable. In the desirable areas and job centers with homes built before Prop 13, the owner-occupied rates have fallen dramatically.

You’ll note that California is one of 11 states that has a lower percentage of owner-occupied housing in 2000 than it did in 1960 and/or 1970. Even in other “expensive” states, most of them managed to increase the percentage of owner-occupied housing over the 1960-2000 period noted in the table you’ve linked.

…………..

“Los Angeles’ Low Homeownership Rate
A.
The “American Dream” of homeownership is difficult to attain in Los Angeles, which
has the second lowest percentage in the nation (New York City has the lowest rate). The
1990 Census showed that only 39% of households living in the City of Los Angeles were
homeowners; preliminary Census 2000 data shows no change. The after effects of
predatory lending can result in even lower home ownership rates and damage the
neighborhood stability that homeownership can bring to a community. (H&CD Hearing
2/21/02, p.6, lines 13-15.)”

…

Here, they note the decrease in owner-occupied housing, but blame it on predatory lending. I blame it largely on Prop 13. -CAR

D.
From 1980 to 1990 [Census figures] there was a dramatic decrease in owner
occupancy in South Los Angeles. There are many reasons for that, but predatory lending
may have had something to do with that [decrease]. (Testimony of Sally Richman,
H&CD Hearing, 2/21/02, p. 7, lines 3-7.)”

http://lahd.lacity.org/lahdinternet/Portals/0/Policy/Predatory/02b-lowhomeownership.pdf

——————-

And is it any coincidence that 40% of the metro areas with the lowest owner-occupied rates in the nation are in California?

(see Figure 3)

http://www.nahb.org/generic.aspx?sectionID=734&genericContentID=176691&channelID=311

[CA renter]

[quote=EconProf]States tend to have four major tax sources: Sales taxes, individual income taxes, corporate income taxes, and property taxes, (locally imposed). In the first three categories, CA is highest in the nation, or very close to it.
Only in property taxes are Californians about in the middle of states, measured in absolute dollars paid.
The politicians won’t be happy until they eliminate Proposition 13, and succeed in making our property taxes near or at the highest among states. They will likely succeed.[/quote]

You’re entirely missing the point about Prop 13 being the impetus behind all of the higher taxes and fees.

Let’s look at how Prop 13 affected revenues, surpluses, and spending:

The share of property taxes directly
levied on homeowners increased from 34
percent in 1970 to 44 percent in 1978. The
state had accumulated a surplus that
would have reached $10 billion had
Proposition 13 not passed. State and local
governments did not respond to rising
property values and tax revenue by cut-
ting tax rates, so voters took matters into
their own hands. In doing so, they did not
expect reductions in government services,
but believed that government could pro-
vide the same level of services with less
money. Just before the election, 38 percent
of the electorate believed that state and
local governments could absorb a 40 per-
cent cut in tax revenue without cutting
services.

http://ntj.tax.org/wwtax/ntjrec.nsf/80A9A9639CDB749585256AFC007F1910/$FILE/v52n1099.pdf

Regarding the bolded parts, the surplus “problem” is EXACTLY why politicians have to spend every cent they get when they get it. God forbid you have a surplus, even during good times, if you are a politician. And so, we get the chronic deficits that the conservatives decry…because they don’t want surpluses, either. Go figure.

The second bolded sentence is mind-blowing, showing just how painfully naive and ignorant many people can be…and they’re allowed to vote! 🙁

Just to note that the BOE has a different surplus number, but at least they agree that there was a surplus — a growing surplus, no less.

“On June 6, 1978, California voters overwhelmingly approved Proposition 13, a property tax limitation initiative. This
amendment to California’s Constitution was the taxpayers’ collective response to dramatic increases in property
taxes and a growing state revenue surplus of nearly $5 billion.”

http://www.boe.ca.gov/proptaxes/pdf/pub29.pdf

—————-

“In a single generation, Californians have witnessed the universal deterioration of public services, from schools, universities and libraries to fire and police departments, roads and health care. The law is complex, but its details are relevant and important to understand. In a nutshell, the bill dramatically slashed one of California’s single largest sources of revenue – property taxes – by 60%. At the time, property taxes provided 28% of the state’s revenue, but the cuts dropped this value down to 13% within just a couple years.”

http://www.stanford.edu/group/progressive/cgi-bin/?p=1113

———

Read more here about how Prop 13 changed the revenue sources and funding allocations for the state, counties, and cities:

http://www.ppic.org/content/pubs/op/op_998jcop.pdf

[EconProf]

CA renter, we agree on the main facts, but I come to different conclusions.
First, a primer on what Prop 13 did. Throughout the 1970s, property values rose rapidly in CA, and tax assessments rose accordingly. Taxes averaged about 2% of value, roughly in line with the national average. Homeowners were seeing their tax bills rise astronomically, fueling voter anger, especially when they saw local tax revenues soar and surpluses generated. They understandably felt local governments would simply find more wasteful ways to spend it. Crusty old conservative Howard Jarvis capitalized on this anger by proposing an easy-to-understand blunt instrument: Limit all property taxes to 1% of the property’s value, and only allow that amount to increase by 2% a year, no matter what inflation is (which was then soaring). This was easy to understand by the angry voters, but also contained problems. In the long run it created unfairness in that it favored those who stayed put in their homes while their neighbors sold and created a new higher assessment for that neighbor and resulting tax. It also favored business property where changes in ownership or shares did not prompt an actual property sale and resulting higher property value and tax.
We live with these inequities today, and I’d be happy to see them fixed even though that would upset a lot of people.
Now back to where CA Renter and I agree on the facts but come to different conclusions.
I buy the claim that the accumulated surplus would be $10 billion from 1970 to 1978 had Prop 13 not passed. But voters were angry that government was piling up surpluses, profiting from the massive inflation and even faster rise in property values during the 1970s, while widows were being taxed out of their houses. They rightly suspected governments should rein in their spending instead of hiking tax revenues by 10 – 20% per house per year. So they flocked to Jarvis’ crude instrument of Prop 13, however imperfect it was.
CA Renter also stated that 28% of voters believed government could cut 40% of tax revenues without cutting services. I can accept that statement because 1) Many examples of government waste were cited by Jarvis, as well as government surpluses as they couldn’t spend it fast enough, and 2) 28% is not that high a number (72%, after all, do not agree).
In sum, Prop 13 passed because of voters’ anger, by a nearly 2 to 1 ratio. Then-governor Brown was solidly against it, but afterward embraced it, even claimed some credit for it. The huge drop in property tax revenues was offset by the state taking over the financing of many local functions, especially in education. Local school districts lost much of their autonomy and surrendered to state controls, to their detriment. That’s why our income and sales taxes remain so high, while our property taxes paid per homeowner are roughly at the national average (CA homes are higher in value than the national average).

[an]

[quote=CA renter]
Those numbers in your chart mute the real effects of Prop 13 on the owner-occupied/rental housing ratio, particularly in desirable areas with older housing stock (which is where the benefits of Prop 13 are the greatest). The fact so much of California’s newer housing developments were built in “lizard land”– making it more affordable for younger buyers — is what has kept the *statewide* owner-occupied numbers fairly stable. In the desirable areas and job centers with homes built before Prop 13, the owner-occupied rates have fallen dramatically….[/quote]Uh, Prop 13 starts in 1978, so why did you use 1960 numbers? If you use 1970s, which would be more appropriate, home ownership is up. But you’re trying to link causation where there doesn’t seem to have any hard evidence of one. You stated a declined of home ownership after prop 13 came into effect, but the opposite is true. Also, could home ownership have something home price vs rent and not so much prop 13? Unless you’re hypothesizing that somehow, if we remove prop 13 for non-owner occupied, that somehow will reduce price and get more people to buy vs rent? If your assertion is prop 13 reduces home ownership, then why not remove prop 13 for everyone? All other states don’t have prop 13 and they seem to have retires doing OK and have a higher home ownership than us.

[The-Shoveler]

I think there are a few things not discussed so far like the fact that rent control will need to go in places like Santa Monica ETC… as well .

Not as easy as it seems I say.

Woe to the congress person who touches this one.

[CA renter]

[quote=AN][quote=CA renter]
Those numbers in your chart mute the real effects of Prop 13 on the owner-occupied/rental housing ratio, particularly in desirable areas with older housing stock (which is where the benefits of Prop 13 are the greatest). The fact so much of California’s newer housing developments were built in “lizard land”– making it more affordable for younger buyers — is what has kept the *statewide* owner-occupied numbers fairly stable. In the desirable areas and job centers with homes built before Prop 13, the owner-occupied rates have fallen dramatically….[/quote]Uh, Prop 13 starts in 1978, so why did you use 1960 numbers? If you use 1970s, which would be more appropriate, home ownership is up. But you’re trying to link causation where there doesn’t seem to have any hard evidence of one. You stated a declined of home ownership after prop 13 came into effect, but the opposite is true. Also, could home ownership have something home price vs rent and not so much prop 13? Unless you’re hypothesizing that somehow, if we remove prop 13 for non-owner occupied, that somehow will reduce price and get more people to buy vs rent? If your assertion is prop 13 reduces home ownership, then why not remove prop 13 for everyone? All other states don’t have prop 13 and they seem to have retires doing OK and have a higher home ownership than us.[/quote]

I compared the changes from *both* 1960 and 1970. You can see for yourself that most of the other expensive states made improvements in the owner-occupied rates, while California declined or remained fairly stagnant. If you consider all of the new housing that’s been built here since 1976, with much of that in “affordable” areas (far-flung communities with long commutes for workers — this trend is much stronger in CA than in other states), that would explain why the statewide owner-occupied housing ratio is higher than it is in the more desirable areas.

Yes, some of it is due to being a high-cost area, but other high-cost areas in the U.S. don’t see the same trends. Even New York has made improvements in owner-occupied trends. If you look at the metro areas with the lowest owner-occupied rates, you’ll see that the other areas aren’t necessarily high-cost, either, so the high prices are not the only, or primary, cause of the low owner-occupancy rates in expensive California areas.

Yes, I believe that by removing Prop 13 protection for non owner-occupied housing, more inventory would come on the market for sale. Renters can’t use mortgages, and raising rents beyond what renters can truly afford would lead to higher turnover rates and evictions, and/or higher density living with more people/families living in a single unit/home (whether or not the LL knows about it, or approves of it). The profitability of holding long-term rentals would be greatly affected, and many of these landlords would end up selling instead of holding onto these older homes in desirable areas.

If we were to remove Prop 13 protection for everyone, then there would definitely be an exodus of elderly people who would sell and move to other, cheaper areas in CA, or out of state. I do NOT favor this, and it’s not even politically feasible under any circumstances. Just making the point that Prop 13 does indeed distort the RE market.

———

“The effect of Proposition 13 on mobility varies widely depending on the size of the subsidy, with the largest effects occurring in coastal California cities where the increase in property values has been greatest.”

http://www.nber.org/digest/apr05/w11108.html
————

I’ll give you some real-life examples of properties I’m familiar with in LA (SFHs and an apartment complex or two — the apartments as an example of how much taxpayers are subsidizing landlords/property owners) to make my point. Will take some time to dig up all the info, but will get back to you with the details today or tomorrow. I’m even going to try to find some info on long-time owners of large tracts of land (like Pardee!) and commercial/industrial buildings to show how much we’re subsidizing them. The numbers are staggering.

[CA renter]

[quote=EconProf]
Now back to where CA Renter and I agree on the facts but come to different conclusions.
I buy the claim that the accumulated surplus would be $10 billion from 1970 to 1978 had Prop 13 not passed. But voters were angry that government was piling up surpluses, profiting from the massive inflation and even faster rise in property values during the 1970s, while widows were being taxed out of their houses. They rightly suspected governments should rein in their spending instead of hiking tax revenues by 10 – 20% per house per year. So they flocked to Jarvis’ crude instrument of Prop 13, however imperfect it was.
CA Renter also stated that 28% of voters believed government could cut 40% of tax revenues without cutting services. I can accept that statement because 1) Many examples of government waste were cited by Jarvis, as well as government surpluses as they couldn’t spend it fast enough, and 2) 28% is not that high a number (72%, after all, do not agree).
In sum, Prop 13 passed because of voters’ anger, by a nearly 2 to 1 ratio. Then-governor Brown was solidly against it, but afterward embraced it, even claimed some credit for it. The huge drop in property tax revenues was offset by the state taking over the financing of many local functions, especially in education. Local school districts lost much of their autonomy and surrendered to state controls, to their detriment. That’s why our income and sales taxes remain so high, while our property taxes paid per homeowner are roughly at the national average (CA homes are higher in value than the national average).[/quote]

EconProf,

Those who thought that a 40% decrease in revenues wouldn’t affect services…38% of the population(!), not 28%. And the decrease in property tax revenues was actually much greater than that. Sorry, but that is insanely idiotic.

And I fully understand the history of, and events leading up to, Prop 13. That’s never been in question.

What you, and others, don’t seem to understand is that surpluses are NECESSARY in govt finance. The problem is that people view surpluses as an open invitation to stake a claim. Everyone from taxpayers who think they’re taxed too much, to unions, developers, and other special interests want a piece of that pie. But when the surpluses inevitably run low or, more likely, we end up with deficits at some point; everyone wants to point fingers at everybody else.

People need to get over the idea that surpluses are bad…all while claiming that deficits are bad, too.

I agree that people should not be “taxed out of their homes,” but we also should not subsidize the profits of landlords and owners of commercial/industrial properties and owners of large (or small?) tracts of land. Again, I don’t have as much of a problem with business owners who own their own building/land (within certain size constraints), but taxpayers should not, under any circumstances, be subsidizing landlords, developers, and other wealthy individuals who are using the subsidy for anything other than a single, primary residence (with the possible exemption for small businesses who own their building).

[an]

[quote=CA renter]I compared the changes from *both* 1960 and 1970. You can see for yourself that most of the other expensive states made improvements in the owner-occupied rates, while California declined or remained fairly stagnant. If you consider all of the new housing that’s been built here since 1976, with much of that in “affordable” areas (far-flung communities with long commutes for workers — this trend is much stronger in CA than in other states), that would explain why the statewide owner-occupied housing ratio is higher than it is in the more desirable areas.

Yes, some of it is due to being a high-cost area, but other high-cost areas in the U.S. don’t see the same trends. Even New York has made improvements in owner-occupied trends. If you look at the metro areas with the lowest owner-occupied rates, you’ll see that the other areas aren’t necessarily high-cost, either, so the high prices are not the only, or primary, cause of the low owner-occupancy rates in expensive California areas.

Yes, I believe that by removing Prop 13 protection for non owner-occupied housing, more inventory would come on the market for sale. Renters can’t use mortgages, and raising rents beyond what renters can truly afford would lead to higher turnover rates and evictions, and/or higher density living with more people/families living in a single unit/home (whether or not the LL knows about it, or approves of it). The profitability of holding long-term rentals would be greatly affected, and many of these landlords would end up selling instead of holding onto these older homes in desirable areas.

If we were to remove Prop 13 protection for everyone, then there would definitely be an exodus of elderly people who would sell and move to other, cheaper areas in CA, or out of state. I do NOT favor this, and it’s not even politically feasible under any circumstances. Just making the point that Prop 13 does indeed distort the RE market.

———

“The effect of Proposition 13 on mobility varies widely depending on the size of the subsidy, with the largest effects occurring in coastal California cities where the increase in property values has been greatest.”

http://www.nber.org/digest/apr05/w11108.html
————

I’ll give you some real-life examples of properties I’m familiar with in LA (SFHs and an apartment complex or two — the apartments as an example of how much taxpayers are subsidizing landlords/property owners) to make my point. Will take some time to dig up all the info, but will get back to you with the details today or tomorrow. I’m even going to try to find some info on long-time owners of large tracts of land (like Pardee!) and commercial/industrial buildings to show how much we’re subsidizing them. The numbers are staggering.[/quote]There has been no proof that removing prop 13 for non-owner occupied will do what you think it will do. If you’re comparing with other states, they don’t have prop 13 at all. If that’s your desired effect, then remove prop 13 to everyone. Then, if your theory is correct, we’ll have an increase of home ownership at that point. I don’t buy tweaking prop 13 will get the result you think it would. But maybe removing prop 13 for all would. It would forced all the retirees to move because they can’t afford the tax, which would increase supply and drive down price.

[flyer]

They have been talking about tweaking Prop 13 for years, so it should be interesting to see how this variation on a theme goes this time around.

It’s true that if 13 is repealed in it’s entirety, it would effect some retirees and long-time property owners–not us (although we’re not yet retired) or anyone we know, since most own all properties free and clear, and have more than enough funds to live for the rest of our/their
lives, and probably their children’s lives–especially if they sell their investment properties–but yes, some retirees might have to leave the state under those circumstances.

Guess we’ll all just have to stay tuned.

[CA renter]

AN,

It would also push out the long-time landlords who’ve been getting thousands of dollars in taxpayer subsidies every year. And it would eliminate the subsidies for corporations and other RE “investors” who’ve been getting an incredibly unfair deal at the expense of other taxpayers.

Enough is enough. It’s one thing to keep a person from being taxed out of their only home, but to pay thousands (sometimes hundreds of thousands, or more) per year to subsidize the profits of very wealthy people…that is totally unjustifiable.

I will show you why repealing Prop 13 protection for non-owner-occupied properties would lower housing prices and free up more inventory for people who are looking to buy a primary residence. Stay tuned…

[The-Shoveler]

To be honest I don’t see how that will help create inventory and if you lower property values it will lower property taxes as well.

The only thing I see it doing is force old apartment owners to raise rents, force places like Qceanside to remove rent control on the trailer parks. Etc… and force biz out of the state,
Anyway good luck with that.

[Author]

Posts