Low income seniors who hit the real estate jackpot can defer taxes indefinitely.

It's called the California Tax Postponement Program and solves exactly the problem you're discussing.

> If their property taxes had risen with the rate of the area that they bought a house in as we grew up, we would have been unable to continue living there and forced to leave. The same thing goes with my grandparents.

We're ensuring stability for the older generation, at the expense of a younger generation who couldn't possibly afford the same neighbourhood they grew up in.

Those with millions in real estate equity can use that equity and financial engineering to defer the property tax increases until their death.

Prop 19 more or less eliminated the landed gentry problem. Previously children could inherit their parent's primary residence and get their parent's tax base, even if they didn't want to live in the home. Before we bought a house we rented and my landlord was in that position. He already owned his own home in addition to several other properties in SF... yet he inherited his mom's house at a 200k tax basis, a house that would sell for $1.2m. His children could inherit the house from him, keeping the 200k tax base. And their children. And their children. Forever creating a true landed gentry.

Now with Prop 19 children can only keep the lower tax basis if they use the home as their primary residence and it only excludes up to 1m in value.

Prop 19 only passed because it did not of course affect the landed gentry. You just register your home as an LLC.

https://www.hollisterlawoffice.com/the-llc-loophole-in-the-a...

Prop 13 is bad policy as demonstrated by every single area of the world that gets by without it. Most cities assess property values on a lagging window basis where your value for property taxes is set every few years based on the value from a few years ago. This generally gives you time to prepare for the increase or make whatever financial decisions you need to. One thing to keep in mind is that percentage property tax rates are necessarily set higher when some people pay taxes on values far below market. My region has a 0.63% property tax rate which amounts to about $6,300 a year on a million dollar home. That might be larger than one month of a mortgage payment but it's a reasonable price to pay for all the services the city provides. I live in a city where this includes garbage, mail, police, fire, transportation and sewage infrastructure and a number of other important services. The idea that someone who bought a house in 1963 should pay less than 10% of the taxes that other taxpayers do means that someone or several someone's are footing the remainder of the bill. You pay a substantial price for that as new homes become less affordable with the higher % rates of property tax. It's also not clear that being forced to sell over high property tax bills is a bad thing as it creates new supply on the market. Most people selling a single family home could easily afford to live in a condominium in the same neighborhood without losing touch with the people they care about. Keep in mind the necessary condition for selling is the property has gone up by enough to make the property tax bill unaffordable. This means whomever is selling their home is making a substantial profit and portraying them as low/middle income people who are hard done by is doing a disservice to anyone struggling in the artificial market created by prop 13 and paying the higher base rates associated with it.

>prepare for the increase or make whatever financial decisions you need to

What does this statement actually mean for an individual family? Most working class people cannot just demand more money from their employer. So really it just means "get ready to move out and find a new home", which means uprooting your family, commuting further, finding new schools for your kids to attend, potentially worse ones because its probably a cheaper/poorer neighborhood.

>It's also not clear that being forced to sell over high property tax bills is a bad thing

I just plain old disagree with this; my family would have been forced to move because some rich people would have displaced my working class parents, and it honestly sounds like you consider that a good thing, "well they're poorer so they don't deserve to live in a place where a lot of people want to live" is really what that argument boils down to. Even though they worked hard and saved for many years to afford to buy that place. There are very few condos in the neighborhood I grew up in, and the ones that exist are on the edge of the city in much less desirable areas. I would have had to go to a different (worse) school, lose touch with my friends and generally have much less space than I had as well. Your argument only makes sense if you consider people as wanting to live somewhere purely as a financial enterprise rather than a good safe place to raise a family.

If you eliminated the zoning restrictions and power of the NIMBYs then this would allow for the best of both worlds. We could continue to allow a tax rate for working class people, but also allow the development of more profitable/denser units. As people naturally move around, companies could buy the houses and redevelop them into denser units.

Regarding your last point, I think you're overestimating how much rental income is subject to California's income taxes. For real estate investors expensive areas like most of CA have a reputation for being profitable in a different way than most other places.

Often rent alone isn't profitable in CA if you have to get a mortgage and even if you don't - the rent you would get is a low ROI, so investors rely more on appreciation. For some it's considered a win if the monthly cashflow is around break even, but some investors bet so heavily on appreciation and rely on the low property taxes that they find having a renter isn't worth the risk. They just want to own something that's going up in value $100,000 every year with minimal hassle.

On top of this, when they go to sell, it will often be through a 1031 exchange where they can sell the property and not have to pay taxes on the appreciation right away as long as they quickly buy another-like property within a short period after. Eventually they will have to pay the capital gains if they ever just want to sell and keep the money, but they've spent years with a negative cashflow (especially if they just let the buildings stay empty) which will help out with those capital gains taxes.

always fun to see prop13ers turn themselves into victims over the idea of having to sell their 300% ROI property

It's not about selling the house, it's about being forced to move out of a city / neighborhood they've been in for decades, simply because it got more popular and they can't afford a property tax bill several times higher than their largest mortgage payment ever was.

Welcome to the real world, Californians. When you have an asset you get taxed on its value. You have no right to live somewhere indefinitely.

== "You don't deserve to live there anymore because you're not rich enough."

This is similar to arguing that people shouldn't even be allowed to own land in the first place. We're all just renting from the government and the government should ratchet up the price so that only the richest and most successful people should get to live in the nice desirable areas.

>When you have an asset you get taxed on its value.

I mean, no? We tax different assets in different ways. If you buy a bunch of stocks you don't have to pay tax on it as its value changes month by month or year by year. You only pay when you liquidate it. We can choose how to tax things for different reasons.

If property taxes were level across properties, wouldn't we likely see property values drop, given the presumed higher taxes in the future?

I'd rather see us adopt lower but uniform property tax rates that are revenue-neutral with Prop 13 rates.

Of course I'm only an aspiring property owner so I have a significant bias here.

> wouldn't we likely see property values drop, given the presumed higher taxes in the future?

Yes. Prop 13 is priced in to the market. Buyers are willing to bid higher because they expect that tax cut.

The tax resets when they buy, which also leads to people not wanting to sell because they don’t want to give up their tax cut.

Higher property tax rates lead to lower home values. If you reduce property taxes then the house will get increasingly less affordable because the money saved on taxes is getting priced into the value of the house.

The local government will get the money in a different way so you end up paying twice.

You're right that it does have an effect, however if you look at other areas with a higher property tax, houses are still extremely expensive in desirable areas. It doesn't have as big of an effect as you'd think and it severely penalizes the middle class who are forced to relocate so that the ultra wealthy can take their place.

>The local government will get the money in a different way

This is a feature IMO, the government can get that tax revenue but in a more fair way e.g. income taxes that are skewed higher towards the ultra wealthy rather than just kicking people out of their homes, where they probably do want to live.