agreed on commercial. but the reality for residential is way more complicated. its not just long term owners who have benefited-look at the prices in the city over the last ten years for example. and suggesting that old folks just get a reverse mortgage sounds good for the govt. and mortgage brokers. letting those fiscally responsible politicians prey on sitting ducks (homeowners w/high transaction costs of selling and moving) sounds like a very bad idea.

no doubt that the unintended consequences of prop 13 have included making prices go much higher in CA. than they would otherwise; but to blame budgetary shortfalls on housing winners (“who can afford it”) sounds like bitter populism.

as for the neighbor paying less in taxes-so what? he paid a lower price too probably-do you want to adjust that?

so all of you prop 13 haters, i think you ought to just come out and admit that you want MASSIVE tax increases (but only on those assholes who bought property…). go ahead and tell us how our politicians will fix everything with this windfall.

california does not have a tax problem-ITS A SPENDING PROBLEM. prison guards and bus drivers make 2-4x what teachers make.

let the flames begin…

It’s really funny. Everyone who posts on real estate blogs favors dropping prop 13. I think that’s understandable because the majority of us are in the market or have recently purchased. We’re the ones getting screwed.

But if you look at CA’s population as a whole, the majority are either indifferent (e.g. renters) or “entitled” (e.g. retirees). That is why it will never get fixed in our lifetimes. If you recently purchased, in ten or fifteen years you’ll be on the pro-prop13 bandwagon, anxious to screw the new crop of buyers…

The most ironic part is the number of “protected” owners who get stuck inside inappropriate homes (too big for them after kids move out, too many stairs for old people, too far away from work or medical facilities, etc.). Yes, there are tax transfer opportunities for older folks, but there’s a serious penalty built in for most homeowners who wants to trade up, trade down, move closer to their new job, etc.

Too bad we’re stuck with this for life…

slippery slope thinking there. after the $10 mil targets are gone, then what?

look at the brilliance of the AMT for guidance.

I post here now and then. I SUPPORT leaving prop 13 as is. I have owned my own house in SF now for 24 years.

No complaints. No problem.

I agree with Paco. spending is the problem.

And I didnt flame anybody. so there.

You’re not gonna drag that outta me. but i will say this: it’s worth approx 13 times what I paid for it..and we’re not done remodeling yet.

and no, that doesnt make me an evil homeowner. it just makes me grateful and lucky I guess.

so i take it your property tax bill going up 13x would crush you? or just slow down your remodel?

ok. i wasn’t trying to bait you, just trying to make a point. you are getting the huge benefit of paying nothing in taxes which you are leveraging to fix your place up and flip. good for you.

i hope you don’t have any kids because you’d see how sad a shape our schools are in thanks in large part to prop 13.

Ok james. thats it. the gloves are off. I worked my ass off to buy that fixer upper 20 some years ago. it was a dump. i saved and saved for a down payment.

After years of sweat equity and building permit hell, it’s getting done.

And you have the f’ing arrogance to think I’m leveraging the house to FLIP IT??

It’s my HOME, my domocile. I’m going to live in it for many more years, with NO intention of flipping it. you have a lot of nerve to throw out crap like that. And no, I dont need to have kids to know that the schools are a mess..for many other reasons.

think before you assume such crap next time.

I’m joining this conversation a bit late, sorry, but I just couldn’t stay silent on this issue. I’m a government employee in the South Bay area and a recent new homeowner here as well (and yes, we intend to ‘flip’ it). I hate Prop 13, straight up. It has put a strangle hold on everything that government has to do, which is way more than many people realize. And it affects everyone in the whole state, even renters. As the housing market tightens because supply is locked up by prop 13, the price of renting increases as well. Homeowners who want to remodel or even just get a SIMPLE building permit to replace a gas line or something have to pay more of the cost of processing that permit. Tax dollars impact our schools, roads, emergency services, social services, and land use planning ability. You want more from your government? Give them more to work with. I would gladly see my taxes rise more than the 1% annually allowed by Prop 13. That’s just basic economics, and if you can’t handle it there are other markets that will always be more affordable than Coastal California. Any time you F around with raw, basic, supply and demand economics everyone looses sooner or later.

I’m with Paco here. Why should there be an underlying assumption that a windfall would be put to good use? It wouldn’t. California needs a systemic top to bottom fix starting with the prison industry.

this is the comment of the millennium!!!!

“Any time you F around with raw, basic, supply and demand economics everyone looses sooner or later.”

way to go jade

Well, good luck prop 13 lottery winners when the rest of us leave SF for cities that are fairer with the tax allocation and you have no one left to ‘cash out’ to. Certainly, people shouldn’t be losing their houses for regular non-payment of property tax (the city should attach a lien to the house to be collected after death, etc.), but people who happened to buy ‘x’ years ago shouldn’t get a free ride, either.

Frankly, I came back to SF after 20 years of living elsewhere and I’m sorry I did. I can’t believe how short-sighted and selfish this town has gotten. Criminy, cut out the “I got mine” attitude and fight for the future of this city. Can’t you see where it’s headed?

-PM

Don’t sell yourself short jamielynn. You also chair your local realtor-hater support group.

jamie, that is all good. if we didn’t have prop 13, there’s no guarantee that you’d have to pay as much tax as i do. the city would have to find comps in your neighborhood to justify the higher valuation, and even if they did, you could challenge it every year to say this isn’t logical for this reason.

just thought i’d throw that in there.

jane was a typo for jade by the way.

i’m not as perfect as you.

;)

just thought of something else. all that property tax, no matter how little or much, is deductable.

i need to do more homework to see if the lack of a prop 13 would even matter to a city/county like sf, where i presume we have had enough turnover in the past 10 years to be getting as much revenue from valuations as we can.

what if we got rid of rent control and prop 13 at the same time? you can rent out your beautifully remodeled vic for as much as the market will bear as long as we can assess it at it’s true value?

just throwing that out there.

I think that Prop 13 should be revisited. On my block there are people who pay $30K in property tax and some that pay less than $1K. This kind of discrepancy is not fair. If you pay that much more, you should recieve more services or something. Anyway, I’ve felt that a minimum of 25%-50% valuation for the property tax would be more fair.

What about a less radical solution: raising the annual percentage increase allowed under prop 13? I think it is about 2% now. Raise it to 3% — a very marginal increase fairly distributed on all prop owners — and you’d generate a whole lot of need money for the public schools.

Oh, and PPS:

FYI, one thing I do support about prop 13 is the notion of not pricing seniors out of their homes due to rising property values. So I’ve always felt any change should have some sort of protection for this segment. But the 3% solution I think is clean enough that it might not even need such a special clause.

hey kb- remember that they sold us on the lootery by saying the money would go to the schools. do not believe the hype. raising taxes will not make the schools better. fiscally conservative my ass (republicans, democrats, they are all the same-porkporkpork).

i notice that no one will address my assertion that california has had a couple of HUGE booms (dot com and real estate) in just the last ten years and still the politicians frittered that windfall tax revenue away. face reality- if they were not able to manage with huge extra revenue why do you believe that raising taxes will make the situation different?

i have a suggestion. Why not be really fair and just get rid of property taxes altogether. Seems ridiculous on its face that people should pay taxes every year on their home! Then make up the shortfall in the fairest way we know.. ie income taxes.. or a sales tax.

now your talking brian. get rid of everything but a true flat tax on our incomes and offer no deductions at all. i’d be for that in favor of dropping property tax. i believe ron paul has been suggesting this for some time.

brian and james.

I’m not sure dropping the whole tax is wise – but in that idea, the tax can be related to the PROPERTY and not the VALUE of the property.

over a 1000 years ago, property taxes where a plain simple table.

one floor up = 2 gold coins

two floors up = 4 gold coins

three floors up = 7 gold coins.

out of cities, you’d pay your propety taxes according to the area of windows or length of front wall.

in the same way, figure out what criterias are appropriate to a property. Length of curbside is one (so the city gets the same amount of money to repare ALL blocks’pavement with similar length – the block being in china town or seacliff). For all I know, in europ they have an underoccupancy tax: you get a penalized tax if the number of occupants is way below what the sqfootage of the property is – encouraging people to put empty properties back on the rental market, and somehow empty nester to dowsize (which might work – or not)

taxing people on the value of an investment with UNREALIZED profits is not ok – nor is it fair to have 5 neighbors in a row of IDENTICAL houses pay different amounts (doesnt this sound like airlines pricing policies when no two travelers payd the same price on the EXACT same flight?)

Add waiver and exemptions if you want (all caduc in the way that you need to reapply for each each year) .. but work on those property taxes.

“i notice that no one will address my assertion that california has had a couple of HUGE booms (dot com and real estate) in just the last ten years and still the politicians frittered that windfall tax revenue away.”

Not exactly. If you’ll recall, during the dot-com boom, state budgets were passed without the benefit/necessity of selling bonds to cover operating expenses. I also recall schools being built and a lot of “deferred” maintenance items being addressed. SF spent a load of cash making schools wheelchair accessible – a legal mandate, not something that can be blamed on the board of supervisors. Auto licensing fees were cut by 2/3 during this time, also. Reversal of the fee discount is one reason why why have Gov. Arnold rather than Gov. Gray, if you’ll recall.

The housing boom occurred (at least in part) during or while coming out of a recession. While the bay area did mostly okay during this period, I don’t think rural counties – especially those that filed or considered filing for bankruptcy had much opportunity to fritter anything away.

Seems a lot has happened here over the weekend! Glad the discussion is so lively.

Anyway, just a few more things I’d like to point out from my perspective, again as an employee of a local government agency and as a new homeowner in the south bay area.

First, there seems to be a little confusion on where prop 13 applies – it is state wide for California, not specific to San Francisco and not applicable to any other state in the nation. Since most of our property taxes fund things that are either directly or indirectly handled by the state, that’s where the bulk of our money goes, and is then redistributed to local municipalities to handle local issues. So the issue is larger than a $2 million condo vs a $425k victorian in San Francisco. People who own 20 acres in Santa Clara, or Humboldt or Orange are affecting the services you get in your local city. This tax creates what used to be known as “landed families” by allowing trusts to pass land from parents to children without being reassessed. People in the Bay area can own over $10 millon dollars of property and maybe be paying tax on $500k. I pay that same tax on my 1/10 acre lot. Is that fair? Maybe. I mean, those grandparents worked hard long ago to ensure their children would be taken care of, right? Those children now have no incentive to sell the land, and less to invest in improvements on it since that would trigger reassessment. So the rent them out and the properties deteriorate. (We have several situations like this involved with our code enforcement division, and personally, it makes me crazy. Professionally, that’s just life under Prop 13)

Also, if this it isn’t fair to tax someone on an unrealized gain in value, why do 49 states in the nation do it that way? Yes, property is expensive in California, and yes there are probably places where the State and Local governments could do a better job with spending, but curtailing tax revenue is not the answer. Each bump in revenue has also followed a boom in population, and therefore an increase in expenditure. Living wages, health care expenses, seismic retrofitting, improved road surfaces and improved teaching and curriculum in schools, which would you suggest the government cut so you can keep your tax break?

Seriously. It’s not about street trees and graffiti. This is a much, MUCH, bigger issue than that.

prop 13 gives people an incentive to stay in their subsidized prop tax situ- which constricts supply which drives up the prices which encourages the development of more supply which then sells for a higher price point than it would (barring 13) and therefore produces way way more tax revenue for the state than would otherwise have been generated. AND STILL the govt. cannot make do. look at spending folks. if you think the govt. is being fiscally responsible then convince me. otherwise i believe raising taxes will just be throwing good money after bad.

i’m sorry paco but i have ZERO sympathy for someone inheriting a property they cannot truly afford. sell it!

If commercial/industrial property owners (i.e., non single-family residences) had seen their property assessments increase at the same (Prop 13-tamped-down!!!) rate as single-family homeowners, California would be collecting $15B (that’s billion) a year MORE in property tax. Now let’s see what our shortfall is this year … $14B … wow … so we’d be putting $1B INTO schools, police, libraries, prisons, etc., instead of taking $14B out.

In 1978, the year Prop 13 passed and the market-based rates froze, single-family homeowners paid 40% of all property tax, while commercial/industrial/etc. paid 60%. Now, the proportions are reversed. We, the homeowners — even with retirees paying less than the newbie next door — are paying 60% of 30B, while businesses and landlords are paying 40%. Do the math — if our $18B represented 40% of the pie, the whole pie would be $45B … and they’d be paying $27B … instead of $12B.

Wow.

Why don’t politicians talk about this? Because it’s political suicide. The Jarvis PAC goes after them with double full-page ads. Who’s paying for those ads? We are — with the $15B that commercial interests have quietly pocketed.

How can they do this? Property is not revalued until it’s sold under Prop 13. And every clever commercial property holder has carefully ensured that this property is held by a company/partnership/etc. that can be sold … without the underlying property technically changing hands!

Still with me? Email the SF County assessor’s office and ask what the deal is in San Francisco County — do the math for yourself. I did it for San Mateo County (where I live) and discovered that we’re “lucky” — due to all the new building, our percentages only went from 50-50 to 60-50 … leaving landlords and businesses a mere $200M richer in our neck of the woods … Or more, since the new stuff is just covering up for the old … for a while.

Anyway, the fight shouldn’t be between retirees and new prop owners. It should be all of us asking why commercial property can’t be brought up to market value if it hasn’t been through an arm’s-length transaction every 25 years. The small, retired landlords who are sure to bleat could be allowed to defer their increased tax — with a lien created against their property when it does change hands for the deferred tax at a reasonable rate of interest.

Done. Fairness. Prop 13 intact for the folks it was supposed to protect — elderly homeowners. California budget balanced. Schools funded enough to maintain our status as 45th out of 50 instead of dropping to last.

Any chance that we, the people, have more political will than the politicians?

Thanks, James, for your vote of support. I think it will take individuals, checking it out for themselves (e.g. in SF County) and writing their officials directly. That’s more than signing a petition, I know.

I just got my in-laws to check out Santa Clara County, where they live. There, it began at 50-50 in 1978 and has dropped to 68-32 … even with all that new development in the Silicon Valley. (Heck, it was ORCHARDS when I worked for Apple in the ’80’s!)

Incidentally, I meant San Mateo had fallen to 60-40, not 60-50, by 2003. Though, since Santa Clara has fallen another 5 since then, no reason to think San Mateo isn’t down to 35 … by now.

Anyhow, PLEASE take a look at your county’s number … and if you care about kids, the elderly, the poor … WRITE your state reps. THANKS!!!!

i guess we know where paco stands on this issue. presuming he’d rather punish the kids and elderly and poor for electing bad politicians or for being ambivalent about them. either way, not cool paco!

jennifer,

i sent a note to arnold about this. let’s see what he or his office has to say.