How did an entire state price itself out for entry-level home buyers?
<i>“Cities will tell you that from a property tax perspective, housing is a loser,” says David Cogdill, president of the [California Building Industry Association].</i><p>I was trying to make this point a few weeks ago here on HN, in a discussion on Prop. 13, and got pushback.  I take this quote as evidence that it&#x27;s common knowledge among people in the housing industry.  <i>Prop. 13 disincentivizes cities from adding housing.</i><p><i>Prop. 13 needs to be fixed.</i>  The way it should have been done is this: in a year in which property values increase by more than 2%, instead of limiting the <i>tax</i> to 2% more than the previous year&#x27;s, we limit the <i>payment due</i> to 2% more than last year&#x27;s payment due.  The locality receives a lien on the difference, but that lien does not become due until the property is sold.<p>So in an area in which property values have been rapidly rising, a homeowner who sells their property will have to share their windfall to some extent with the locality.  But those on fixed incomes are still protected: their annual tax payments don&#x27;t increase any faster than they would today.<p>Common objections:<p>&quot;People will take out home equity loans that will have to be repaid at sale, leaving them with a cash loss.&quot;<p>A property tax lien is a public record.  Banks will take the liens into consideration when deciding how large a loan to offer.  This is standard practice already.<p>&quot;The liens will accumulate to the point that they will be greater than the owner&#x27;s gain on the property, giving them a strong disincentive to sell.&quot;<p>No, this wouldn&#x27;t happen, because the lien is only on 1% of the excess gain (the amount the value increased over 2%).  If, for one example, the value jumped in the first year and then went flat, the payment would continue to grow at 2% annually until it caught up to the value.  The only scenario that generates a lien larger than the owner&#x27;s gain is if the market has been up but then drops sharply just before the owner wants to sell -- in short, if there was a bubble.  Well, bubbles produce lots of dislocation; I don&#x27;t think they make for a good argument against this proposal.<p>&quot;Prop. 13 will never be modified.&quot;<p>Well, it certainly won&#x27;t if no better alternative is put forth!