The problem with Proposition 13 is that it also applies to commercial real estate.
A personal residence can only be about 30 years out of date in terms of assessment. And, when the owner dies, that assessment corrects.
Commercial real estate will get buried behind layers and layers of sublease agreements in order to avoid triggering a reassessment. At one place I worked, we had to find the actual original building owner because someone drove a car through a support beam and the rework was going to cause everything to come up to code. We moved out because nobody could actually get through all the layers of subleases (11 layers when I last checked) and guarantee a completion date.
The solution is to remove the Proposition 13 protections from commercial real estate. Good luck. Every company with real estate on the books in California is going to fight you tooth and nail.
Prop 13 has distorted the market of residential, but, at this point, it's baked in. Individual residential housing will turn over--the owner will eventually die.
Where Prop 13 has been terrible is on commercial real estate. Most office complexes in Silicon Valley have dozens of sublease layers in order to avoid triggering a reassessment. Forcing those to unwind would be a gigantic boon.
Unfortunately, those people have a LOT of money to throw around. The last time this popped up on a proposition, the commercial real estate owners spent a FORTUNE to defeat it.
The biggest issue with Prop 13 is the allowance for commercial properties.
Prop 13 for protecting individual residential property owners on a fixed income from escalating "assessed" property values makes a good deal of sense. Especially in a state like California, if left unchecked, would be raising all sorts of taxes and fees for failed experiments.
(Note - born/raised/ life long Bay Area resident)
Prop 13 needs a revision to exempt commercial property...
My grandparents own a home in Livermore they've had from 1925. Livermore is now a very costly place to live in, and modern property taxes would make it impossible for them to live in a city they saw grow up around them.
I do think Prop 13's protection should be eliminated for businesses - most definitely.
If you're a landlord, perhaps it would make sense to allow up to 2 x Prop 13-protected [low-density] properties, and all those after would have unfixed property tax.
The problem here is landlords will simply pass this along to renters, so it seems 'sane' to just eliminate Prop 13 for commercial and not residential properties.
We lose billions of dollars in tax money from corporations because of Prop 13. :(
Repeal it ASAP for commercial properties and rental properties (even if SFH).
For single-family, owner-occupied housing, remove Prop 13 provisions for new sales, but grandfather in all current owners until their death or 20 years, whichever is sooner. After which their assessed values are gradually (say over 5 years) allowed to rise to the fair market value.
Force a reassessment upon the property being inherited, and remove Prop 13 protections from it. Right now, there's no reassessment if a child or grandchild inherits the property.
Eventually all grandfathered owners will die off, sell and leave, or start paying taxes based on the fair market value of their property.
It doesn't make sense to allow commercial real-estate companies to take advantage of prop-13. I thought, the whole point of Prop-13 was to ensure that old folks don't get thrown out their homes.
You need to fix the problem, but fixing it by Prop 13 has numerous issues. If it had been deferred as a lien against future sale/inheritance, or didn't apply to commercial properties, or ...
Best case it will apply to commercial properties. I dont foresee changes to prop 13 for residential. They would also have to undo rent control, which is sort of like non-owners prop 13.
One half-fix sometimes proposed to solve the most egregious Prop 13 issues but leave it in place for the people you're talking about is to limit it to only owner-occupied primary residences. As it stands today, Prop 13 applies to not only homes people actually live in, but also investment property, vacation homes, even commercial real-estate. Imo any "protect the nature of our community" / "keep old people from being displaced" type justification makes a lot less sense when we're talking about Intel's property taxes, or about property held by real-estate investment trusts.
The biggest issue with prop 13 is they also rolled it out for commercial properties not just your primary residential home. So much prime land is squandered as a result by things like 1950s era single story retail at best or just a surface lot that sees minimal overhead but a lot of upside for the absentee owner.
There are problems with prop 13, but it does prevent people from being kicked out of their owned homes for temporary market conditions that are out of their control.
Imho the problem was that the politics of the day got it passed to cover commercial properties too, when it really should just cover primary residences. And not secondary homes or rental properties.
This is the real answer in my opinion. Prop 13 does make some sense (especially in its current form now that the other measure passed that limits prop 13 for homeowners over 1 million in value).
But for commercial real estate ? That seems totally ridiculous. There is so much tax that could be collected there!
There are many bad things about Prop 13. Indeed I'm straining to think of anything good about it. But the worst is that it applies to commercial property as well.
Whenever CA's prop 13 is brought up, I find it interesting when the article doesn't mention that commercial properties are also covered. They can be owned eternally by a corporate entity instead of paying property taxes anything near resembling current commercial values. This one at least mentions it, but the odd part is that this was used as the justification of extending inherited tax rate grants to families, instead of removing it from commercial properties.
You are attacking the wrong people. Prop 13 applies to business real estate as well. This is the true problem. Before Prop 13 business was paying 2/3 of the property taxes now business is paying less than 1/3.
The problem isn't the elderly, the problem is that Prop 13 includes commercial properties
In case you were unaware, there were two proposed constitutional amendments that would reduce Proposition 13 benefits this past November:
Proposition 15 (which would have eliminated commercial property tax breaks) failed 48%-52%. I think its biggest political flaw is probably the fact that it would apply July 1, 2022, with no phase-in for small businesses whose lease passes through the property tax. So hopefully in November 2022 another attempt can be made that addresses the political shortcomings.
Proposition 19 (which eliminated tax breaks for inherited investment property in exchange for increased tax portability for the elderly) only barely passed 51%-49%, and that was after it received overwhelming support from the legislature, and a $45 million advertising campaign from the California Association of Realtors that some people criticized for only highlighting the goodies for old people and not the costs for inheritors.
No one is attempting a full repeal of Proposition 13 including residential property.
It could also be attacked judicially; see this episode of the Henry George Program for a discussion of Nordlinger v Hahn and whether different legal arguments could be tried (e.g. does Proposition 13 impinge on the American freedom to migrate under the US Constitution?) http://seethecat.org/ep/2017-07-11.html
I'm glad there's a chance the commercial exemption may go away. That never made sense.
The bigger problem is that prop 13 is structured in a way that screws up neighborhoods. On my street in Palo Alto is a widow in her 90s who can still afford to stay in her home, which I think is great. There's also an older couple in a different home who would like to move out of their largish/multistory home but couldn't afford to pay the rent or property taxes on a small one-bedroom. As a result there's only one family with kids on the block.
As for prop 58...well if you are the sort of person who considers inheritance at all legitimate I'm not sure you have grounds to complain.
A personal residence can only be about 30 years out of date in terms of assessment. And, when the owner dies, that assessment corrects.
Commercial real estate will get buried behind layers and layers of sublease agreements in order to avoid triggering a reassessment. At one place I worked, we had to find the actual original building owner because someone drove a car through a support beam and the rework was going to cause everything to come up to code. We moved out because nobody could actually get through all the layers of subleases (11 layers when I last checked) and guarantee a completion date.
The solution is to remove the Proposition 13 protections from commercial real estate. Good luck. Every company with real estate on the books in California is going to fight you tooth and nail.
reply