People don't move because there's a tax hike proportionate to how long you've lived there, so there's less turnover in housing, meaning less supply, meaning higher prices.
It puts a hard, long term, effectively permanent cap on tax growth, so cities must plan for everything to continually get leaner. Cities make land use and zoning decisions based on uses that are net contributors to revenue, vs net costs. What is a net cost? Housing in general, especially housing that might contain school aged children - that's why 3+ bedroom apartments are so much more rare. What are net contributors? Offices and retail. So the places with demand get to pick, and SF and the Peninsula restrict housing as much as they can and have a huge concentration of offices.
Places on the outskirts (e.g. Dublin, Livermore, Gilbert, Brentwood) are allowing housing to be built because they're trying to turn nothing into something, but any established, and especially built-out city, has a strong financial incentive not to admit a single additional resident to live there, while encouraging everyone they can to shop and work there.
How do we get rid of Prop 13? Supporting repeal is a political death sentence for anyone in local or state office. Homeowners of course love it (even when it has negative effects on them), and renters tend to be less politically active. What kind of campaign would it take to do this?
It's a constitutional amendment, so it would take another amendment to overturn it. It has created its own positive feedback cycle for support, because its beneficiaries are long-term residents, which means older older and wealthier people, who vote more. If a) your rent isn't going up, because you own and your taxes are fixed, and b) your kids are old enough to be out of school, and c) you live closer to work because you bought when the areas were less developed, then you're insulated from the 3 main problems that Prop 13 creates.
Those who would benefit from its repeal - renters, people who moved out, people who choose not to move to CA in the first place because of cost and governance, children, etc, either don't vote as consistently or can't vote in CA at all.
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
The way to have a shot would be to have a ballot which simultaneously gets rid of Prop 13 property tax caps (and increases property taxes) while capping income tax. If you are going to increase property taxes then people are going to want to see corresponding decreases in income tax.
I believe it could be revisited on the grounds that Prop 13 primarily benefits white families (makes sense -- they were the only ones buying property 40 years ago).
There is now good data on the racial disparities in our current tax law and with enough money I think another lawsuit has a chance.
You're absolutely right: it's a massive transfer of wealth from the young, productive class to older people and to commercial landlords. But it can't be changed: it's the "third rail" of California tax policy.
Prop 13 doesn't allow taxes to grow at a rate commensurate with infrastructure, which is why so many counties in California are teaching out of "temporary classrooms" installed in the 70's and 80's, except for the wealthy counties. For example: Folsom has a multi-million dollar highschool, but south sac has Luther Burbank, with aforementioned trailers.
Another problem is that many California counties subsidized suburban sprawl by not charging for utility hookups (like sewers). This put them in debt which caused them to encourage sprawl to balance the books, and some day someone will get left holding the bag, as is happening now.
California catered to the wealthy for decades and now they are having to pay the piper, so to speak.
This is what happens when you bend over backward for the super rich. I say good riddance, maybe California's taxation policies will recover to something more equitable without the 0.1%ers fucking it all up.... Like lowering income tax and repealing prop 13.
Yes, it both drives home prices up and robs the state of taxes. It would also devastate many people already invested if it went away overnight; there's not really an easy solution to fixing it.
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.
There's also the approach of allowing property taxes to be accrued as liens on the property owned by the government, to be paid on the death of the owner or the sale of the property. This ensures that retired people are protected from paying high property taxes, as was originally intended, while ensuring that there's no actual tax break, just a deferment.
I think it's probably overstated, California isn't the only place that's seen urban areas with a lot of high-paying jobs + a lot of property value growth in the last few decades.
It probably means prices are a bit higher than they could be, and people have stayed in their current property longer than they might've, but as a dominant factor? It's a lazy explanation since expensive city property is a problem elsewhere in the US and internationally too.
That continued price growth also tells you that "exodus" is a misleading oversimplification, since it means people are still buying. It wouldn't be too expensive for the people leaving if there weren't richer people buying!
(Even in a prop-13-less CA, the additional people selling their current properties to buy new CA properties instead would be adding to both the buyer pool and seller pool, it's not like there'd be an increase in inventory without an increase in buyers. So price effects seem potentially weak?)
Is it driving home prices up?
Or is it robbing the state coffers of a tax revenue that has to be made up elsewhere?
I don't know.