Property Tax Laws May Be Part To Blame In Worsening Housing Market
According to Bloomberg a number of tax laws passed since the 1980’s may be increasing troubles in the housing market. In particular proposition 13, which was intended to help alleviate the burden of rising property taxes by limiting the local property tax to 1% of the purchase price (or the assessed value in 1975), has been noted by Columnist Virginia Postrel to be at least in part to blame for troubles in the housing market.
“It also encourages them to hang on long past the time when they would have otherwise moved on. This lock-in exacerbates California’s housing crisis.”
So is anything being done? We will have to wait until this November’s ballot when proposition 5, intended to lessen the incentive not to sell, goes up for vote. Until then the housing market will continue to have to grapple with reluctant sellers, incentives and all.
At A Glance:
– Prop 13 placed local property tax limits of 1% of purchase price (or the 1975 assessed price), in addition to capping increases to 2% per year.
– Prop 58 allowed homes and up to 1 million in other property to be inherited from parent to child, and prop 193 extended this to include grandchildren.
– These three propositions noted above have been identified as being potentially responsible (at least in part) for the worsening housing market; this is due to the incentives these propositions place on keeping homes within the family instead of the “natural” return to market which keeps price levels stable.
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