Tuesday, June 26, 2007

Unforeseen consequence of Prop. 13 tax law in CA

A commenter at Calculated Risk made a comment that "retirees and empty-nest boomers won't sell the family homes nearby, since they'd lose the Prop 13 tax rates, and so younger families have to move further out"...that statement made the proverbial lightbulb go on over my head. That is a factor in limiting housing supply in CA that I hadn't thought of. Theoretically, as home prices rose in CA, it would have made economic sense to bulldoze a couple of adjoining SFR's and replace with a number of townhomes. But I can see why the SFR owners wouldn't sell to a developer, because the homeowners would have to buy a new house with the much higher property tax rate.

I was in Anaheim recently taking the family to Disneyland and was quite surprised at how much of the city that I saw was still SFR's on quarter-acre lots. The whole property tax issue seems like a reasonable theory to explain this. Of course, I also saw a lot that still was a grove of orange trees that was within a couple of miles of Disneyland. That was a mind-boggler...

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