Property Tax Web Series

Abstract

California faces a shortage of housing according to politicians, activists, and residents. In this paper, I leverage differential exposure to the Proposition 13 tax laws to understand the impact of this policy on the production of housing in Southern California. Proposition 13 restricts property tax growth as long as the owner doesn't sell or redevelop the property, which allows me to exploit differences in market conditions at the time of prior purchase to identify the effect of these property tax limits on property redevelopment. I find that Proposition 13 discourages redevelopment and sales. In a dynamic discrete choice model of land use, I find that adopting a land value tax or other property tax reforms would increase housing production by 14-32% generating a similar or greater amount of new housing as other polices under consideration in California.

This paper was presented by Paul J. Fisher (U.S. Department of the Treasury) on November 18, 2022 as part of the 2022-2023 Syracuse-Chicago Webinar Series on Property Tax Administration and Design. Carlos Fernando Avenancio-León (University of California - San Diego) was the discussant for this presentation. Avenancio-León comments on Fisher's "The Role of Property Tax in California's Housing Crisis."