Agreed, Prop 13 is a huge part of the problem. Anyone concerned about the problem of housing in CA should consider calling their state representative and telling them to repeal prop 13.

Well, or new residential assessed at new rates. I'm not sure how free cities are to change their tax rates, my understanding is the major problem with Prop 13 is that existing owner's taxes can't go up very fast. But if a new resident displaces an older one, the tax value resets and the tax receipts go up. Same for building new residential, you get a bunch of taxpayers at the 'current' rate.

But I'm guessing there are also limits on overall rates because otherwise property tax rates would have gone up to make up for the 'lost' revenue from owners who are grandfathered in.

This is behind the correlation between "new areas" and "good school districts".

> It behooves a Bay Area municipality to seek out commercial investment and drive away residential.

AIUI, (and I might not understand correctly) that's not quite right.

If you make significant improvements [0] to a piece of land the value of just those improvements are assessed and added to the assessed value of that land. So -IIRC- if the owner of a two-story multi-family dwelling demolishes the building and builds a fifty-story building in its place, his assessed property value would be the same as it would if he had purchased that property with the new construction on it.

[0] Like -for instance- adding on a new room to a house.

What you've said is true, but misses the point. Office buildings don't require schools in the same way houses do. Look at the development in Palo Alto over the last ten years. It's largely commercial and this isn't an accident.

I'm afraid you've missed the point. :)

Prop 13 caps the rate of property tax increase... only if there is either no new development on a property, or if the property changes hands in one of the ways that triggers the property valuation reassessment.

A city should be strongly encouraging the periodic demolition and/or radical improvement of existing structures... whether they be commercial or residential. New construction and new improvements get taxed at their "market rate" valuation. Given how insane prices are in the area (and how very, very little teachers make), I find it hard to believe that tax revenues from new construction wouldn't cover the costs required to support new families.

> Look at the development in Palo Alto over the last ten years. It's largely commercial and this isn't an accident.

coughredliningcough :)

While prop 13 limits the rate cites can charge for property taxes, if your average tract home is selling for a million bucks %1 is still plenty of money for city services.