I wouldn't bother, because my preference is to tax capital gains on all property including family homes (and to apply this tax annually based on paper profits too).

That said, occupancy requirements are reasonably common elsewhere (e.g. to claim first home buyer benefits in AU, to prove that it's your primary residence to avoid capital gains taxes in AU, to get owner/occupier interest rates in AU) so I assume that they have some means of enforcement, but haven't really looked.

Property taxes already tax based on the paper value of the house (well, an assessed value, which may or may not be fair).

Tying it to appreciation and paper profits could quickly drive someone out of their home (e.g. Seniors). Heck, this is why prop 13 was initiated in the first place, for all the damage it did.

In Australia there is no taxes on the family home and it isn't counted as an asset for welfare purposes.

So we end up with this bizarre situation where people in multimillion dollar houses can and do claim the aged pension.

Different situation here in AU, but the idea would be that you put so many dampeners on capital growth that there isn't really any (and so nobody gets driven out of their home).

See the other comment re: multi millionaires collecting the pension; my taxes paying for benefits with far more wealth than I'll ever have, it's a frustrating situation.

Pensions and SS aren't considered welfare in the states so it wouldn't matter how much wealth they had. The problem that the USA Californian seniors were having is that they had a fixed income (SS, pension) and couldn't keep up with rising property taxes (problem when your taxes go up but your income doesn't).

I don't know that they're generally considered "benefits" here, but that's what they are. There is a means test (i.e. if you have enough in the way of assets then you don't get the pension) but it totally omits the family home; someone with a million dollar house vs a million in cash have the same assets, but one will get a full pension and one will get none.

Tie tax discounts to residency and register those applications centrally.

This is a different issue, establishing the difference between someone that buys a property to live in vs buys it as an investment.

It is, but tax policy can drive behavior. No residential exemption == higher carrying cost.