You're pointing out another really bad side effect of Prop 13. Local communities have less tax incentive to allow higher density, since property taxes are capped. On the other hand, they are strongly incentivized to overbuild office space and retail, since they can increase sales taxes. In other words, if Prop 13 were repealed, communities would have more reason to allow housing construction (since the resulting housing could be taxed more).

The result of your policy is not only increased cost of housing and underdevelopment, but higher sales taxes as well. If California had a more healthy proportion of property taxes, then sales taxes wouldn't be forced up to nearly 10% to fund government.

If you turn a single family home into 10 condos, you'll probably get a bigger combined assessment, and also more frequent turnover. Prop 13 actually would encourage this.

If your turn it into apartments though, you've probably eliminated turnover, since it's much easier to own apartments through corporate forms that won't trigger a reassessment.

No but I'd be 3 million dollars richer, which is a fair trade off.

How about if you could be $6 million dollars richer if you could stay for another decade? Why should you be taxed out of potential unrealized gains?

Because a higher price typically indicates that the property’s utility has increased. Think about what a waste an empty plot of land or a large single family house would represent in Lower Manhattan. It is good to punish speculation that hinders actual use

In other words, “investing” in property by purchasing it but not putting it to use is an unproductive investment

That is an interesting perspective. Do you think a lot of people think like that? Or whether it is more likely that people simply purchase their homes in youth, go on with their lives, grow old there and one day find out that their community is desirable and thus their property taxes have spiked? And that they might be kicked out of their homes only because they are now living on fixed incomes and hence cannot afford increased taxes?

I bet more people will be in the later bucket than the ones who analyze things like you do. Since (property) tax policy depends on politics, which is driven mostly by emotions rather than reason, how would you persuade people to think like you? And if one cannot persuade them and simply try to impose one's preferred tax policy by whatever means, then we will see a tax revolt similar to what happened in 1978 with Prop 13.

I think lots of people pursue non optimal tax strategies because being kicked out of your house for being a multi-millionaire is more emotionally salient than all of the good the government can do with increased revenue from property taxes.

The recent prices could be lower without prop 13. It depends on how many people are factoring low taxes into their choice not to sell.