A landlord who has owned a building continuously since 1985 is paying tax on its assessed value as of 1985. A landlord entering the market today pays based on the value today. This is an obvious subsidy for the incumbent landlord. A building built or purchased today is strictly less valuable than an identical one held for years.
> A landlord who has owned a building continuously since 1985 is paying tax on its assessed value as of 1985.
Not true - Prop 13 allows small increases each year.
> A landlord entering the market today pays based on the value today. This is an obvious subsidy for the incumbent landlord.
Or, it's payment for the infrastructure that the "old landlord" paid for that the new landlord will use.
More to the point, that "subsidy" does not affect the demand for new housing, the supply of existing housing, or the cost of providing it. As a result, it can't affect whether building new housing is profitable.
Yes, prop 13 means that different landlords can have different profits on the "same" building, but so what?
The fact that someone else can make $10 doing something doesn't affect my decision to do it for $1.
In fact, prop 13's "stable taxation" might actually encourage building in advance of need, to lock in the extra profit potential.
We're talking about a situation where the guy making higher profits can't grow, so comparative advantage doesn't apply. In this situation, all new supply is the same - there's no comparative advantage.
Prop 13 doesn't block construction.
Prop 13 keeps property tax revenues relatively stable.