Heart & Home is a monthly column by Josh Ishimatsu, Deputy Director of Strategy.

In a recent column for our SV@Home Action Fund Newsletter, I wrote about a potential November 2026 ballot measure from the Howard Jarvis Tax Payers Association.  (Side note: if you enjoy Heart and Home, please check out the other regular columns I write for SV@Home.  You can see my SV@Home Action Fund column here.  And, if you join as a member, you get our (highly exclusive!) members only newsletter with more original content from yours truly).  In this past Action Fund column, I wrote assuming everybody understood Prop 13’s impact on housing affordability.  But, for this month’s column, I want to take some inches on your screen to talk more about Prop 13 and its ongoing contributions to exacerbating the state of injustice that some call a housing crisis.

Newcomers/Younger People Subsidize Long-time/Older Property Owners

Passed in 1978 during what has been described as a taxpayer revolt, Proposition 13 (and its progeny) limit state and local governments’ ability to raise revenue, leaving California governments struggling to pay for basic services.  This has led governments to implement all sorts of creative and not always well-thought through fundraising schemes.  And, in this ad hoc public finance context, there are at least 3 ways in which Prop 13 shifts the burden of paying for public services and amenities from longer-term property owners (large corporations and older, generally wealthier and whiter homeowners) to newcomers (younger people, immigrants, start ups, entrepreneurs), with specific impacts on the cost/affordability of housing.  

• Taxing on purchase price not present value:  Because of Prop 13, two next door homeowners may have wildly different property tax bills.  Someone who bought their home decades ago may be paying property taxes on a property valuation of a couple hundred thousand dollars.  And their next door neighbor, who bought the property more recently, might be paying property taxes on a property valuation of a couple million dollars – a 10x difference.  And yet, both homeowners benefit from the same level of public services (roads, sewers, fire fighting, etc.) that are funded from their property taxes.  This inequity is a structural feature of Prop 13 because it calculates taxes based on a property’s purchase price and not its actual value.
• Fiscalization of land use:  Because Prop 13 reduced property tax revenue, cities have become more dependent on other taxes and fees – sales taxes and hotel taxes as examples.  This has meant that cities make land use and zoning/planning decisions based, in part, upon what uses produce more public revenue – for example, prioritizing sales tax producing uses (malls, car dealerships, etc.) over housing.  This practice reduces the available land for housing, making it more scarce and more expensive.  
• Development impact fees:  In California, in order to pay for things that used to be paid through property taxes, most cities impose a mix of fees on each new housing unit built.  For cities in Santa Clara County, these fees can be in the tens of thousands of dollars per unit.  These fees are passed from the developer to the future residents of the housing – either through increased sales prices or increased rents.  The fees pay for good things – fire stations, parks, libraries, roads, schools, etc. – but have the net effect of raising housing costs. 

Taken together, we are asking the newest members of our community to subsidize the infrastructure and tax breaks enjoyed by those who have been here the longest (including some of the largest corporations in the world). It is a reverse-inheritance: instead of passing wealth down, we are passing the bill to people who don’t even live here yet.  We are squeezing our renters tighter and tighter.  We are pushing the dream of homeownership further out of reach for our workforce—the teachers, nonprofit staff, and service workers who make Silicon Valley function. It also deepens our racial and economic wealth gap, as those who didn’t buy in decades ago are locked out by a barrier to entry that is artificially inflated by our (anti-tax) tax policy.

What We Need Now

In recent years, we have made some inroads in reducing fees for new housing, especially affordable housing.  And, while this is a generally good thing, we have not come up with many new sources of revenue to pay for the basic services and infrastructure (roads, fire stations, schools, libraries, etc.) that the development fees supported.  As we reduce development impact fees, we still need the public resources that they were used for.  But, because of Prop 13, we’re left with no easy or fair ways to raise new revenues.  Because of Prop 13, our current systems of public finance are unsustainable.

And yet, Prop 13 is considered a third rail in Californian politics – touch it and your career dies.  So, we need leadership at all levels with the vision and courage to address it.

We need to start having an adult conversation about rebalancing our state’s tax system. This means looking at tools like split rolls, which would allow us to capture current value of commercial properties without dismantling the protections for vulnerable homeowners.  It also means advocating for state-level reforms that provide cities and counties with alternative revenue streams so they don’t have to treat new housing as a liability.

At SV@Home, we believe home is the heart of a community. But a healthy heart needs circulation—new people, new ideas, and new energy. If our tax system acts as a clot that stops that flow, our communities suffer.

The next time you see a “No on Housing” sign or hear a complaint about a new development, ask yourself: Who is actually paying for the world we live in? And is it fair to keep sending the bill to the people who are just trying to find a place to call home?