Prop 13 On My Block

Property taxes are typically described as a wealth tax – they are taxes levied on assets held rather than transactional taxes like income taxes (applied to wages as earned) or sales taxes (applied to goods when purchased).  Property taxes are applied to the same property each year.

Back in 1978 Proposition 13 was passed in California to place a limit on property tax increases.  Per Wikipedia, Section 1. (a) of Proposition 13:  “The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.”

Proposition 13 also placed some rules on how the value of a property is assessed or re-assessed.  Again, per Wikipedia: “Proposition 13 declared property taxes were to be assessed their 1975 value and restricted annual increases of the tax to an inflation factor, not to exceed 2% per year. A reassessment of the property tax can only be made a) when the property ownership changes or b) there is construction done.”

I was curious about the impact of Prop 13 on property taxes in San Diego after seeing some listings on Redfin and Zillow that had astoundingly low property taxes.  For example, the Banker’s Hill property shown below, currently for sale for $1,697,955, carries an annual property tax levy of $136.97.  That effective tax rate of .008% is far below the 1% established under Proposition 13.

I decided to take a look at the property values and property taxes on my block in North Park.  The houses are all pretty similar (outside of one empty lot that was purchased by a local church and razed for a small and scarcely used parking lot).  Below are the property values (per Zillow Zestimate) and property taxes paid (per San Diego County Treasurer website).  I’ve listed all the properties on both sides of the street but removed the addresses for privacy reasons.

Summary of property value estimates and property taxes on a block in North Park

Despite the homes on the block having pretty similar property values the amount of taxes paid and effective tax rate vary quite a bit.  I found it interesting to see the differences in a very small area of town summarized together.

Short-Term Rentals in San Diego – Economic Impact Analysis Report (Oct 2017)

Last month a press conference was held to release a study done on the economic impact of short-term rentals in San Diego for HomeAway / Expedia by Xpera Group.  The report follows a similar study commissioned by Airbnb and done by National University in October 2015.  Both full reports are included on this post for anyone interested in this issue.

A few highlights from the new study:

  • Total of $500M of impact in City of San Diego ($300M direct spending, $200 induced and indirect spending)
  • 3,00 jobs in City of San Diego
  • Transient Occupancy Tax (TOT or “hotel tax”) estimated to be $19M or more in 2017, a 200% increase over 2015 when the TOT from short-term rentals total $9.6M
  • In 2016, City of San Diego TOT was $202.8M of which $15.6M was from short-term rentals, a 7.7% share.
  • “Short term lodging guests tend to be much younger than hotel guests and have a higher percentage of females than hotels.”
  • Short-term guests typically stay longer than hotel guests, “roughly half of short term lodging room nights coming from trips of seven days or longer”
  • 7,436 total short-term lodging listings in City of San Diego, estimated (as of June 2017).  11,530 estimated for San Diego County.
  • In 2016 San Diego County had 30.4 million visitors, 17.4 million overnight visitors.  That would be an average of 47,671 overnight guests per night in the County.

The short-term rental issue continues to be a hot topic in San Diego and a good explainer for the current status can be found here on Voice of San Diego (from Nov 1, 2017).  A full City Council hearing is expected to be held on December 12 although a recent hearing was cancelled on short notice in October so we’ll see how the December hearing plays out.

a photo of my Airbnb listing in North Park
Short-term rentals in SD – Economic Impact Analysis – Xpera Group – October 2017
Short-term rentals in SD – Economic Impact Analysis – National University – Oct 2015