By Emily Hamilton
Governing
(TNS)
Americans are ushering in the country’s biggest property tax revolt since the inflation of the 1970s and 1980s. In recent years, more than a dozen states have implemented policies to rein in property tax bills, and more-sweeping proposals are on the table this year. In November, for example, Florida voters will decide on a constitutional amendment that would sharply raise the state’s homestead exemption and direct the Legislature to consider a path toward eliminating all non-school-district property taxes for primary residences.
Affordability, and housing costs in particular, top voters’ list of concerns, and property taxes are one place where state and local policymakers have the capacity to cut costs directly. But the design of one approach being touted—caps on assessment growth—can exacerbate our long-run housing affordability challenges.
California’s Proposition 13, which passed in 1978, is the country’s most important property tax cap. The original law limited the increase in a property’s assessed value to 2 percent per year or the level of inflation, whichever is lower. Perniciously, properties are generally reassessed only when sold, so owners who decide to move have to give up their artificially low tax base.
In the many California markets with fast-rising home values, this has led to drastically different property tax bills for the owners of similar houses, depending on how long they have been there. It also has led to a pronounced lock-in effect; research shows that the law made people less likely to move out of their homes once they were benefitting from assessed values well below market values. Over time, this keeps older couples in large family homes and growing families in smaller ones—exacerbating the effects of housing shortages that can push people out of high-cost markets entirely.
This lock-in effect causes “deadweight losses”—exchanges people don’t make because of how the tax changes their behavior. Prop. 13–style assessment caps increase it by leading to mismatches between people and homes. That’s why a 2021 California law introduced expanded options for some people to move their assessed base year with them to a new home, reducing the disincentive to sell.
Some of the new generation of tax cuts avoid this trap, because their benefits don’t vanish when an owner moves. Policymakers in New Jersey, New York and Texas all expanded rebates or exemptions that apply to homeowners without tying the benefit to their current house.
Others do the opposite, introducing the Prop. 13 effect to new states. In Georgia, a 2024 law lets localities cap increases in assessments at the rate of inflation until the property changes hands; the more real estate values climb, the stronger the incentive to stay put. Illinois policymakers have also failed to learn from the California experience, expanding assessment freezes for seniors—benefits that are forfeited if an owner moves.
When property owners are taxed the same regardless of their age or how long they’ve lived in the same place, they can neutrally weigh the decision to downsize. We can’t restore fully functioning housing markets by subsidizing the choice to stay in large homes. Without that subsidy, more of these houses would come onto the market for first-time homebuyers or families looking for more space.
Voters are understandably crying out for housing price relief. Half of all renters are now cost-burdened, spending at least 30 percent of their income on housing—near record levels. And even worse, property tax policies that create lock-in pull up the housing ladder from those trying to climb on.
With voters increasingly anxious about housing costs, policymakers can require property tax rates to adjust automatically in response to rising assessments, as some jurisdictions already do. This prevents localities from quietly bringing in more revenue simply because property values rise, sparing homeowners an extra burden without the mismatch between homes and homebuyers that unequal assessment caps create. The right kind of tax relief can help families get the space they need without locking longtime owners in place.
Governing‘s opinion columns reflect the views of their authors and not necessarily those of Governing‘s editors or management.
Photo credit: Jakub Żerdzicki/Unsplash
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© 2026 Governing. Visit www.governing.com. Distributed by Tribune Content Agency LLC.
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Tags: housing, property tax, property taxes, Taxes
