Rent Control for Homeowners? Acquisition-Value Assessments and Housing Costs

We assess the effects of two citizen-initiated proposals on housing costs in California and Florida. In 1978, voters in California approved of Proposition 13. In 1992, voters in Florida approved a similar measure, the "Save Our Homes" amendment. Both proposals instituted acquisition-value assessments: for tax purposes, real property is assessed based on its value at acquisition. We argue that such assessment practices should inflate home costs by spurring demand immediately (via property-tax capitalization) and reducing supply gradually. Effects on supply occur due to the locking-in of residents and land-use fiscalization. Using synthetic-control analyses, we find that Proposition 13 increased home costs in California after 1993 when local costs diverged from national trends, but no effect occurred in Florida prior to 2008. At its peak, the variable effect of Proposition 13 increased California residential value added by more than 50 percent.