Let's say you live in a neighborhood of cloned homes. The market is 100,000 when you all buy, the value increases based on the cap to say 150,000 after some number of years but the real market value is at 750,000. When you sell your home the new owner pays taxes based on 750,000 even if all his neighbors are paying based on 150,000. He is paying 5 times as much property taxes as all of them.
That's why prop 13 is fucking retarded.
Let's assume we fully finance that house with a 30 year fixed mortgage of 6% and live it in for 50 years before retiring. With a 1% property tax rate, we have.
Starting cost: $1,000 tax + ~600 mortgage = $1,600
Cost at retirement: $7,500 tax + fully paid mortgage.
Without prop 13 or an alternative solution, a person might lose their home to a tax lien when they retire because of skyrocketing property tax rates.
Even worse, if a market rapidly appreciates over 2-3 years, a person might be unable to meet their mortgage payments because their tax owed increased faster than their income.
edit: and before some accuses me of wanting government budget to grow 5 times I think it's asinine for tax rate not to be set every year to be equal to budget divided by total assessed value of the county like it's done in NJ. A home growing in value should not increase taxes, only a town's budget increasing/decreasing in size due to people voting for such should effect your property tax increase/decrease.
At first glance that seems like a decent system, but in California you'd have to put limits on annual budget increases or property taxes would skyrocket depending on how well the governor mitigates the state legislature.