Effect No. 5: Cities prioritize commercial development over adding housing

Prop. 13’s effect on city land use and planning decisions is perhaps its worst outcome, said Denise Pinkston, a partner with San Francisco development firm TMG Partners.

When Prop. 13 came into effect, property tax revenue plummeted by about a third statewide. Since then, cities have had to look for other ways to raise revenue to pay for services that residents demand such as roads, sewers, parks, schools, police and fire departments.

Enter commercial properties such as shopping centers, hotels, office buildings and warehouses. Those uses tend to generate more property tax revenue than housing while requiring fewer services, Del Beccaro said.

The effect has been that city officials zone sections of their cities as commercial even if the most pressing demand and need is for housing.

“Cities are rational actors and they are following the money,” Pinkston said. “The money is not in housing.”

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