Interesting analysis. I've thought about this from a tax, interest rate, and transactional approach.<p>Although we often think of landlords and renters in an adversarial way, they might be able to work out a deal that is better for everyone than selling and transferring ownership to the new residents, especially in California.<p>Think about an an heir to a house in palo alto, a house that her parents purchased in 1970. She doesn't really want to live in it, and is deciding if she should rent it out or sell.<p>Let's also say that her parents were wise about refinancing and did so when rates were very low. Because prop 13 preserves the low taxes through inheritance, her taxes are extremely low, and would skyrocket if she sells. Furthermore, let's say interest rates have gone up, so whoever takes out the new mortgage will pay a higher rate. Alternatively, if rates are low, she can most likely refinance and pull some money out. If she's smart about this, she can remain cash flow positive and still have a large chunk of money without selling.<p>In some ways, it just doesn't make sense to sell. It might make sense, at this point, for people who own property to become permanent landlords, and for the vast majority of tenants to be renters. This might even be better for renters, since the overall cost of housing would be lower due to overall lighter taxes and interest rates.<p>Interestingly, that hasn't happened, so there is clearly a strong motivation to not be a landlord and/or to be an owner rather than a renter. The income tax break could be a big factor here as well - perhaps that exceeds the value of the property tax break?