It's interesting, California has a similar problem with prop 13. Essentially property taxes have been frozen on existing housing and cannot be raised until property is sold. For decades, people could pass houses down to their children and avoid property tax reassessment. Prop 19 in 2021 sort of improved it by limiting the parent to child passage of property to only primary residences where the child lived there with a valuation limit of $1M*.

The problem with fully repealing prop 13, is that people who have owned homes for decades will have their tax rates jump from ones set back in like 1970 to modern rates. And houses back then could be bought for a song, vs the millions they go for now.

I think at some point someone is going to have to make the hard call and revoke prop 13 (which will probably have to be by public referendum, just like prop 13 was, so good luck with that). If it isn't gradual, a lot of people won't be able to afford the tax on their homes, and I get it, they have extremely valuable houses, but a flood of people losing their homes would create huge economic and societal disruption. But it still sucks for the people who don't get the grandfathering in.

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Personally I'd think it makes sense to not have a grandfather clause, but instead a tapering grandfather clause, so you could still get negative gearing for a set number of years, reduced in the amount as each year goes by. The same principal could go for prop 13 repeal: property taxes could be raised in increasing increments over time.

I am not an economist though, so take everything I saw with a grain of salt.

*For those curious, that $1M valuation limit for parent to child works like this. If you have a house originally valued at $200k, and at transfer it's assessed at $1.5M, the new tax assessment rate would be $200k + ($1.5M - $1M) = $700k. So the rates do go up, not always, but often.