Thanks to Proposition 13, since 1978 California homeowners have benefited from property taxes that equate to 1% of their home’s assessed market value plus up to an additional 1% to pay for state bonds and other indebtedness approved by voters. But the low property tax basis created by Prop 13 has resulted in many remaining in their homes much longer than they ever intended.
The reason? Concern about their annual property tax bill increasing exponentially. Because of this, approximately three-quarters of homeowners 55 years or older have not moved in almost two decades.
To address this issue as well as the statewide housing shortage, the California Association of Realtors® (CAR) has proposed an amendment to Prop 13, which, if passed, would create incentives for homeowners age 55 and above to sell.
Since the 1980’s, Propositions 60 and 90 have enabled the aforementioned homeowners to sell their primary residence and take their existing property tax basis with them. When they apply within three years of moving, they are able to transfer their tax basis when they purchase a home of equal or lesser value either within the county in which they live (Prop 60) or in eleven participating counties in California that welcome inter-county property transfers. In the Bay Area, only Alameda, Santa Clara and San Mateo counties participate in Prop 90. Currently, this transfer of property taxes can only be used once.
CAR’s initiative, titled the People’s Initiative to Protect Proposition 13 Savings, proposes the following changes:
- All 58 counties statewide would allow inter-county property tax transfers
- A home of greater value would be assessed based partially on the market value and partially on the value of the previous residence.
- Homeowners 55 years and older would be able to utilize this transfer of the base value multiple times
Because this legislation requires amending the state Constitution, it needs to be approved by a simple majority of voters. If approved by two-thirds of the Legislature, it would be on the November general election ballot as laid out by bill ACA-7, introduced by State Assemblyperson Raul Bocanegra. A sister bill, AB-1322, would implement the ballot measure.
According to initiative supporter, the Howard Jarvis Taxpayers Association implementation would help address the state’s housing crisis.
Says Jon Coupal, president of the Howard Jarvis Association, “We think that it will prove to be an integral part of addressing the housing crisis in California. It will provide an incentive for empty-nesters to move out of bigger homes and to downsize and make their previous home available for younger families.”
The California Association of Realtors® believes that by eliminating this “moving penalty”, a significant number of homeowners in this age bracket would purchase a home that better suits their needs, freeing up a considerable number of single family homes for others looking to buy. The California Legislative Analyst’s Office estimates that this amendment would boost homeownership opportunities in the ‘tens of thousands’ each year. They also claim that this initiative, were it to be implemented, would result in annual revenue losses of $1 billion or more for schools and the same for cities and counties, even after taking into account the higher taxes paid by those buying the newly released housing inventory.
Currently, proponents of the People’s Initiative to Protect Proposition 13 Savings are gathering the required signatures needed to qualify the proposed amendment and move it forward in the process.
“A lot of older people—and I’m one of those older people, by the way—are feeling locked into their properties. They’re holding onto their property not because they like their house, but because they like their taxes,” said Alex Creel, a lobbyist for CAR.
The deadline for submittal of signatures is February 28, 2018. If you are interested in signing, please contact The Dawn Thomas Team.
To learn more about the People’s Initiative to Protect Proposition 13 Savings, we encourage you to read the following articles: