Monday, July 30, 2018 / by Abio Properties, Blogger
Prop. 5: Boon for baby boomers and cure for the housing shortage?
Proposition 5, a measure developed by the California Association of Realtors, is headed to the ballot Nov. 6, and advocates say it could ease not only the property tax burden on seniors, but also relieve the state’s housing crunch.
Here’s what you need to know before you vote on Prop. 5, also known as the Property Tax Transfer Initiative:
What is Prop. 5?Prop. 5 would expand Prop. 13 to allow homebuyers who are 55 or older or severely disabled to transfer their property tax base to a replacement residence in California for any price and as many times as they want. Prop. 5 also would apply to disaster victims like those affected by the recent wildfires.
How would it work?Let’s say you bought a home in 1988 for $300,000, sold it in 2020 for $700,000, and bought another home for $500,000 that same year. You’d keep the tax rate you had on the 1988 home.
What does this have to do with Prop. 13?Well, first of all, happy 40th birthday to Prop. 13 – the voter-approved measure measure that (a) ties a home's assessed value to its sale price, (b) caps the property tax rate at 1% of that value, and (c) limits any increase due to inflation to a maximum of 2% per year.
Prop. 5 advocates say that too many older Californians are unhappily sitting on properties they don’t love anymore because they still love their original Prop. 13 tax base.
Under current Prop.13-related law, senior or disabled homeowners are eligible to transfer their tax assessments just once in their lifetimes from a prior home to a new home, if the new home's market value is equal to or less than the prior home's value.
Also, current law says if these homeowners move to a different county, that new county has the right to decide whether to accept incoming transfers. (Fewer than a dozen counties do.)
What’s the fine print on Prop. 5?
- Eligible homeowners could take their property tax bills with them to any county anywhere in the state.
- Prop. 5 would allow unlimited property tax transfers – a major expansion of current law that generally allows one transfer per homeowner.
- There would be no cap on the purchase price of the new home.
Supporters include the California Association of Realtors and the California Chamber of Commerce.
Who supports Prop. 5?
Why? Steve White, president of the California Association of Realtors, has said, “Many seniors live in homes that no longer fit their needs because their homes are now too big or too far away from their families. If they want to downsize or move closer to their children, they could face property tax increases of 100%, 200% or even 300%."
How could Prop. 5 ease California’s housing shortage?Housing stats show that California homeowners aged 55-75 are the least likely demographic to sell. But under Prop. 5, advocates say, empty nesters would be more likely to sell their big homes, thereby freeing up housing stock for younger families who have been struggling to find something to buy in this crazy tight housing market.
Who opposes Prop. 5?Opponents include the California Teachers Association and the California State Association of Counties.
Why? The state Legislative Analyst's Office estimates that schools and other local governments each could lose more than $100 million in annual property tax revenue in the first few years, growing over time to about $1 billion per year.
Prop. 5 proponents counter that lower property tax revenues would be offset by economic activity elsewhere.
Are you registered to vote?The deadline to register with the California Secretary of State is Oct. 22. Register online now!
Want to talk about property taxes or the potential impact of Prop. 5 on your personal situation? Call Abio's expert real estate agents and brokers at 888-400-ABIO (2246) or email at email@example.com.