Some think it has to do with Prop. 13. To help counter-act this situation, there is currently a “Property Tax Fairness Initiative” underway. This would revamp and extend Prop. 13. Here’s what you need to know:
• Nearly three-quarters of homeowners 55 years of age or older have not moved since 2000, furthering constricting inventory. A large part of the reason why is that, even if they want to downsize or move closer to family, the prospect of a property tax increase of 100, 200 or even 300 percent, effectively locks our parents and grandparents in their homes.
· To help free up some of this inventory, and protect seniors, the disabled and victims of natural disasters, C.A.R. is qualifying a ballot measure, The Property Tax Fairness Initiative, that will help these homeowners to sell their current homes and move without being subjected to what is effectively a massive “moving penalty.” These homes will then be available for families and other would-be buyers to purchase, increasing their assessed valuations, revitalizing communities and adding tax dollars.
How It Works
• Under current law, homeowners 55 years of age or older can transfer their Prop. 13 property tax base – only once – to a replacement home located in the same County or another participating County, but only if the purchase price for the replacement home is equal or less than the sale price of the original residence. Not all counties make this allowance, and because of these arbitrary and geographic restrictions, the “moving penalty” can be prohibitive.
• C.A.R.’s Property Tax Fairness Initiative would allow homeowners 55 years of age or older to transfer their Prop. 13 tax base to a home of any price, located anywhere in the state, any number of times. These protections are also extended to people who are disabled and those who have lost their homes to a natural disaster. It’s a carefully written initiative that includes appropriate safeguards while eliminating California’s property tax “moving penalty.”
Why It’s Needed Now
• Under Prop. 13, homeowners are protected from rapidly increasing property taxes. However, seniors, who are often on a fixed income, fear they will not be able to afford a big property tax increase if they sell their existing home and buy another one, discouraging them from ever moving.
• This initiative will allow them to sell their home while keeping some property tax protections, continue paying their fair share in property taxes and therefore create homeownership opportunities for young families.
How Property Tax Assessments Currently Work
• The amount any homeowner pays in property taxes is based on the assessed value of their home at the time of purchase with assessed increases. Generally Prop. 13 limits property taxes to a much lower amount than the taxes as the base amount is based on acquisition amount and limits subsequent increases.
• Unfortunately, homeowners lose their Prop. 13 property tax savings when they move to another home. There are two other Propositions that affect property tax basis: Prop. 60 and Prop. 90.
• Under Prop. 60, senior homeowners – 55 years of age or older – may transfer their property tax base to another home in the same county so long as the purchase price of the replacement home is equal to, or less than, the sale price of the original residence. If a senior is moving from the Central Valley to Los Angeles or San Francisco, there’s no way they can do so and keep their protections.
• Additionally, a senior homeowner is limited to making only one such transfer over the course of his or her lifetime. And, if the spouse of a senior homeowner has already transferred a property tax base, that senior homeowner is disqualified from making another transfer of the tax base.
• Prop. 90 is an extension of the original Prop. 60 program. Prop. 90 allows senior homeowners to transfer their property tax base to a home in a different County so long as that County accepts such transfers. There’s no need for the local political process to influence the property taxes of seniors, the disabled and victims of natural disasters.
• Both Prop. 60 and Prop. 90 are relatively limited, which is where C.A.R.’s property tax portability initiative comes in.
Buy Up Example Original Purchase Price: $100k Estimated Property Taxes: $1k/annually Existing Home Sale Price: $300k New Home Price: $400k New Property Taxes: $2k/annually. The $100k difference between the $300k sales price and the $400k purchase price is added to the original Prop. 13 property tax base of $100k for a new Prop. 13 tax base of $200k. The buyer still pays their fair share of taxes but isn’t blocked from making the move.
Buy Down Example Original Purchase Price: $100k Estimated Property Taxes: $1k/annually Existing Home Sale Price: $300k New Home Price: $200k New Property Taxes: 1/3 of $200k = $67k or $670/year for property taxes
If a homeowner buys a less expensive home, the property taxes will be proportionally the same as for the original home. In other words, if the tax base was one-third of the sale price, the new property tax would be one-third of the new sale price. Buying down reduces the homeowner’s annual property tax bill. When the home they sold is reassessed, it will generate more property tax revenue paid by the new owner.
One million signatures are needed to qualify it for the November 6, 2018 General Election Ballot.
• If you have any questions, please email email@example.com or call 818-259-4270