by Dave Walsh
Baby Boomers in California who want to downsize from their three- or four-bedroom home now that their children are grown and gone face a costly scenario. If they sell, they lose their longtime property tax protections and face a substantial “moving penalty” that could see them paying double or even triple their existing property tax bill.
So instead of moving closer to family or considering health care facilities, they stay put, meaning fewer single-family homes are available during a critical housing shortage across the state. These are homes that could be sold to a young family but aren’t because they never make it onto the market.
Voters can fix these problems and eliminate California’s property tax moving penalty by approving Proposition 5, the Property Tax Fairness Initiative. It would allow people 55 and older to take their property tax protections with them when they move. That protection would also be extended to the severely disabled, victims of natural disasters such as the wildfires that have ravaged California this year, and those whose homes are located on contaminated property.
Proposition 5 would clean up confusing and inconsistent law that varies from county to county throughout California. Other previously passed ballot measures allow residents to keep their assessment, as long as their new home’s value is the same as or less than their old residence. But there are strings attached. They can do this only once, and only if the property is in the same county, or in one of 10 counties that allow assessment transfers from other counties.
Includes All Counties
Proposition 5 would allow those eligible to move anywhere in California’s 58 counties, and has also been carefully written to ensure that those homeowners continue to pay their fair share of taxes.
If, for example, a senior sells a house assessed at $300,000 for $700,000 and then buys a new home for $800,000, the new tax assessment would be on $400,000. That represents the difference between the sale and purchase prices that is then added to the original assessed value.
In other words, if someone buys a more expensive home they will keep their original Proposition 13 property tax savings but they will have to pay an increased amount in property taxes because they purchased a more expensive home.
Revenue Loss Big Picture
In projecting substantial property tax revenue losses for government, the Legislative Analyst’s Office did not accurately examine the broader and more complete picture. More home sales at a higher assessment could more than offset the Proposition 5 senior, disabled and disaster victim benefits. Add in other economic activity associated with sales — such as payment of fees, housing renovation and purchase of new furnishings that generates more sales taxes — and the benefits would be substantial.
California’s housing market faces great challenges, which I see in my job every day. Proposition 5 represents a good-faith effort to expand housing opportunities by removing the moving penalty that faces seniors, the disabled and disaster victims. Let’s help fix a flawed and unfair system by passing Proposition 5.
Source: Mercury News