Mark Powell with the Greater San Diego Assn. of REALTORS makes a case for making changes to Proposition 13, the 40-year-old California property tax law.
California’s Proposition 13 was designed to stabilize property taxes in an effort to make housing affordable, especially for seniors living on fixed incomes. Unfortunately, the same law could now be responsible for driving up property values and preventing seniors from moving.
Many senior homeowners are holding onto their property, not because they are in love with their homes, but because they love their low property tax and moving might increase it. They feel locked into their properties, so they stay put—and for that reason many houses remain off the market, which creates a housing inventory shortage.
Currently, it’s simply a supply and demand problem. When the real estate inventory is low, real estate prices generally go up; and when the number of available properties increases, prices usually drop. The real estate inventory in cities like Los Angeles, San Francisco and San Diego is extremely low because they are not building enough new homes to keep up with the demand. Therefore, prices will most likely increase unless we devise ways to loosen up existing housing.
There is no one answer to the housing shortage, and that is why we need to provide multiple solutions. Making the property tax base portable for homeowners aged 55 years or older is a good start. While some may feel that this initiative only benefits older homeowners, it would help first-time home buyers as well as move-up buyers who are struggling with the limited inventory.
With an estimated 75 percent of Southern Californians unable to afford to buy a home, California needs to double the number of homes built each year to keep prices from rising faster than the national average. A slight change to Proposition 13 could help increase the number of homes for sale in California, if the initiative gets enough signatures to make it on the ballot in 2018.
Existing law allows for the one-time transfer of a homeowner’s property tax base to a replacement property of equal or lesser value after the age of 55, provided that the replacement property is located within the same county. The new statewide initiative backed by the California Association of REALTORS® would allow homeowners who are over 55 years to transfer their property tax base multiple times and to any county in California. Further, the homeowner would no longer be restricted to a replacement property of equal or lesser value.
Simply explained, a homeowner who purchased a home in 1987 for $200,000, sold it this year for $500,000, and then purchased a new home for $600,000 would have a tax bill closer to their original 1987 tax rate. When a homeowner is allowed to purchase a home of greater value and still have a property tax bill that is manageable, they may be more likely to sell—and that frees up some housing inventory.
–Mark Powell, Greater San Diego Assn. of REALTORS®
Source: San Diego Times