November is coming, and California’s voters will be asked to decide on two important housing issues: Prop 5 and Prop 10.
Let’s take a look at propositions and what they mean to California.
California has an unfair moving penalty.
Under current California law, property taxes are set at 1% of the assessed value of the property when purchased. This becomes known as the property’s “tax base.” In addition, the assessed value can only increase annually by 2%. Often, when a homeowner sells their home, they lose this tax base. For seniors and the severely disabled, particularly those that have owned their homes for a long period of time, a move to a new home can mean a massive increase in their property tax base in what amounts to a “moving penalty.” The Property Tax Fairness Initiative protects these vulnerable Californians who are often on fixed incomes and can’t afford large property tax increases by allowing them to maintain a lower, fairer tax base when they need to move.
Many seniors cannot afford to move
Seniors often live in homes that no longer fit their needs because their homes may be too big or too far away from their families. When seniors want to downsize or move closer to their grandchildren, they could face property tax increases of 100%, 200%, or even 300%.
Many severely disabled trapped in inadequate homes
Severely disabled people may live in homes that are no longer safe or practical for them. Buying a more suitable home is often impossible because they could face significant property tax increases if they want to move, even if they move to a less expensive home.
Disaster victims are penalized
Today disaster victims like those recently affected by the massive wildfires and mudslides have arbitrary and limited protections. They may face a large increase in property taxes if they choose to move outside of their disaster-torn county.
Arbitrary and limited property tax protections
The current law requires severely disabled people, seniors and victims of natural disasters to navigate a confusing patchwork of county laws. Severely disabled people and seniors can currently transfer their tax base when they move, but only once and only within their own county or in 11 of California’s 58 counties that specifically allow it.
Give all seniors and severely disabled the right to move without penalty
The Property Tax Fairness Initiative eliminates the moving penalty to protect seniors (55+) and severely disabled people who want to move to safer, more practical homes or closer to their families. This initiative limits the property tax penalties they could face if they purchase another home in any county of the state while still ensuring they pay their fair share of property taxes.
Expand aid to help disaster victims
Under the Prop 5 initiative, a homeowner in a disaster area, whose home is destroyed, would be able to move anywhere in the state without paying the moving tax penalty.
Increase economic activity
Economic research has shown that this initiative will increase property sales and increase economic activity, providing new tax revenues to state and local governments.
Often there will be an increase in property tax revenues from the property sold by a senior or severely disabled person. The buyer of those properties is likely to pay higher property taxes, providing increased revenue to local governments and school districts.
Every property sold results in real estate transaction costs such as transfer fees, escrow costs, closing costs, and additional household spending like building renovations, new furniture, carpeting and other purchases, costs associated with moving, and increases in tax revenue.
Unlock the housing market
Too many Californians feel like they will never be able to become homeowners. Eliminating the moving penalty for the severely disabled and seniors will create more opportunities for homeownership for first time buyers and young families.
More information about Proposition 5 can be found online: https://voteyesonprop5.com/
The other measure of concern on the November ballot is Prop 10, the so-called “Affordable Housing Act,” that would actually make the housing crisis worse by repealing the long standing Costa-Hawkins Rental Housing Act, eventually allowing local governments to impose draconian rent control measures.
Proposition 10 will reduce availability of affordable and middle-class housing.
Academic experts from the University of Southern California, U.C. Berkeley and Stanford agree that it would drive up rents, while discouraging new construction and reduce the availability of affordable and middle-class housing. Even the state’s nonpartisan Legislative Analyst has found that passage of Proposition 10 would both discourage new construction and result in existing rental units being taken off the market, reducing availability of rental housing.
Proposition 10 will increase the cost of existing housing
Proposition 10 will cause homeowners to sell or convert rental properties into other more profitable uses, such as short-term vacation listing services like Airbnb. That would increase the cost of existing housing and make it even harder for renters to find affordable housing.
Proposition 10 will cost taxpayers
Proposition 10 will cost taxpayers hundreds of millions of dollars per year, reducing revenues available for education and public safety. The Legislative Analyst also said that Proposition 10 would likely reduce the value of rental properties and single-family homes, driving down local property tax revenues by up to hundreds of millions of dollars per year. Driving down home values will hurt middle-class families and will also reduce the funding available for vital services like schools, public safety, road repairs, education, and fire safety.
Proposition 10 will eliminate homeowner protections.
Proposition 10 repeals protections homeowners have enjoyed for over 20 years, and lets the government dictate pricing for privately owned single-family homes, controlling how much homeowners can charge to rent out their home – or even just a room. Proposition 10 might even lead to bureaucrats imposing oppressive surcharges when an owner takes a home off the rental market and chooses to occupy it.