The California Association of Realtors has introduced a bill which would overhaul critical provisions of Proposition 13. Proposition 13 currently provides important limitations on property tax assessments for qualified real estate.
The proposed changes could greatly impact Newport Beach senior citizens who have benefited from property tax stabilization over the decades since Proposition 13 was first enacted. It is important to understand the proposed changes in order to prepare for changes in the Orange County housing market that are likely to occur if the measure passes.
The History of Proposition 13 - And How It Could Be Changed
Proposition 13 was passed by the voters of California in June 1978. According to California Tax Data, the measure effectively reduced more than half of all property tax liability across the state. This was done by capping the property tax assessment at one percent of the acquisition value. Annual increases were also capped at two percent annually. The Proposition did, however, provide for a reassessment of taxes at a property's fair market value any time a sale took place. This gave many homeowners incentive to stay in their homes when they might otherwise have sold.
Voters recognized that maintaining property tax caps on a single property would discourage homeowners from selling, and contribute to California's chronic housing shortage. Propositions 60 and 90 were passed in the mid-'80s as a result. These propositions allowed homeowners to transfer their Proposition 13 tax caps to another home in limited circumstances. The idea was that portability of these protections would encourage homeowners to sell (particularly "empty-nesters" and elderly homeowners who were looking to downsize). Unfortunately, as Builder Online reports, this did not actually happen. It seemed that the limitations were too restrictive to actually promote home sales.
Seeing this problem, the California Association of Realtors has launched an initiative to expand the portability of Proposition 13. Their proposed changes would expand portability to any home in the state of California. They would also no longer require buyers to purchase a home of equal or lesser value in order to transfer their Proposition 13 protection. The Association has reportedly already gained enough signatures to get the initiative on the ballot. Voters will decide the fate of these changes in November 2018.
How Proposition 13 Changes Could Affect Newport Beach Homeowners
At first glance, it would appear that the protections of Proposition 13 will largely benefit senior citizens. Because Proposition 13 provides lower taxes the longer a home is owned, it largely protects senior citizens (as they tend to have homes which have been owned the longest). Increased portability of Proposition 13 protections can give senior homeowners more housing options with respect to their real estate taxes.
Of course, no law is without pros and cons. The portability of Proposition 13 may make home prices elsewhere so affordable that seniors feel forced to leave their homes. Then again, municipal and local governments must realize the lost revenue from property taxes in some form. This can lead to heavy sales or county taxes. These, too, can make it cost-prohibitive for senior citizens to stay in their homes.
A Newport Beach real estate attorney can help senior citizens protect their housing rights under Proposition 13 and other applicable laws. Contact the Law Offices of Daniel C. Carlton and find out how we can help you.