California Realtors launch ballot drive to expand Prop. 13 for senior homeowners
Orange County Register
PUBLISHED: November 27, 2017 at 7:00 am | UPDATED: November 27, 2017 at 3:26 pm
An overhaul of Proposition 13, California’s landmark tax-control measure, could go before state voters next year under a plan adopted last month by the California Association of Realtors.
The trade group is launching a signature drive to put a new proposition on the November 2018 ballot that would expand tax breaks for homeowners age 55 and older or those who are disabled.
If passed, the proposition would allow senior and disabled homeowners to transfer their low, existing Prop. 13 tax assessment to a new home anywhere in the state, using the option as often as they choose and paying any price for their new home.
Realtors say the provisions would help older owners “locked in their homes” because they’re reluctant to give up low Prop. 13 tax assessments when buying a new residence. Realtors maintain at least 70 percent of seniors haven’t moved in 17 years.
“It’s to make it easier for senior homeowners who want to move but don’t want to see a big tax bill,” said CAR President Steve White, owner of two Keller Williams brokerages in north Los Angeles County.
“Many homeowners who have seen their homes appreciate over the years are discouraged from moving because they face a big property tax increase,” White added. “This will allow senior homeowners to sell their existing home and blend their current tax rate with their new home. And it will free up their homes for other buyers who haven’t been able … to get into the housing market.”
A nonpartisan state analysis concurred that the proposal would boost home sales in the state, but it might cost local governments as much as $2 billion a year in lost revenue — a finding Realtors dispute.
California’s city and county government associations have opposed similar proposals in the past, and the chief lobbyist for the California State Association of Counties argued the CAR proposal would blow a hole in city, county and school budgets.
Under Prop.13, a home’s taxable value is set to market prices every time it sells. But future tax hikes are capped at 2 percent a year after that, even when home price gains are in the double digits.
New ballot measures adopted in the 1980s — Props. 60 and 90 — gave homeowners 55 and older and those who are disabled a one-time opportunity to move without facing a tax increase. They can transfer their existing tax assessment to a new principal residence so long as it’s in the same county or in one of 11 counties that opted to accept “intercounty” transfers.
The new home also has to be of equal or lesser value than the old one.
Under the Realtor proposition, there would be no limit on how many times senior and disabled homeowners could transfer their old assessment. They could take that assessment to any of California’s 58 counties. And the new home could be more expensive than the old one.
If the price of the new home is higher than the previous one, the new assessment would be a blend of the old and new assessments, combining the old assessment with an additional assessment for the amount paid over that price for the new home. (See related box.)
If the new home is less expensive, the new assessment would be lower.
Four similar measures — two of them sponsored by CAR — have been introduced in the California Legislature since 2008, but all of them failed to pass. “They have opposed this, so we’re taking it to the voters,” White said.
The trade group plans to gather 1 million signatures by the March 26 deadline — 415,000 more than required just to be safe, said Alex Creel, CAR chief lobbyist. White said CAR is preparing to spend $20 million to $50 million on the ballot campaign.
White and Creel scoffed at the notion CAR is seeking to boost sales to increase Realtor commissions. The proposition is projected to increase sales by about 40,000 a year, which is “not an incentive,” given that CAR has more than 190,000 members and house sales alone already are projected to reach 422,000 this year, Creel said.
“Suggesting this is a Realtor full-employment act is like suggesting Tesla builds cars just to make money. They’re responding to a need,” White said. “Our members are responding to the need of senior homeowners for property tax bill protection.”
The Howard Jarvis Taxpayers Association, which originally backed Proposition 13, long has supported tax-base “portability” for seniors, said David Wolfe, the group’s legislative director.
“We’re completely in favor of the concept,” Wolfe said. “The simple fact is you’re churning up the housing market by making it easier for families to move out of their starter homes and giving millennials a chance to buy those starter homes.”
The nonpartisan Legislative Analyst’s Office agreed the Realtor proposition would boost home sales “by as much as tens of thousands per year.”
But the agency also concluded it would decrease property taxes by $300 million a year in the first years, and further decrease it by $2 billion a year over the long term. Currently, property taxes generate nearly $60 billion a year.
White, CAR’s president, said the Legislative Analyst’s assessment fails to take into account revenue from additional transactions or from increased tax assessments on the homes seniors would sell.
“Our own analysis shows this would be a net gain in tax revenues,” White said. “When people buy homes, they buy new cars, they buy furniture, they put in pools and new carpet. All those things that generate activity and sales tax.”
Since state law guarantees school and community college funding levels, a drop in property tax revenue could trigger an increase in state school spending, the legislative analyst reported.
“It’s not a simple tax benefit. It affects communities,” said Dorothy Johnson, a lobbyist for the California State Association of Counties. “CSAC is very concerned this proposal will reduce revenue that provides police, fire, social services and other criminal justice services.”
Johnson believes counties need to retain the authority to choose whether to accept lower property taxes from outside their borders since they know their local market conditions best. Almost 30 counties have voted against intercounty tax-assessment transfers in the past 29 years, Johnson said.
“I think that really speaks for the need for local jurisdictions to make the determination,” she said.