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info@opendoormiami.com
info@opendoormiami.com
The California Association of REALTORSreg; CAR is attempting to qualify a ballot initiative, The Property Tax Fairness Initiative, that will restructure the way property taxes are calculated for buyers over the age of 55 and also the disabled and/or natural disaster victims. In many cases REALTORSreg; are already circulating petitions asking for ballot-placement of the initiative, and, in short order, professional signature-gathering organizations will be engaged as well.
CARs approximately 200,000 members have been assessed 100 each in support of the effort; and there are expectations that the Associations substantial reserves will also be tapped in efforts to support the initiatives passage.
What would this accomplish and why is it needed? In what follows I will seek to summarize CARs answer to those questions. First: the why?
As is well-known, California is currently experiencing a shrinking inventory of housing available for sale. This lack of supply has driven up prices, which makes it extremely difficult -- in many cases, impossible -- for first-time buyers to enter the market. In many cases, it also makes it difficult for move-up buyers to find replacement property.
There are, no doubt, multiple causes for this, but, no doubt, a major one is this: nearly 75 of California homeowners 55 years of age and older have not moved since the year 2000
Why? Because of the way property taxes are calculated under Californias Proposition 13. For tax purposes, properties are valued on the basis of purchase price, not current market conditions. Example: Suppose I bought my house for 600,000 a few years ago; and that my neighbor bought the same model -- as identical as can be -- in this heated market for 800,000. My tax will still be calculated on 600,000, whereas his will be based on 800,000.
CAR says, "A large part of the reason why [55 and overs are not moving] is that, even if they want to downsize or move closer to family, the prospect of a property tax increase of 100, 200, or even 300 percent, effectively locks our parents and grandparents in their homes." Thus, CAR maintains, "hellip;The Property Tax Initiativehellip;will help these homeowners to sell their current homes and move without being subjected to a what is effectively a massive "moving penalty."
How will it help? By modifying current law to expand the conditions under which those over 55 would be allowed to transfer their current tax base -- based on their original purchase price -- to a replacement home that they are purchasing.
Currently there are only limited conditions under which someone over 55 may transfer his or her old tax base to a newly purchased home. The Initiative would expand this. "C.A.R.s Property Tax Fairness Initiative would allow homeowners 55 years of age or older to transfer their Prop. 13 tax base to a home of any price, located anywhere in the state, any number of times."
CARs talking points offer two examples of what would happen if the Initiative should pass.
Buy Up Example
The 100k difference between the 300k sales price and the 400k purchase price is added to the original Prop.13 property tax base of 100k for a new Prop. 13 tax base of 200k. The buyer still pays their fare share of taxes but isnt blocked from making the move.
Buy Down Example
If a homeowner buys a less expensive home, the property taxes will be proportionally the same as for the original home. In other words, if the tax base was one-third of the sale price, the new property tax would be one-third of the new sale price. Buying down reduces the homeowners annual property tax bill.
Among the objections raised to the Initiative is that it will reduce revenues to local governments. In response to this, CAR says: "The revenue loss is the result of a lsquo;static analysis -- it only looks at the revenue lost, not the revenue gained which a lsquo;dynamic analysis would do. All buyers of homes formally owned by a senior homeowner will have the home reassessed to market value and pay property taxes based on the reassessed value."
Lots to think about. Theres an election coming.
