Here’s why I’m a YES on Prop 5 on the California ballot:
- The current law, Prop 13 from 1978, was designed to help homeowners stay in their homes. The worry at that time was that property tax increases would force many older Californians to lose their homes to the county. Prop 5 fixes an unintended consequence for many people who now cannot afford to move because of the increase in property taxes.
- Simply put Prop 5 will allow people to downsize. Let’s say you own a 4 bedroom house that you purchased 30 years ago for $120,000 that is now worth $500,000. Not only do you no longer have a mortgage, Prop 13 locked in your taxes so that you’re paying a tax rate far less than your current homes value. If you’re on a fixed income it’s perfect as long as you never move. Prop 5 will allow you to profit from the sale of your home, move into a home that fits your current needs, AND take much of your current tax rate with you, making it possible for you to downsize from that 4 bedroom house to the 1 bedroom condo you really want.
- Prop 5 will ultimately free up inventory for younger families. This is a real problem in Rolando where I’d estimate at least 50% of bedrooms don’t have an occupant. (Their kids grew up and moved away.) Since people over 55 can’t currently afford to downsize because the increase in taxes will eat away their savings, which locks them into a house larger than they need/want, their inability to move is actually locking young families out of the neighborhood simply because there’s no inventory.
- Creating tax portability for people 55+ will help with the statewide housing crisis. Yes, we need to build more housing, but we also just need to help get people into the right-sized property, too.
- I think this will ultimately generate more revenue for the state and counties. Think about it… if someone is currently paying $800/year for property tax on a $500,000 home and they move to a $300,000 condo, their property taxes would actually go down. But the flip is also true. A person under 55 who buys the house for $500,000 would start paying a little over $5,000 a year for a property that the county used to collect just $800 on. Factor in that people over 55 don’t live as long as someone buying that home who is 35 and you’ll actually see more transactions on both properties and more overall revenue on both the original home and the condo.
- More fluidity in the California housing market is good for everyone.
Learn more about Prop 5 here