Older California residents who move could save thousands of dollars in property taxes under an initiative that has qualified for the statewide November ballot.
The initiative – backed by the California Association of Realtors – would change a key provision of Proposition 13, the state’s 40-year-old property tax law that ties a home’s assessed value to its sales price and caps the property tax rate at 1 percent of that value.
Under the initiative, people over the age of 55 moving within the state could pay property taxes based on the sales price of the home they are leaving. The new tax structure would be determined by a complicated formula that takes into account the values of the home someone is selling and the home they are buying.
For example, a resident lives in a home with an assessed value of $200,000 and sells that home for $400,000. They then buy a different home for $1 million somewhere else in California.
Under the current structure, their property tax bill for the new home would be based on the $1 million purchase price.
But under the proposed structure, the new tax rate would be determined by adding the assessed value of the old home ($200,000) to the difference in value between the sale price of the new home ($1 million) and the sale price of the old home ($400,000). In that case, the property tax bill would be calculated at a home value of $800,000, not $1 million.
The initiative also gives older homeowners a break if they move to a cheaper area. If that same resident moved to a $300,000 house in Redding, the property would be assessed at a value of $150,000 under the formula - half what it would be otherwise.
The secretary of state's office said 585,407 signed petitions were required to qualify the initiative for the Nov. 6 ballot.
Supporters have said it could help with the state’s housing crisis by encouraging older residents to sell their homes, freeing up much-needed housing inventory.
A representative for the California Association of Realtors did not return a message seeking comment. When the group proposed the initiative last year, Alexander Creel, the association’s senior vice president for governmental affairs, said many people were "sitting on their properties with the original Proposition 13 tax base on them."
“They really would like to move on, and they’re not so in love with their house anymore," he said. "But they are in love with their property taxes.”
A summary of the initiative by the Legislative Analyst's Office estimates the initiative would result in property tax revenue losses of around $150 million for cities, counties, schools and special districts that rely heavily on that funding to pay for core services. The loss to those agencies could grow to $1 billion a year.
The initiative is likely to be opposed by groups representing local governments and districts around the state.
The California State Association of Counties’ board voted to oppose the initiative on Thursday. A staff report to the CSAC board said property taxes account for roughly 20 percent of revenue for California counties.
Dorothy Johnson, a legislative representative with CSAC, said the initiative "would be a direct threat to our revenues that support almost 40 million Californians."
"Counties are entrusted with serving the most vulnerable of Californians," she said. "We provide direct services in their times of greatest need on a day-to-day basis."