What you need to know about Proposition 5: Property tax break for seniors
If you’re looking for affordable housing in California these days, you’ll need a lot of luck, thanks to sky-high prices and a shortage of homes for sale.
This is especially true for empty-nesters whose children have grown and moved on. They would downsize, sell their three- or four-bedroom home and move closer to their kids and grandkids. But they face a massive moving penalty in the form of a property tax spike. So instead of selling to a young family, many older homeowners stay put to keep their property tax bill low.
Voters can abolish the moving penalty while ensuring people pay their fair share of taxes by passing Proposition 5 on Nov. 6.
Proposition 5 protects people 55 and older by allowing them to transfer their property tax protections if they move. The measure also helps the severely disabled and victims of natural disasters. In a year when wildfires have caused overwhelming housing losses, we should do all we can to help disaster victims; it’s punishment enough to lose one’s home without the added insult of a drastic moving penalty.
The lack of housing impacts everyone. Too many people find themselves priced out of the market. California’s homeownership rate is barely 54 percent. In Sacramento, the median home price is about $370,000, up nearly five percent from last year.
Proposition 5 unlocks the housing market, creating more turnover of single-family homes in established neighborhoods and providing housing opportunities for young families. These home sales would revitalize neighborhoods as well as generate higher tax revenues for school districts and local governments, because houses would be assessed at a new, higher rate.
Proposition 5 ensures that seniors, the disabled and disaster victims still pay their fair share of taxes. Under Proposition 13, a home’s assessed value at the time of sale is calculated at 1 percent, with annual increases of no more than 2 percent. While that’s been a safeguard to longtime owners, it has also created the lack of mobility we see today.
Here’s how Proposition 5 works. If a senior sells a house assessed at $300,000 for $700,000 and buys a new home for $900,000, their new tax bill would be $5,000. Property tax fairness is reached by adding the original assessment to the difference between the two sales prices. Without Proposition 5, the bill would be $9,000. A tax bill of that size prevents homeowners from moving.
Proposition 5 replaces an inconsistent, confusing patchwork of property tax laws with simple fairness. Homes get reassessed, homes are turned over and neighborhoods stay strong.
California should respect its seniors, the disabled and disaster victims by supporting their ability to make prudent housing choices. By eliminating the moving penalty, Proposition 5 provides both freedom and fairness.