“California’s housing crisis, largely a consequence of housing production insufficient to keep pace with population growth, has made it hard for many aspiring homeowners to find a place to call home. At a time when legislators and activists are considering a wide range of options, from rent control to streamlining housing development, it is important for the state to use its existing housing stock as efficiently as possible. One long-recognized issue is the fact that many long-time homeowners remain in homes purchased long ago out of concern for sharp increases in property taxes should they move to a new property. Thanks to Proposition 13, property taxes are limited to 1 percent of the assessed value of a home and increases are capped at 2 percent annually.
For Californians who purchased their homes several decades ago, the advantage is obvious. Having purchased their homes at times when costs were low, long-time homeowners also benefit from lower taxes than the next buyer. Thus, Prop. 13 and the nature of the real estate market in California have yielded the unintended consequence of keeping long-time homeowners in their homes, denying aspiring homeowners from what could be starter homes. Proposition 5, backed by the California Association of Realtors and the Howard Jarvis Taxpayers Association, would help fix this problem.
Under current law, homeowners who meet certain criteria — age 55 or older, severely disabled or have property impacted by a natural disaster or contamination — are allowed to carry over their current property tax base with them to their next home. For many, this can make thousands of dollars of difference in property taxes.
Prop. 5 would remove various limitations on when such transfers are allowed. It allows eligible homeowners to transfer their property tax base anywhere in the state, lifts the limit on the number of transfers allowed and slightly adjusts the transferred tax based on whether the new home is more or less expensive. While it’s true this reform will benefit many wealthier Californians, the tens of thousands of moves estimated by the legislative analyst to result from Prop. 5 is sure to free up critically needed housing stock.”