Housing in Westlake
Housing in Westlake

Will California Get Desperate Enough to Mess With Proposition 13?

Depending on where you stand politically, Proposition 13 is either the cause of or solution to all of California's problems.

The 1978 ballot measure places strict limits on property tax increases by locking in a home's assessed value at its sale price. That means that if you bought a $400,000 house 12 years ago (lucky you!), you're still paying taxes today on a $400,000 house — even though it's worth $1.2 million.

Proposition 13's supporters say it protects middle-class homeowners by ensuring predictable property taxes; its opponents say it has decimated the state's tax base and budget for public education. But since it passed, it's been untouchable. As Gov. Jerry Brown said in 2014: "Proposition 13 is a sacred doctrine that should never be questioned."

But these are desperate times for the great state of California. With the Republicans in Washington poised to enact a tax cut that largely benefits corporations and millionaires, some are wondering if California should be taking matters into its own hands by rolling back the once-sacred Proposition 13. A group calling itself the Make It Fair coalition wants to repeal the parts of Proposition 13 that protect commercial and industrial properties from tax increases (residential and agricultural properties would be untouched).

The group hasn't said whether it intends to try to get its proposal on the 2018 ballot.

"There’s no decision that’s been made about whether or not a ballot measure is going forward," says Mac Zilber, Make It Fair's political consultant. "We only want to move forward if we feel like we’re in a position to change this once and for all. Whether that is 2018 or legislatively, we want to see what the best pathway is."

Another proposal, by the California Association of Realtors, would expand Proposition 13, allowing homeowners who sell their house and buy a new one to carry over part of their property tax savings to their new home.

The idea is actually an expansion of an expansion. In the 1980s, people started to worry that Proposition 13 was keeping senior citizens who wanted to downsize from selling their homes and moving into condos. So voters passed Propositions 60 and 90, which allow anyone over 55 who's buying a new home of equal or lesser value to keep some of the Proposition 13 tax savings.

Now, the California Association of Realtors wants to extend that benefit to people of all ages, buying new homes of all values.

The group's top lobbyist, Alex Creel, told the Los Angeles Times: "A lot of people kind of feel locked into their properties. ... This will free up those folks." (The association did not return our phone calls requesting a comment.)

The idea is a pricey one. According to the state's Legislative Analyst's Office, the proposal would cost cities, counties and school districts "hundreds of millions of dollars per year in the near term, growing over time to a few billion dollars per year."

Lenny Goldberg, executive director of the California Tax Reform Association, who's part of Make It Fair, says there's a much bigger problem with the proposal.

"That is one of the worst initiatives I’ve ever seen," Goldberg says. "Here’s the deal: It completely screws young people and new home buyers."

He adds: "Not only does it benefit longtime homeowners who already benefit the most from Proposition 13, it freezes out new home buyers."

Why? Because longtime homeowners would be able to afford a higher mortgage, since they'd be saving money on property taxes. First-time home buyers, by comparison, would have less purchasing power.

"It makes housing less affordable rather than more affordable," Goldberg says. "What a really bad idea."

Richard Close, president of the Sherman Oaks Homeowners Association (who helped pass Proposition 13), disagrees with Goldberg's analysis.

"The biggest problem that first-time home buyers have is that too many people refuse to sell smaller homes, which is usually what they're looking for," Close says. "People are not selling their homes. The prices of homes depends on supply and demand. This would have the benefit of making it easier to sell and buy homes. So I favor the concept."

He adds: "My concern is that once you start tinkering with Proposition 13, what is the next change gonna be? Would this measure be an excuse for other changes that may not be so beneficial?"

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