Recently divorced and raising a teenager on her own, Vicky Campbell moved to San Diego because of the weather but it didn’t hurt that she could bring her low property taxes with her.
Campbell’s house in the San Francisco suburb of San Ramon was taxed based on the $220,000 she paid 26 years earlier, well below the $729,000 that her new house cost in the San Diego suburb of Chula Vista. As a result, her annual tax bill stayed below $3,000 instead of jumping to about $8,000.
“It wasn’t a deciding factor, but it sure made me happy,” says Campbell, a 68-year-old real estate broker.
Proposition 5 on the Nov. 6 ballot would sharply expand the tax benefit for homeowners over 55 years old, the severely disabled and natural-disaster victims. According to findings of the state’s nonpartisan Legislative Analyst’s Office, it would also be a big drain on schools and local governments, which depend heavily on property tax revenue.
Under current law, seniors and near-seniors can transfer tax assessments if their new homes are worth the same or less than the ones they sell, and they can only do it only once. Also, counties can decide whether to accept out-of-county transfers; only 10 of 58 do.
The ballot measure would allow over-55 homeowners to transfer their assessments to any new home — no matter what it costs — anywhere in the state and as many times as they wish. It would also increase the tax break for homeowners who move to less expensive homes, like Campbell.
The Legislative Analyst’s Office concluded that schools and local governments would each probably lose more than $100 million in property tax revenue a year initially and that, over time, those losses would reach about $1 billion a year for each. About 85,000 homeowners over 55 who move every year without the tax break would pay much less.
Supporters say passage will end a “moving penalty” on older people and encourage more to sell, helping alleviate California’s housing shortage. The Legislative Analyst’s Office estimates home sales would increase by tens of thousands a year.
The California Association of Realtors, the measure’s main proponent, funded a consultant’s report that contends Proposition 5 would have much less impact on state and local governments, resulting in annual losses of $120 million to annual gains of $200 million.
Opponents challenge the assertion that Proposition 5 will spur construction and warn about a hit to public services.
“We’re not being chicken little by saying the sky is falling,” said Dorothy Johnson, legislative representative for the California State Association of Counties.
As a result of Proposition 13 passed in 1978, a home is typically taxed at 1.1 percent of the purchase price and increases no more than 2 percent a year. Prices have risen much more, sticking many homeowners with much higher taxes when they move.
Ann Throckmartin, a 76-year-old real estate broker whose husband is retired, said passage of Proposition 5 would be a deciding factor in whether to sell the couple’s San Diego home of the last 45 years for one in a more expensive neighborhood downtown or closer to the beach.
“I wish this would hurry up,” she said. “We want to move.”
Supporters raised $13.2 million as of Sept. 25, mostly from the Realtors, whose members would benefit from more sales commissions. Opponents raised $1.7 million, mostly from the Service Employees International Union and California Teachers Association.
The Realtors recently filed notice with authorities that it will try again on the November 2020 ballot. Chris Carlyle, its legislative advocate, said it was “just to signal to our opponent we are not going away. If we lose this time, we will be back in 2020.”
Associated Press writer Sophia Bollag in Sacramento, California, contributed.