Blogging Bayport Alameda

December 12, 2017

Prop 13 reasons why

Filed under: Alameda — Lauren Do @ 6:02 am

From the Mercury News:

The proposal from the California Association of Realtors would expand Proposition 13, the landmark constitutional amendment passed by voters in 1978 that has kept homeowners’ property taxes artificially low over the years, even as their home values have doubled or even quadrupled. Under the initiative, homeowners who are over 55 or severely disabled would be able to keep those lower tax obligations for life, regardless of how many times they move, as long as they stay in California.

The proposal has touched a nerve in a state profoundly shaped by Proposition 13, which buffered homeowners from sharp tax increases while slashing revenue for schools and public services. Proponents argue that it could help solve the housing shortage by allowing empty-nesters to leave their long-time family homes without a steep tax hike, clearing the way for new buyers with children to move in. But many are wary of the idea, predicting it will only widen the generational wealth gap at the expense of public schools, local services and the poor.

“This seems like, ‘Let’s solve Prop. 13 by having more of it,’ ” said Laura Clark, executive director of San Francisco-based YIMBY Action, a pro-development, millennial-led group that has joined others in calling for reforms of the decades-old property tax law. “We’re talking about, once again, another tax giveaway to people who are wealthy.”

The Legislative Analyst’s Office estimates the annual losses in tax revenue from giving older owners a break would grow to $1 billion or more for schools and at least $1 billion for cities and counties. And that’s even after taking into account the higher taxes paid by those buyers who would presumably purchase some of the new inventory.

Because, we haven’t done enough to let those with legacy Prop 13 homes and tax rates beggar our local governments and schools.  More:

The initiative “turns the logic of Proposition 13 on its head,” said Thad Kousser, a California politics professor at UC San Diego. “This is not about keeping Grandma in her house, which is what Proposition 13 was all about. It’s about people trying to move up.”

The measure could appeal to young families frustrated by the dwindling supply of homes for sale, Kousser said, but opponents could make headway by arguing that the plan is just another tax cut for older homeowners — who will already get a huge windfall from the sale of their appreciated home. “`Why should we be protecting people who are moving up in the world at the expense of people who are trying to get their start?’” he said. “I can write those commercials.”

If the Congressional Republicans get their way rather than doubling down on Prop 13, we should be looking at the opposite as suggested by this opinion piece in the LA Times:

The natural response to this turn of events would be to rebalance the revenue mix. California Democrats could offer a bargain: Lower personal income tax rates combined with a property tax rate more in line with the rest of the country. Of course, that would require voters to first repeal Proposition 13, which since 1978 has severely limited property taxes.

The result could be highly progressive. If income tax cuts are on the first $50,000 of income, everyone would benefit, but the main winners would be the working poor and the middle class. Plus, tax increases on property do not directly affect renters, who are, in general, lower income-earners than homeowners.

Because property taxes remain deductible, Californians likely would save money. And the new tax system would be more predictable, less reliant on volatile income and more on home values, which outside of the historic housing bubble of the 2000s are generally more stable.

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35 Comments »

  1. For those families with aging parents on a fixed income, allowing seniors to keep their property tax rate when they sell the family home makes sense. It accomplishes several things:

    Here’s a few:
    1. Increases the supply of homes for young families
    2. Makes it more affordable for seniors on fixed incomes to purchase another home
    3. The reduction of property tax helps to offset medical expenses (costs that are increasingly rising)
    4. Another tool that helps families plan and support their aging parents on a fixed income as they give up the family home and transition into smaller housing

    Comment by Karen — December 12, 2017 @ 7:42 am

    • People don’t know that when Texas switched from income based to property based, old people lost their homes in droves. Alameda should be sensitive to this given how many seniors here would be displaced given the current home ‘values’. Who will take these people in? Where will they go? Have we become San Francisco? Seniors need to be near their friends, family, health care and other services to survive.

      Comment by Retiredteacher — December 12, 2017 @ 8:03 am

    • Regarding Point 1.

      Prop 13 as it stands now has led to such a massive decrease in supply of homes for young families, I don’t see how this expansion is going to make a dent. Most single, married, or widowed empty nest seniors will continue to live in their paid-off, family-scale homes while paying ultra-low property taxes relative to anyone who recently bought in the neighborhood.

      What about a young family, 55 bidders that can outbid them in direct proportion to their P13 tax reduction advantage? This could plausibly allow the >55 bidder to add up to $100,000 to their bid while keeping the same PITI payment as the young family they are competing against.

      Comment by brock — December 12, 2017 @ 11:31 am

      • Something in the wordpress code mangled that first sentence. “…young family, under 55, bidding on a house but competing against over 55 bidders…”

        Comment by brock — December 12, 2017 @ 11:33 am

        • I’m not convinced senior citizens would be interested in the same properties as young families. My parents’ generation (mid-70s to early 80s) tend to want to downsize, looking at 1 or 2 bedroom condos in walkable neighborhoods close to shopping centers that have grocery stores. My parents & their friends all complain about how crowded the roads have become and their need to drive pretty much everywhere (they live in suburbs) and most of them seem aware that eventually, they won’t be able to drive. I think part of what keeps my own parents in their home is that they are wary of steep HOA dues on top of the higher tax rate they would have to pay.

          Comment by Kristen — December 12, 2017 @ 4:23 pm

        • Newsflash to Kristen: in California, many young families are forced to consider 2 bedroom condos (and many are looking at 1 bedrooms, maybe with an extra office nook for the kid) when looking to buy their first property.

          Families also want to be in walkable neighborhoods and not be forced to the exurbs. I’m not sure why you think they are differentiated from seniors in this aspect. Nothing worse than buying a new-family home, but having to sacrifice 2+ hours a day commuting that you could be instead spending with your kid.

          Comment by brock — December 13, 2017 @ 12:28 pm

        • Many seniors’ incomes are a small percentage of working folks. We live in a two bedroom small home and are considered low income. Even with investments earned by years of no furniture or heat, literally, our income is one third of what it was at the height of our earning power, and we were a teacher and a journalist, not techies. Don’t make this seniors versus young families. We’re in the same boat for different reasons. Neither group is the problem nor should be the solution. I draw your attention to the current tax legislation.

          Comment by Retiredteacher — December 13, 2017 @ 12:53 pm

      • Where are the seniors supposed to go when they vacate their long owned family homes? What do you think they can afford locally? Nothing.

        Comment by Retiredteacher — December 13, 2017 @ 6:23 am

      • You obviously don’t understand this demographic very well. There is a transition that takes place as seniors age — which is one reason for the new Universal Design ordinance that was recently passed. It requires developers to design their units to accommodate seniors.

        This is a win win for both young families and seniors — allowing seniors to give up their family home to young families in exchange for letting them keep their original property tax rate so they can afford to stay close to their friends, family, and community. The bidding wars you mention are due to the lack of housing supply.

        To that point, seniors need to be more compassionate and understanding about the lack of housing for young families. It works both ways!

        Comment by Karen — December 13, 2017 @ 8:40 am

        • Not as good as getting rid of Prop 13 altogether. That’d give seniors an incentive to downsize without all this monkeying about. To mitigate cashflow issues, collect taxes on liquidation of the estate.

          Comment by BC — December 13, 2017 @ 10:02 am

        • Please cite your sources and personal expertise for your superior knowledge relative to mine with regards to the CA senior homeowner demographic. My observations are based on my personal parents, in-laws, grandparents, neighbors, parents of friends, and various co-workers and colleagues.

          Comment by brock — December 13, 2017 @ 12:23 pm

      • Newsflash to Brock: You didn’t tell me anything I don’t already know. I am in my forties, am a bay area native, and have a young family. Your patronizing reply suggests I wrote that families are not interested in walkable communities close to their jobs, and thus should be exiled to the far exurbs. I wrote nothing of the sort. (And for the record, our 4-person family bikes, walks, uses public transit, and has only one car. So we walk the talk.)

        Also, it’s laughable to use the phrase “many young families are forced to consider 2 bedroom condos” because it shows your level of privilege. To be “forced” to consider a two bedroom! Oh my! Well, my family of origin was in a two bedroom– two adults, two kids– until I was in high school. We never considered ourselves deprived. When we moved to a three bedroom it was an almost unimaginable luxury. My parents (neither were in tech– a secretary and a maintenance worker, neither college graduates) still live in that house and it is too big for them now. It’s on the peninsula, in close proximity to a public school the techies who now live in the neighborhood hold their noses at (it rates less than a 7 on Great Schools– the horror! the horror!) but it was good enough for us growing up. They are also walking distance to a Caltrain station, which many of their neighbors could use but shun for commuting in the private space of their SUVs. (Perhaps walking half a mile to the station is beneath them, or perhaps because they’ve shunned the public school that is two blocks from them, they need the extra time to drive their kids to the private school on the way to work. Hmm.)

        I’m sure a young family would love their house, and one will buy it someday. I hope the rules allow my parents to move to the east bay to be closer to us, because buying a property of same or lesser value in their county doesn’t make sense. But if it comes at such a high price to California (see M.McMahon’s reply) then it certainly isn’t worth it. What needs to happen is building more housing for what now passes as “lower middle class” in the bay area– households earning $50k – $100K. What we see is high-end condos and town homes added to the market and we’re told this will “free up” housing stock for those who didn’t go into tech or become corporate lawyers. So far, this doesn’t seem to be happening. I look forward to when it does, because too many of my friends have had to move away, disrupting the fabric of our community and our schools.

        Comment by Kristen — December 14, 2017 @ 9:37 am

        • “I’m not convinced senior citizens would be interested in the same properties as young families. My parents’ generation (mid-70s to early 80s) tend to want to downsize, looking at 1 or 2 bedroom condos”

          How are these two sentences to be interpreted other than “Seniors are interested in 1 or 2 bedroom condos, which I’m not convinced are the same properties young families are interested in”? In other words, “I don’t think families are interested in 2 bedroom condos”?

          Comment by brock — December 15, 2017 @ 9:16 am

    • Regarding point 2, 3, and 4.

      It’s my understanding that existing Prop 13 law already allows this to happen a single time, as long as the new home is purchased in the same county or counties that have inter-county transfer agreements.

      What is the supporting argument that we should subsidize seniors to do this as many times as they want and wherever they want. Note other commenters have said the support for this is to keep seniors near their friends and families.

      Comment by brock — December 13, 2017 @ 12:38 pm

      • Health care and social services. Hospitals. You know, minor details like meals on wheels and doctors for people who can’t drive any more, and there are plenty. Friends and families are often caregivers for people who can’t afford paid care. Seniors can’t live in the far burbs if they can’t drive.

        Comment by Retiredteacher — December 13, 2017 @ 12:48 pm

        • Retiredteacher: please read my post again. Existing P13 laws allow seniors to do a one-time move to a new property of equal or lesser value in the same location.

          My question is why we need to change the laws to allow them (A) to do this multiple times, and (B) to purchase property wherever they want, i.e., far away from where they live now close to their friends and families.

          The proposed changes to P13 that we are discussing are (A) and (B).

          Comment by brock — December 13, 2017 @ 1:00 pm

        • RT: Many seniors with needs like what you describe are better off not living in a SFH, especially one that has more than one level. They can, and often need to, downsize and live in more manageable quarters or assisted living. Proceeds from selling a 1.0 to 1.5MM home go a long way toward that.

          P13 is already an unjust gift to the superannuated, who enjoy services that their newer neighbors pay dearly for. Just about every block in this town has an example of this injustice. On mine there are new neighbors who pay approximately 18M per year, and some older ones who pay about a tenth of that for homes of similar value.

          This proposed addendum to the law is nothing more than another giveaway to an age group that is already the wealthiest in our society and that already eats more than half the federal budget in entitlements.

          Comment by dave — December 13, 2017 @ 5:59 pm

        • And even more if you’re a veteran.

          Comment by Jack — December 17, 2017 @ 8:20 pm

      • Brock, you are right. I am eligible right now to downsize and keep my prop 13 low property tax assessment. I am a senior and don’t understand why we need even more giveaways to seniors. I think I only need to downsize once. It is young people who are having the hard time finding housing.

        Comment by Kevis Brownson — December 18, 2017 @ 12:29 am

  2. My reply was meant for Brock

    Comment by Karen — December 13, 2017 @ 8:41 am

  3. The fiscal impact statement for a California ballot initiative authorized for circulation is prepared by the state’s legislative analyst and director of finance.

    Annual property tax losses for cities, counties, and special districts of around $150 million in the near term, growing over time to $1 billion or more per year (in today’s dollars). Annual property tax losses for schools of around $150 million per year in the near term, growing over time to $1 billion or more per year (in today’s dollars). Increase in state costs for schools of an equivalent amount in most years.

    San Diego Union-Tribune (November 28, 2017) called for more thorough study on the initiative: “The Legislative Analyst’s Office warns that the measure could eventually lead to $2 billion or more in lost annual tax revenue. Realtors challenge this assertion and point to the new revenue that would come in as older homes worth $500,000 and more are finally taxed at their current value. This question needs more thorough study because the basic concept of the Realtors’ proposal makes considerable sense — at least if it can’t be readily gamed by wealthy people to limit their property taxes. Retirement security is a huge issue for millions of aging Californians on fixed incomes. Protecting this growing group is a good idea.

    So the question is: does this initiative help with housing supply or just create most transactions for real estate agents?

    Comment by Mike McMahon — December 13, 2017 @ 7:54 pm

    • Increases in the seller’s locality, decreases in the buyer’s.

      Comment by dave — December 13, 2017 @ 8:19 pm

  4. Brock, who are we to decide where one’s family lives? Kristen just gave a real life example of her wanting to have her parents move from the peninsula to the east bay to be closer to her (family).

    Comment by Karen — December 14, 2017 @ 6:30 pm

    • Oh my god enough with the fake libertarian concern. Given two families in the housing market, a senior couple and a young first-time buying family, this proposed modification to P13 (further) tips the scales in the direction of the senior couple.

      It’s clearly not a question of “deciding where one’s family lives”. The real question is “who are we to create more laws that give a economic advantage to one family over another”? That’s exactly what this proposed modification does.

      Comment by brock — December 15, 2017 @ 9:22 am

      • There’s nothing fake here— it’s called empathy.

        Comment by Karen — December 15, 2017 @ 6:25 pm

      • Equal means different things to different people. As a former teacher, equal education meant giving kids resources, often different, to reach the same goal. Not equal resources. Where do you suggest we go?

        Comment by Retiredteacher — December 17, 2017 @ 12:48 pm

  5. There is only one thing you can depend on from anything promoted by the California Association of Realtors, that it is good for realtors. If it’s good for anyone else it’s purely happenstance. I can’t fault them for that, they are a realtor trade group whose job is to make money for realtors. Once again though, a private group is going to use the proposition system to try to bamboozle people into voting against their own best interest. The California Association of Realtors knew it could not get this approved in Sacramento.

    Comment by Were-Realtor — December 14, 2017 @ 6:36 pm

    • I don’t get your argument. The realtor will make a commission whenever “grandma” decides to sale – whether it be when she’s forced to move to a Assisted Living Community, or when she moves closer to her children (in whatever county they reside).

      The winner is everyone:
      1. Grandma’s large family home is now available to a young family
      2. Young families are good for the local economy
      3. Grandma gets to move closer to her children
      4. The grandchildren gets to spend more time with grandma
      5. Her children are there for grandma as she ages and needs help getting
      around
      6. Oh, yeah and the realtor makes a commission

      Comment by Karen — December 15, 2017 @ 7:12 am

      • Karen, this benefit is already available in our law. My family home can be sold and be available to a young family, when I downsize and buy a smaller home of equal or lesser value. What this proposal appears to do is allow me to buy a more expensive home than I already own, and keep my low assessment. And also, to do it multiple times in multiple sales. Why should we allow such a huge tax giveaway to one age group when property tax supported services need funding? It only increases the unfairness of the property tax and unfairly burdens young families with paying a bigger percentage of it.

        Comment by Kevis Brownson — December 18, 2017 @ 12:35 am

        • You highlight one thing I don’t like about the bill, and that is the provision that would allow seniors to use this benefit multiple times. I think this was a mistake adding this to the bill. It should be a one time benefit.

          But I like the provion that it would allow seniors to move to a different county and keep their rate.

          I also don’t agree that downsizing means “lesser value”. I know of two seniors that moved from Sacramento to the Bay Area where prices are higher. And they chose to live in a multi family building with elevators.

          In Alameda our multi family buildings will come with universal design and the ability to age in place which will be a big appeal to seniors looking to sell their family house and move to a smaller space. New construction mostly always costs more.

          Comment by Karen — December 18, 2017 @ 8:44 am

  6. I hope to leave my “large” 2/1 feet first. I can’t afford Assisted living and don’t have children to take care of me. The total disregard of some people for the specific needs of the aging will come around and bite them in the behind one day.

    Comment by Retiredteacher — December 17, 2017 @ 12:46 pm


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