November 2018 Ballot Initiative Offers Property Tax Relief to Seniors Who Want to Sell Their Homes
Unlocking inventory, increasing the number homes for sale and creating more homeownership opportunity for younger buyers is the goal behind the California Association of Realtors (C.A.R.) 2018 Property Tax Portability Initiative. Realtors throughout California are collecting signatures to get this Initiative on the November 2018 ballot. It's my understanding that the Initiative is supposed to remove the barriers that keep Seniors 55 and older from selling their homes. That would mean allowing Seniors to carry their property tax base to a replacement property anywhere in California and removing the restriction that the replacement property be of equal or lesser value.
Here’s the story behind this initiative. Seniors throughout California (Marin has one of the largest number of homeowners over 55 in California) who are on a fixed income do not want to sell their homes because they fear a big property tax increase if they sell their existing home and buy another one. Property taxes are based on the sale price of the home. As a result of this “moving penalty” according to CAR, almost three-quarters of homeowners 55 and older haven’t moved since 2000.
As realtors, this issue comes up all the time when talking to “would be” sellers that are 55 and older. Proposition 60 allows for the one-time transfer of the base value within the same county for anyone 55 and older. Proposition 90 allows for the one-time transfer of the base value for anyone 55 or older from one county to another in California at the discretion of each county. There are only a handful that will accept an intercounty transfer.
In order to take advantage of Prop. 6o and 90 there are a number of rules. (See FAQ) The biggest one is that the replacement property must be of equal or lesser value in order to carry your property tax base with you. That might sound reasonable until you go house hunting in Marin hoping to take advantage of Prop. 60. What you will find is that a home that is suitable often costs more than the home you are selling. That represents a huge increase in property taxes. There are many Marinites who would like to downsize to a more affordable home in Sonoma or Napa Counties but those counties don’t accept inter-county transfers. Hence…those 55 and older are stuck in homes that are too big or unsuitable for aging in place and younger or move-up buyers have nowhere to go.
The thinking behind the Property Tax Portabilitiy Initiative is that if more Seniors sell their homes it will add more supply to our tight real estate market and relieve pressure on the demand side. It will also enable Seniors who would like to move out of homes that are too big or unsuitable or who would like to move to another county in California, to do so without incurring a big bump in property taxes. How this initiative will impact overall tax revenue to the state, cities and counties remains to be seen but it feels like a step in the right direction.
If you would like more information about this Initiative or how to take advantage of Prop. 60 and 90, call me.