More Homeownership Opportunities for Young Families
The California Association of Realtors® (C.A.R.) has completed a historic effort to increase home ownership opportunities. C.A.R. has submitted one million signatures (only 590,000 need to be verified) for an initiative for the November 2018 ballot which will allow senior homeowners (55 years of age, and older) several new ways to keep their Proposition 13 property tax savings when they move.
Why does this matter?
Proposition 13 protects homeowners from rapidly increasing property taxes. However, seniors worry that they cannot afford a big property tax increase if they sell to downsize or move closer to their families. As a result, nearly three-quarters of homeowners 55 and older haven’t moved since 2000. The same is true for the severely disabled and those with homes destroyed by natural disasters.
What will the Property Tax Fairness Initiative do?
The measure, when approved by voters, will eliminate the “moving penalty” and fix property tax laws to allow seniors, the disabled, and victims of natural disasters to sell their homes and maintain their property tax protections while continuing to pay their fair share in taxes. According to the California Legislative Analyst’s office, tens of thousands of additional home ownership opportunities will occur annually.
Doesn’t current law protect homeowners?
The amount any homeowner pays in property taxes is based on the assessed value of their home at the time of purchase. Generally, Proposition 13 limits property taxes to 1 percent of the assessed value at the time of purchase—even if the value of the property subsequently increases.
Current Rules When Seniors Move
Unfortunately, homeowners lose their Proposition 13 property tax savings when they move to another home. They have a single opportunity in their lifetime to transfer their property tax base to another home—provided it is in the same county and the purchase price of the replacement home does not exceed the sales price of the original. Under current law, only 11 counties allow you to move to that county and keep your tax base.
Ocean bathers enjoyed the area’s sandy beaches and the opulent accommodations of the Potter Hotel (1903–1921) in Santa Barbara’s early tourism days.
New Rules for Senior Moves
The new law will allow people to move to any county in California and keep their tax base. Instead of being restricted to one move in your lifetime, you could do this every 2 years. Plus, you will be allowed to move up. If your home is worth $1.2 million, currently you must select a replacement home for $1.2 million or less. If you want to buy a home for $1.5 million, your taxes go up to $15,000. This highly discourages seniors from moving to a more expensive home. When the law is passed, you will be able to move your old tax base on the $1.2 million, and simply add on the new taxes from the $300,000 that you are moving up—an increase of only $3,000. This will free up people over 55 to move instead of feeling like they have no option to move because of their existing low taxes.
Ending the “Moving Penalty”
The Realtor’s Property Tax Fairness Initiative eliminates the geographic restrictions and single-use provision to allow seniors, the disabled, and victims of natural disasters to keep their property tax protections. They can move while still paying their fair share in property taxes. Eliminating the “moving penalty” will unlock tens of thousands of homes for new home buyers, helping to address California’s historic housing supply crisis. Passing the Property Tax Fairness Initiative is a win-win for California. The million signatures are being reviewed right now. Soon it will be approved to be on the ballot in November. Then it will be assigned a ballot initiative number. Look for it in the fall—and vote for it.
If you are over 55 and planning on a move, you may want to take this change into account. When you want to move give me a call. 805 451-9300.
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