Taxes can be a valuable tool for a community looking to fix crumbling sidewalks and clean up its streets. But Proposition 5 would defeat the entire purpose of that.
At first glance, this proposition looks like it could be geared at curbing the California housing crisis by keeping property taxes down even if homeowners move to other homes. If Californians are incentivized to leave their homes for more affordable ones, it could leave markets open.
The problem is they would be taking their tax dollars with them.
Rich homeowners who purchased their homes for a fraction of what they currently cost would, under Proposition 5, be able to waltz on over to a new home and still pay the same property tax assessment. Since the new home’s market value isn’t considered, they could move into a new neighborhood where existing homeowners have paid considerably higher taxes to pay for neighborhood upkeep. In the process, though, new homeowners could move into expensive communities for a fraction of the cost, deflecting the burden of property taxation.
The caveat to this is the fact that the proposition is specifically limited to those 55 and older or people with severe disabilities. The intention is that these individuals will buy up more accommodating homes and free up some of the market for new homeowners. But because this only impacts the tax assessments for those who leave and not the tax assessments or market value of the homes they are leaving, the proposition stands to just benefit a limited few and leave California with a couple of empty homes in the process.
Proposition 5 basically grants, for example, elderly millionaires who live in Westwood the ability to move wherever they want in the state and use the same low tax assessment in their new home. This practice would turn California’s housing crisis into a scramble for rich homeowners to buy up property at rates that are far more affordable, leaving in the dust those struggling to afford rent.
That’s the last thing California needs. The board thus strongly endorses a “no” vote on this measure.
This simplistic analysis ignores the fact that prop 5 would likely increase the inventory of homes for sale for middle-class Californians. Homeowners who were in the middle-class in the 1990s, and could afford to purchase homes, have seen tremendous home value increases. Yes, partly because of this, many of them are now “elderly millionaries who live in Westwood.” However, these elderly millionaires do not want to sell their previously middle-class homes because they would see a tremendous increase in their property taxes. Allowing prop 5 would encourage them to sell their homes. It is true that they get the benefit of moving to a nicer home that will have a lower property tax than without Prop 5, but Prop 5 would require them to sell their homes inorder to get this benefit. This would increase the amount of homes for sale to middle-class interested buyers (more supply, lower home prices), encouraging those elderly millionaires to move into more expensive houses (the current law encourages them to say in their current price range).
Its true that this would benefit “elderly millionaires”, as awful as they are, but rejecting the proposition on this basis is cutting off the nose to spite the face, it also benefits middle-class Californian’s who want to buy those homes in Westwood.
Vote no on 5. The era of free stuff given to Baby Boomers for nothing on their part is coming to end.