What changes would this ballot initiative make to state law?
Beginning on January 1, 2019, Proposition 5 would allow homebuyers who are age 55 or older or severely disabled to transfer the tax-assessed value from their prior home to their new home, no matter (a) the new home's market value; (b) the new home's location in the state; or (c) the number of moves. As of 2018, homebuyers over 55 years of age were eligible to transfer their tax assessments from their prior home to their new home if the new home's market value is equal to or less than the prior home's value and once in their lifetimes. Furthermore, counties, not the state, decide whether tax assessments can be transferred across county lines.
In 1986, voters approved Proposition 60, which amended Proposition 13 to allow homeowners over the age of 55 to transfer the taxable value of their present home to a replacement home, assuming the replacement home was of equal or lesser value, located within the same county, and purchased within two years of selling the original home. Proposition 13 was again amended in 1988 when voters approved Proposition 90, which allowed qualified homeowners age 55 or older to transfer the current taxable value of their original home to a replacement home in another county, but only if the county in which the replacement home is located agrees to participate in the program.
Proposition 5 would clean up confusing and inconsistent law that varies from county to county throughout California. Proposition 5 would also allow those eligible to move anywhere in California’s 58 counties and has also been carefully written to ensure that those homeowners continue to pay their fair share of taxes.
If the new home is a different value than the prior home, the initiative would allow for an adjusted value between the old and new values. If the new home has a higher market value then the prior home, the assessed value would be adjusted upward. If the new home has a lower market value then the prior home, the assessed value would be adjusted downward. The formulas for the adjustments would be as follows:
Upward adjustment: (assessed value of their prior home) + [(the new home’s market value) - (the prior home's market value)]
Example: An individual sold her house for $500,000. The house had a tax-assessed value of $75,000. She bought a new house for $800,000. The tax-assessed value of the new house would be ($75,000) + [($800,000)-($500,000)] = $375,000.
Downward adjustment: (assessed value of their prior home) × [(the new home’s market value) ÷ (the prior home's market value)]
Example: An individual sold his house for $500,000. The house had a tax-assessed value of $75,000. He bought a new house for $300,000. The tax-assessed value of the new house would be ($75,000) × [($300,000) ÷ ($500,000)] = $45,000.
In projecting substantial property tax revenue losses for the government, the Legislative Analyst’s Office did not accurately examine the broader and more complete picture. More home sales at a higher assessment could more than offset the Proposition 5 senior, disabled and disaster victim benefits. Add in other economic activity associated with sales — such as payment of fees, housing renovation and purchase of new furnishings that generates more sales taxes — and the benefits would be substantial.
California’s housing market faces great challenges, which I see in my job every day. Proposition 5 represents a good-faith effort to expand housing opportunities by removing the moving penalty that faces seniors, the disabled and disaster victims. Let’s help fix a flawed and unfair system by passing Proposition 5.