CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, NOVEMBER 12, 2024, OR THEREAFTER
BY THOMAS D. ELIAS
“PROP. 13 GETTING BLAMED FOR SLOWING STATE’S HOME SALES”
The election is well under
way, even if results are not yet in. Meanwhile, the always controversial
Proposition 13 is far from finished with absorbing criticism.
The landmark 1978 property
tax-cutting initiative took plenty of heat and also saw multitudes rise to its
defense this fall as voters considered Proposition 5, aiming to reduce the vote
needed to pass most local bond issues from the current two-thirds to just 55
percent. Prop. 13 had already been altered early in this century to allow
school construction bonds to pass on 55 percent margins.
That has raised property
taxes considerably wherever such local bond issues passed.
Meanwhile, Prop. 13 continues
to stand for tax stability. This very attribute now creates new gripes about
the measure, also known as the Jarvis-Gann Initiative, for two longtime
anti-tax gadflies of the 1970s, Howard Jarvis and Paul Gann.
Among real estate brokers,
Prop. 13 gets much of the blame these days for the low volume of existing homes
now up for sale and their relatively slow movement – spending an average of
about a month on the market even when sales stock is minimal.
The reason Prop. 13 takes
heat over this is simple: it stabilizes property taxes. This in turn can cause
longtime owners to hang onto their residences much longer than they otherwise
might.
From the time it passed,
Prop. 13 has held property taxes at one percent of the latest purchase price,
plus annual increases limited to just 2 percent of the last previous tax bill.
Homeowners who bought before June 1975 were awarded tax limits of one percent
of their 1975 assessed value, with the same 2 percent limit on annual
increases.
That sees many owners of
homes now valued at $1 million or more paying annual levies of $2,000 or less,
while new buyers of virtually identical properties pay at least $10,000. It’s
an inequity that no politician in the last 46 years has seriously challenged.
And it’s a major incentive for longtime homeowners to stay put.
Also affected is today’s
market, according to realtors all around California. Sales stock of existing
homes is slim in Los Angeles, County, the San Francisco Bay Area, Orange County
and San Diego, the four largest and most expensive major market areas in this
state. It’s also true that non-cash-only buyers must be equipped both to cope
with monthly payments that often top $20,000, plus that big new tax bill.
With sales stock down,
potential buyers now outnumber sellers in all those areas by a fair margin,
realtors report. How low is the stock?
In the San Francisco market, covering the entire Bay Area, fewer than 20 homes
out of every thousand have changed hands this year.
In Los Angeles County, it’s
just 15 of every 1,000. Both are major drops from the pre-pandemic year 2019,
when for-sale housing stock was more than 30 percent higher.
Similar figures are reported
for both San Diego and its North County suburbs, while no current figures were
obtainable for current stocks in Central Valley cities like Fresno and
Bakersfield. Those areas, though, have seen sales price increases of about 10
percent over last year, but new property tax bills there don’t skyrocket the
way they do in the higher-priced markets. That's because the average price in
Fresno stands at about $338,000, which produces a tax bill of almost $3,500 in
the first year of occupancy, far less than in higher-priced areas.
Sales stock of attached
homes, including condominiums and townhouses, is significantly higher than
among detached single family houses, standing at about 19 per 1,000 units in
San Francisco and slightly less in the other big markets.
It all translates to a
seller’s market, with an asterisk for Prop. 13’s limits, which cut down what’s
available but stabilize the tax bill any new homeowner will pay now and in
future years.
Anyone wanting to change this
will have to deal with the powerful lobby that has made the essence of Prop. 13 politically untouchable.
-30-
Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski
Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign
to Squelch It" is now available in a soft cover fourth edition. For more
Elias columns, visit www.californiafocus.net
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