Back From The Dead: Realtors Resurrect Defeated Ballot Measure To Expand Prop. 13
On Nov. 6, California voters resoundingly rejected Proposition 5, which would have expanded property tax breaks for senior and disabled homeowners.
The measure garnered less than 41 percent of the vote. It was defeated in 57 out of 58 counties. Yet, Prop. 5 may not be dead.
The California Association of Realtors plans to resurrect the initiative, launching a new petition drive for the 2020 ballot.
“We are not in any way dissuaded by the vote on Prop. 5,” said Alex Creel, CAR chief lobbyist. “We got 41 percent of the vote, and we did not run any campaign.”
CAR has filed its intent to gather signatures with the state but has yet to start circulating petitions.
But one new provision added to the 2020 measure — closing a loophole on commercial real estate property taxes — already is rubbing backers of a rival initiative the wrong way.
“I think it’s shameful that they would make a second attempt to pass Prop. 5 after voters overwhelmingly rejected it,” said Veronica Carrizales, a policy director for Los Angeles-based California Calls, part of the coalition supporting the rival ballot measure.
Realtors, she said, are widening tax breaks for some homeowners “to serve their own interests.”
At issue is whether to expand property tax benefits under Prop. 13, the landmark 1978 tax measure that capped property tax hikes for residential and commercial real estate at 2 percent a year.
Currently, homeowners who are 55 or older or severely disabled can keep their original Prop. 13 tax rate when selling their homes and buying a new one. But they can do so only once, and only if buying a home that’s the same price or less than their old home. Current rules also limit the benefit to those staying in the same county or moving to one of the 10 counties accepting such transfers.
Under Prop. 5, senior and disabled homeowners would have been able to move anywhere in the state, as often as they like and even buy a more expensive home — all without losing their old Prop. 13 tax rate.
The Realtors’ new 2020 initiative keeps those “portability” provisions intact. But it also adds two others:
- Eliminating Prop. 13 tax-rate transfers on inherited homes used as rentals or second homes.
- Closing a loophole that allows commercial real estate buyers to avoid higher taxes after a sale. Normally, tax assessments rise to market values after real estate changes hands.
‘Terrible idea’
But commercial property tax reform already is on the November 2020 ballot.
The rival measure, which qualified for the ballot in October, would eliminate Prop. 13 protections for most commercial properties while preserving it for residential real estate.
Under this “split-roll” initiative, commercial property tax bills would rise steadily, keeping pace with market value gains.
But CAR is part of the effort to derail that measure, split-roll backers say.
“We expected this kind of tactic,” said Helen Hutchison, president of the California League of Women Voters, a key backer of the split-roll initiative. “Our opponents will do anything they can to confuse voters in an attempt to block our initiative.”
Split-roll backers maintain the new Prop. 5 isn’t any better than the old one, even with the two new provisions.
And they argue the Realtor’s commercial property provisions are “a useless gesture,” saying large corporations will just find new ways to skirt higher property taxes after a sale.
“Prop. 5 was a terrible idea,” said Shamus Roller, executive director of the San Francisco-based National Housing Law Project and co-author of the state Voter’s Guide argument against Prop. 5. “What they’ve done with the 2020 initiative is take a terrible idea and put some halfway decent ideas on top of that. It doesn’t make the original idea any less bad.”
Housing shortage
Prop. 5’s tax provisions were designed to stimulate a market facing a severe housing shortage, Creel said.
While it would do little to increase homebuilding, it would encourage more homeowners to put their houses on the market, boosting sales by an estimated 43,000 a year, or more than 10 percent of all existing single-family home sales. That, in turn, would create more opportunities for younger families to buy homes.
“While we don’t love our houses, we love our (lower) property taxes,” Creel said, explaining why many seniors don’t move. Portable tax rates would “help older people sell their home, … (and) it helps everyone on that housing ladder move up a rung.”
Carrizales questioned CAR’s motives, speculating the trade group merely is trying to increase commissions by boosting sales, which have run an average 19 percent below pre-recession levels during the past six years.
“Prop. 5 was about increasing more sales, increasing profits for (members) of the California Realtors association,” Carrizales said. “I think the voters saw through that.”
Christopher Carlisle, another CAR lobbyist, denied that claim.
“If this is a scheme to generate more commissions, it’s not a very good one,” Carlisle said. “We have half a million real estate licensees in the state, and we’re only generating 43,000 new commissions.”
Tax boosters
The state’s Legislative Analyst Office report on Prop. 5 concluded the measure would cost schools and local governments an estimated $1 billion annually in revenue.
Creel acknowledged CAR — which filed its new initiative with the state three months before the election — is seeking to offset Prop. 5’s tax revenue losses by adding provisions that would boost tax collections.
For example, the current law lets children keep their parents’ low Prop. 13 tax rate when inheriting their homes — a provision designed to help children stay in their parents’ residences. But roughly two-thirds of those homes end up as rentals or vacation properties, the legislative analyst reported. Eliminating tax breaks for homes not used by children as their primary residence would generate about $1 billion a year, the legislative analyst estimated.
Officials speculated closing the commercial property reassessment loophole would raise tens of millions to hundreds of millions in new revenue each year.
“We knew we had problems with (Prop. 5) due to the negative legislative analyst report,” Creel said. “Rather than put all our eggs in one basket, we decided to go ahead with another initiative in 2020 that would not have all the negative fiscal impacts.”
In addition to the initiative, CAR also is seeking changes through the state Legislature, which could place a measure on the ballot in March 2020, rather than in November.
Creel said CAR understands it may take more than one attempt to pass tax-rate portability. CAR was part of the fight to pass the 1995 Costa-Hawkins Act limiting rent control. That took 11 years to pass.
“We’re no strangers to the long fight,” Creel said. “We’re just starting.”
Author: Jeff Collins
Source: san Gabriel Valley Tribune