2018—Would remove certain property tax transfer requirements (see In Depth tab below for list of requirements) for homeowners over 55, severely disabled homeowners, and contaminated or disaster-destroyed property so as to reduce these homeowners' property taxes if they move. Proposition 5 is an initiative constitutional amendment and statute.
Fiscal Impact: Schools and local governments each would lose over $100 million in annual property taxes early on, growing to about $1 billion per year. Would also result in a similar increase in state costs to backfill school property tax losses.
Semi-official results:
Yes: 1,739,425 (42.5%)
No: 2,354,400 (57.5%)
Pro:
Proponents of Proposition 5 argue that the measure eliminates the "moving penalty" that currently hurts seniors (55+) and disabled Californians. They believe that the measure will make it easier for seniors and disabled residents to purchase a new primary residence, and allow them to move near family or purchase more practical, safer homes.
A YES vote on this measure means: All homeowners who are over 55 (or who meet other qualifications) would be eligible for property tax savings when they move to a different home.
Con:
Opponents of Proposition 5 argue that it doesn't build any new housing or help first-time homebuyers purchase homes. They argue that it will also cut up to $1 billion in local revenue from public schools, fire, police, health care, and other services to provide for tax breaks for wealthy Californians and to help its authors—corporate real estate interests.
A NO vote on this measure means: Certain homeowners who are over 55 (or who meet other qualifications) would continue to be eligible for property tax savings when they move to a different home.
Background
Local Governments Levy Taxes on Property Owners. California local governments—cities, counties, schools, and special districts—levy property taxes on property owners based on the value of their property. Property taxes are a major revenue source for local governments, raising over $60 billion per year. As laid out in Proposition 13 (1978), each property owner’s annual property tax bill is equal to the taxable value of his or her property multiplied by the property tax rate. The typical property owner’s property tax rate is 1.1 percent. In the year a property is purchased, its taxable value is its purchase price. Each year after that the property’s taxable value is adjusted for inflation by up to 2 percent. This continues until the property is sold and again is taxed at its purchase price.
Movers Often Face Increased Property Tax Bills. The market value of most homes (what they could be sold for) grows faster than 2 percent annually. This means the taxable value of most homes is less than their market value. Because of this, when a homeowner buys a different home, the purchase price of the new home often exceeds the taxable value of the buyer’s prior home (even when the homes have similar market values). This leads to a higher property tax bill for the home buyer.
Special Rules for Some Homeowners. In some cases, special rules allow existing homeowners to move to a different home without paying higher property taxes. These special rules apply to homeowners who are over 55 or severely disabled or whose property has been impacted by a natural disaster or contamination. (We refer to these homeowners as “eligible homeowners.”) When moving within the same county, an eligible homeowner can transfer the taxable value of his or her existing home to a different home if the market value of the new home is the same or less than the existing home. Also, a county government may allow eligible homeowners to transfer their taxable values to homes in the county from homes in different counties. Ten counties allow these transfers. Except in limited cases, homeowners who are over 55 or severely disabled can transfer their taxable value once in their lifetime. See the LAO Analysis on Proposition 5 for an example of how these rules currently work.
Proposition 5 Proposal
Expands Special Rules for Eligible Homeowners. The measure amends the State Constitution to expand the special rules that give property tax savings to eligible homeowners when they buy a different home. Beginning January 1, 2019, the measure:
- Allows Moves Anywhere in the State. Eligible homeowners could transfer the taxable value of their existing home to another home anywhere in the state.
- Allows the Purchase of a More Expensive Home. Eligible homeowners could transfer the taxable value of their existing home (with some adjustment) to a more expensive home. The taxable value transferred from the existing home to the new home is adjusted upward. The new home’s taxable value is greater than the prior home’s taxable value but less than the new home’s market value. See the LAO Analysis on Proposition 5 for an example of how the property tax calculation would change.
- Reduces Taxes for Newly-Purchased Homes That Are Less Expensive. When an eligible homeowner moves to a less expensive home, the taxable value transferred from the existing home to the new home is adjusted downward.
- Removes Limits on How Many Times a Homeowner Can Use the Special Rules. There is no limit on the number of times an eligible homeowner can transfer their taxable value.
Source: LAO Analysis of Proposition 5
Visit Ballotpedia for summary data from recent polls and links to the complete published polls.
Official California Documents
Prop 5 - California Official Voter Guide
Campaign Finance Information
Voter's Edge Campaign Contributions: Total money raised, size of contributions, and top contributors
Power Search: Access and download data from the Secretary of State's CAL-ACCESS System
Nonpartisan Analysis
Changes Requirements for Certain Property Owners to Transfer Their Property Tax Base to Replacement Property. Initiative Constitutional Amendment and Statute. Legislative Analyst's Office.
Ballot Measure Guide - Prop 5. Berkeley IGS.
Proposition 5: Should Californians Expand Property Tax Breaks for Older, Wealthier Homeowners at the Expense of Other Homeowners and Public Services? California Budget & Policy Center.
Non-Partisan
"Video Voter Series - Proposition 5" from Rose Institute of State and Local Government at Claremont McKenna College
"Proposition 5 Explained in Under 1 Minute" from CALMatters