Measure for Measure: Proposition 5

Voting is an essential part of civic engagement, but it can be confusing, especially in local elections. There are tons of measures and candidates to consider in the upcoming election on November 6th. That’s why we’re doing this round-up of the statewide measures, to provide some insight into the 2018 ballot.

Check out our round-up page for more articles on the other measures.

What is Proposition 5?

We can’t talk about Proposition 5 without talking about a couple of previous propositions that have gotten us here.

We’ve written extensively about Proposition 13 (1978), the state’s regressive property tax law that pegs the taxes landowners pay to the value of the property at the time of purchase. Under Prop 13, homeowner’s tax rates remain flat for the entire time that they own the property, even as the home’s value appreciates. When long-time homeowners sell their property, the home is then reassessed and new owners will pay a market rate tax rate. Likewise, the departing homeowner would have to pay market rate property taxes on any new home they purchase.

However, there are a few exceptions to this. Because of Propositions 60 (1986) and 90 (1988), some older homeowners are able to take their reduced tax rate with them when they move to a new home. Homeowners had to be over 55 to take part in this tax rate transfer, and could only transfer the benefit to a home within the same county or between one of the 11 counties with reciprocal agreements. The most important restriction that Propositions 60 and 90 made was to limit this benefit to homes of an equal or lesser purchase price than the old home’s price.

Proposition 5 seeks to further extend the benefits of preceding measures by allowing homeowners over the age of 55 to transfer their tax rate anywhere in the state. This is an expansion of the benefits allowed under Prop 90, which limited the transfer to Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura counties. Prop 5 would also allow older homeowners to carry their discounted tax rate to a new home that’s potentially more expensive. Under the previous measure, Prop 60, the reduced tax rate was only transferable to homes of an equal or lesser value.

Why does it matter?

If Prop 5 were to pass, the state would lose approximately 1 billion dollars of property tax revenue each year. With our schools and local services already underfunded through Prop 13, this would be another huge cut for our state’s essential services and provide a huge windfall to those who don’t need it.

What are the arguments for Prop 5? Who’s funding the proposition?

The measure was authored by the California Association of Realtors (CAR), and a political action committee was formed to support the measure, The Homeownership for Families and Tax Savings for Seniors PAC. So far, the California Association of Realtors and their PAC have spent over $7.2 million in support of the measure. The measure is also endorsed by the California Chamber of Commerce.

The VP of Governmental Affairs for CAR said the measure was important because “seniors, who are often on a fixed income, fear they will not be able to afford a big property tax increase if they sell their existing home and buy another one, discouraging them from ever moving. As a result of this ‘moving penalty’ almost three-quarters of homeowners 55 and older haven’t moved since 2000.”

They argue that many seniors are over-housed, living in large homes solo, which once housed their children. CAR asserts that many seniors would like to move from their larger homes which are difficult to care for and maintain, and downsize to be closer to family or medical care. CAR sees this as a way to stimulate the shuffling of homes in our state to better match with prospective buyer’s needs, claiming the measure will help alleviate our state’s housing crisis. They believe that making it easier for seniors to move will free up housing for younger prospective homeowners who want a larger house for their growing family.

What are the arguments against Prop 5? Who’s funding the opposition?

The measure is opposed by The California Teachers Association (CTA) with additional opposition from the Middle Class Taxpayers Association, The National Housing Law Project, and the Congress of California Seniors.

Opponents of the measure argue that it does nothing to solve the housing crisis. They say that overhoused seniors can already downsize and keep their tax benefits as allowed under Props 60 and 90. CTA believes the measure will only assist already wealthy homeowners, giving them tax breaks on larger, more expensive homes, while undercutting already tight spending for public education and other essential services.

What is TechEquity’s position on Prop 5?

Prop 5 is a wolf in sheep’s clothing. The measure does nothing to help the housing crisis and gives away another huge property tax break to wealthy homeowners, while cutting revenue for public education and essential public services even more. We say vote no on Prop 5!

Check our round-up page for more measure articles as we publish them!

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