What’s the Deal with Prop 5?
Imagine that you’re over 55 years old and you are in a place in life where you are no longer able to tackle your day-to-day career, landing you in a corner without a fixed income or a substantial livelihood. Or maybe a disability is limiting your day-to-day tasks as well as any job opportunities. Now imagine you've been living in the same house for the last 20 years. You don’t have any family nearby, and your home is becoming increasingly harder to live in because of accessibility, neighborhood activity, and there’s nobody around to help. BUT you can’t move because you cant afford any increase from the current taxable value of your home, leaving you with no options but to stay in the corner in which you reside. Prop 5 has been put in place to give an open door to homeowners that are over 55 or the severely disabled. But like all legislation, there are two sides to every story…
Now imagine you have a young family in a small apartment. You are working full-time to support your family, while putting money aside to provide them a better living situation in the future. Or maybe you work in public services as a cop, firefighter, teacher, health care professional, etc and you’ve seen first hand what happens when there is a revenue loss at the local level and how it affects those fighting fires, teaching our kids, and providing health care to those who can barely afford it. What will happen to house prices if Prop 5 passes? What will happen to our public services after hundreds of millions of dollars of revenue are cut? We are here to give you a transparent lens about who benefits from Prop 5 and how it affects current and soon to be homeowners.
How does this affect new homeowners?
Gerald G. Wilson, board member of the Middle Class Taxpayers Association, Shamus Roller, executive director of the National Housing Law Project, and Gary Passmore, president of the Congress of California Seniors, wrote the official statement found in the state voter information guide in opposition to Proposition 5: “We urge a NO on Prop. 5 for one simple reason. We have a terrible affordable-housing crisis in California, and Prop. 5 will do NOTHING to make this crisis better.” In short what that means is California can’t support its growing population which in return hikes up the overall house prices. And with 52% of Californians spending 30% or more on rent (highest rate in the nation), more and more people don’t have the option to rent either, leaving them with no other choice but to relocate entirely.
Who benefits from Proposition 5?
Steve White, president of the California Association of Realtors, said: “Many seniors live in homes that no longer fit their needs because their homes are now too big or too far away from their families. If they want to downsize or move closer to their children, they could face property tax increases of 100 percent, 200 percent or even 300 percent.” The reality is that we have elderly and disabled citizens that are stuck in circumstances that they cannot change. Statistics show that almost three-quarters of homeowners 55 and older haven’t moved since 2000. This proposition will help this demographic and then some.
However we can’t forget how this benefits seniors who aren’t suffering, who could take advantage of this tax break this for personal gain. If Prop 5 is passed, a homeowner over 55 can use their tax break to keep buying more expensive houses, over and over, anywhere in California. Meanwhile, younger, first-time home buyers with less income will face higher housing prices, and renters will have an even harder time becoming homeowners. This will give a huge tax break to already wealthy Americans.
Everything you need to know about Prop 5?
Prop 5 would amend Proposition 13 which currently allows 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. Unlike Prop 13, Prop 5 would ultimately remove similar replacement-value and location requirements.
In summary, here is what you need to know about Prop 5:
- It will empower severely disabled people stuck in inadequate homes for tax-related financial reasons.
- Annual property tax losses for cities, counties, and special districts of around $150 million in the near term, growing over time to $1 billion or more per year
- It will eliminates the existing “moving penalty” in order to protect seniors (55+) and severely disabled people who want to move to safer, more practical homes or closer to their families
- It will give a huge tax break to wealthy Californians.
- It will further raise the cost of housing