Amid a housing crisis that has placed countless California families in severe economic stress, the last thing we need is a new state policy that would push home prices even higher and put middle-class families at an even greater disadvantage.
Yet that is precisely the policy that the California Association of Realtors, which put Proposition 5 on the Nov. 6 ballot, is asking voters to adopt.
When considering how to vote, Californians should ask themselves: Who does Prop 5 hurt? Who does Prop 5 actually help?
The answers are that it will hurt almost all Californians and help only a select few — and those few are least in need of preferential treatment.
Two independent nonpartisan research institutions have thoroughly studied those questions, and their conclusions are clear.
The Legislative Analyst’s Office determined that over time Proposition 5 would result in $1 billion a year in losses for local government services and another $1 billion loss for schools every year.
As the California Budget & Policy Center notes, the lost revenue “would no longer be available to support an array of local services including schools, police, fire services, housing, infrastructure and human services.” And, because the state would in most cases be required to reimburse local schools for their losses, it would also reduce funding “for key programs” at the state level such as healthcare and higher education.
Proposition 5 would also hurt in another way. Both analyses conclude it would likely result in an increase in housing prices.
In other words, most Californians would be harmed.
Is there a tradeoff that might balance these losses? There might be, if Proposition 5 actually benefitted those the Realtors say they to want to help.
The research puts to rest the false argument by the Realtors that the measure helps seniors who would otherwise be stuck in their homes. California law already allows seniors who sell their homes to transfer their low, Proposition 13 tax base to a new home. That’s been the law for more than 30 years.
There are sensible limits in the existing law. It requires that the new home be of equal or lesser value than the one that was sold, and that the transfer can be taken only once. Those limits help preserve critical public services while also protecting seniors who want to downsize.
Proposition 5 would throw those limits out the window. It would allow the property tax transfer to apply when people 55 and older trade up to a more expensive house — and to take that tax break with them as many times as they wish.
So, who would Proposition 5 actually help?
The Budget & Policy Center’s conclusion is clear: “The ultimate effect … would be to expand tax breaks for older, wealthier California homeowners.” It further notes that these individuals already “receive preferential treatment that allows them to pay far less in annual property taxes than younger homeowners.” It also helps Realtors by increasing transactions and their commissions.
In short, Proposition 5 proposes another special tax break for the wealthy. The rest of us would lose.
Shamus Roller is executive director of the National Housing Law Project.
