With the election around the corner, I’ve had a few questions recently about Prop 5. Sponsored by the California Association of REALTOR®s, the Property Tax Fairness Initiative, otherwise known as Prop 5, works to help anyone over the age of 55 move and maintain their lower property tax basis.

As you know, property taxes in California are 1.1% of the purchase price and can be re-assessed by no more than 2% annually. When someone has lived in their home for a long time, the new property tax basis on a purchase can be prohibitive. Prop 5 eliminates this “moving penalty” for anyone 55 years of age or older, as well as for severely disabled people who want to move to a safer more practical home. 

Prop 5 would have a significant impact on our local market, encouraging more movement, especially within neighborhoods dominated by primary homeowners. This would open up our limited housing supply allowing more seniors to downsize and providing increased inventory for families. 

Not everyone loves the idea, however. The opposition fears this would give already affluent seniors a tax break and reduce revenue for schools and local government. They propose to simply increase the housing supply. In my opinion, the opposition fails to recognize the increase in tax income when the vacated home sells at a higher basis and therefore a higher tax income. Furthermore, increasing the housing supply is not a realistic approach on the Monterey Peninsula, given our water and development constraints. 

Below are a few links to get the facts. Whatever your opinion, let’s get out there and vote! 

Vote yes on Prop 5
Ballotpedia
San Francisco Chronicle Editorial