On Nov. 3, 2020, voters approved an amendment to the California Constitution intended, in part, to assist older residents 55 and over who downsize or move and face getting stuck with a huge property tax bill.
Under Proposition 13, property taxes are based on the fair market value of a house when it changes hands, and remains fixed subject to limited annual increases. This means that a senior who has been in a large family home for many years will pay substantially less in taxes than the family that just bought a similar house next door. For the senior, though, downsizing after the children have left would mean a huge property tax increase when a new house is purchased, as that would be based on the new purchase price.
Back in 1986, voters passed Prop 60, which allowed seniors changing houses in the same county, or moving between certain counties, to transfer their old property tax basis so long as the house they bought cost no more than what they sold the old house for, and so long as the two houses were bought and sold within two years of each other.
The 2020 amendment, called Prop 19, liberalized those rules. Under Prop 19, effective April 1, 2021, the two houses can be anywhere in California, and if the house the senior buys costs more than the one they sold, the old property tax basis can still be transferred, while the senior pays full freight on the difference between the two house prices. If the new house costs less, then just as in Prop 60, the senior pays based on the old house’s property tax basis. These same rules for seniors also apply to disabled homeowners. There are analogous Prop 19 rules for rebuilds or moves after the loss of a house to wildfire, so many in the community are impacted by these delays.
Sounds like a great deal. But a March 2022 Los Angeles Times article noted that as of then, the Los Angeles County Assessor’s Office had received 1,271 Prop 19 applications for seniors and disabled yet had not processed a single one. While relief is retroactive to the later of the date of house sale or purchase, until approved, the owner must pay the full assessed amount based on the purchase price of the new house, waiting for it to be rebated back interest-free. This hits Malibu owners disproportionately, as the median age in the city is 53 years old, compared to 35 years old in Los Angeles. And while the greater public may assume Malibu residents are all millionaires, many Malibu seniors were middle-class purchasers decades ago, and cannot afford the property tax on a house bought at today’s prices.
Adding to the anxiety, the assessor offices were closed for most of the pandemic and applications cannot be submitted online, so claimants were required to mail paper applications; there is no electronic response nor receipt to notify the applicant that their application has been received or is in the queue. The Malibu Times reached out to the Assessor’s Office on this issue and was provided no assistance on what claimants should do to verify receipt.
When TMT asked for an update on how the Prop 19 implementation is faring, according to its Public Information Office, as of August the assessor had received 1,744 applications and had processed 570, leaving 1,174. The office indicated that “as much as possible,” claims are processed in the order received.
While the Assessor’s Office has experienced a significant increase in the number of applications since the passage of Prop 19 (as the requirements for relief were liberalized from Prop 60), it hopes to maintain an ongoing backlog of only four to six months from application to revised valuation starting in September. Adding to the backlog, clarifying legislation had to be enacted. Additionally, changes to intergenerational property tax assessments in Prop 19 led to a rush of applications — 8,000 according to the Assessor’s Office — to beat the deadline for those changes.
For the Malibu senior who changed houses soon after Prop 19’s passage, however, the waiting game continues. And for the senior who downsized and would have qualified under the Prop 60 rules, the Assessor’s Office noted that “ [t]hrough the California Assessors’ Association and other stakeholders, there was general agreement to delay [all] processing until the clarifying legislation was passed.”
Benjamin Franklin famously stated that in this world nothing can be said to be certain, except death and taxes. Perhaps delay can be added to this unhappy list.