[quote=EconProf]Bearish Girl, your lengthy response shows that you do not use data to come to reasoned conclusions. I suggested that academic studies for ALL of California properties could discover the revenue loss from heirs taking over their parents’ properties under Props 13, 58 and 193. Such a study would be peer reviewed to check for accuracy.
You countered this with a long string of….anecdotes. Anecdotes, whether from your personal experience or properties sold that you apparently looked up prove exactly nothing.
From this handful of examples, you concluded that “The golden state has undoubtedly lost trillions on (Props 58 and 193) since 1986.” Are you aware the upcoming entire state budget from all tax sources is only $171 billion?
Instead of cherry-picking examples of properties taking advantage of Props 58 and 193, why not use your time to look for real research that has surely been done on the subject since it is undoubtedly a question that has occurred to others. I don’t have the time to look up such studies, but you seem to have both the time and energy.[/quote]EconProf, those “anecdotes” are from plat maps I bought 8-10 years ago to conduct a little Prop 58/193 “study” of my own. I have more. The out-of-county examples are properties I am already familiar with …. mostly through case work I have taken on in the past. Yes, you are correct that it would take a lot of time and energy to get an exact figure on how much the Golden State has been missing out on collecting every year due to Props 58/193. I’m sure a lobbying group (to repeal these measures) could hire full-time personnel to take on this daunting task but to make it easiest, they would have to gain access to the Change of Ownership statistics that county assessors keep and focus only on transactions in which no tax stamps were paid (non arms-length transactions).
Ok, I exaggerated. It is billions, not trillions the Golden State has lost in operating revenue from these dubious “statutory schemes.” We’re talking about since 1986 here! That’s 30 years of “heirs” who ran, not walked down to their county assessor’s offices to process their Prop 58/193 applications. And they will continue to do so into perpetuity. Why not?
I’ve posted here many times that I am not against Prop 13. If CA did not have it in place and was permitted to assess its properties biennially through a “mill levy” calculation (which takes into account actual appreciation during the past 24 months), as many other states do, CA homeowners would quickly be priced out of affording the homes they just purchased! Especially those who own properties in coastal counties.
I am against Props 58 and 193 because the argument on TV and in print ads FOR Prop 13 in 1978 was “to keep seniors from being priced out of their homes.” I know as I was there. Over 90% of those who were “senior citizens” when Prop 13 was passed in 1978 are now deceased but most of their homes were never sold after their deaths (especially those who died on or after 1/1/87). Instead, a family member took over ownership ALONG WITH their old (base year circa 9/75 plus 2% per year) assessment. When Prop 58 was put on the ballot in 1986 and Prop 193 in 1996, the voters who DID vote for those measures (1/3 to 1/4 of all registered voters?) were sold a bill of goods. Apparently, the “perpetuity” feature of the measures was never brought up in the ballot arguments AGAINST the measures or not discussed in sufficient detail in the Voting Guides for the public to understand exactly what the far reaching fiscal ramifications for the state would be … not to mention a possible (unknowable at the time) severe housing shortage in the distant future directly caused by the disincentive to succeeding owners (who would take advantage of the Props 58/193) to ever market these homes.
In many areas of SD and SD County, there is very little for sale at any one given time. This has been common throughout CA urban coastal counties for at least 15 years, now. The reason for this is due to Props 58 and 193 and this problem is becoming more pronounced by the year.
EconProf, you stated to me that I shouldn’t use my own area as an anecdote but my own area fits this description and is just ONE of many, many thousands of CA residential areas where these statutes are widely used. There has been very little for sale in my area for over 20 years. There was nothing else for sale in it when I bought my house over 15 years ago. The only reason the sellers of my home were selling was because of a very lucrative job relocation. They hired an architect to redesign my home and remodeled in to their liking because it was intended to be their “forever home.” There has been less than a dozen houses for sale around here since then. Several of them were near-uninhabitable longtime rentals which had to be gutted by flipper teams. None of them qualified for mortgages. There have been another 8-9 deaths by the remaining homeowner in my area since I moved here and only one of their homes was sold in a non arms-length transaction thru a probate sale (non-MLS) “pocket listing.” The rest of the properties went to heirs … not counting all the properties around here who had already been transferred to heirs by the time I purchased my home! Typically, no one was aware of these property transfers except possibly the immediate surrounding neighbors. Two of the heirs moved in (one a Prop 193 heir) and the rest of them swooped in out of nowhere within two weeks of their last parent’s death with large pickups, flatbed trucks, long ladders and tools, etc to clean the place out and repair/lightly remodel it for rental service. Even if these heir(s) just worked weekends, they usually got the property into rental service within 2 months of their last parent’s death. My micro area is NOT an anomaly! It is representative of established areas throughout the state but most pronounced in coastal counties. (Because properties are more valuable in coastal counties, they will fetch higher rents and therefore it is more lucrative to keep them with their low assessment attached to them, rather than sell.)
This phenomenon does not bode well for Gen Y (the millenials) trying to buy their first home. Especially those who must find a home as close to work as possible in counties with mostly dedicated open space and thus haven’t had any land left with which to build subdivisions in >40 years (ex: San Mateo and Santa Clara Counties).
A major reason why these measures aren’t getting the public attention they deserve (getting a bright flashlight shown on them) is because all the affected parcels undergo a transfer of ownership in a dark closet. Often, close neighbors don’t even know a neighbor has died. No one moves out or moves in. The heir(s) just moves in and takes a year or more to sort thru mom and/or dad’s stuff and rehab room by room. Neighbors don’t know how to get property records or look at probate cases and don’t care. More often than not, the decedent had a trust, which is not public record. Most of these CA heirs who inherit the typical $350-$550K home (today’s value) wouldn’t take the property if a stepped-up assessment at the time of death was attached to it. They would sell it, instead. They are only taking the property over because of its $400 – $800 annual tax bill which can only rise 2% per year. This huge disparity in current assessment versus market value is far more pronounced in CA’s most exclusive and coveted areas.
Since property tax proceeds (incl “Teeter Funds”) are the lifeblood of CA and its counties, the existence of Props 58 and 193 are an insidious creep on the Golden State’s ability to function and are becoming moreso with each passing year. The vast majority of senior citizens whom Prop 13 was designed to protect (those at least 65 years old by June 1978) are now deceased. Had Props 58 and 193 not been passed 8 and 18 years later, respectively, their homes (the senior’s homes Prop 13 was passed to protect) would have likely been counted in your “every 7-year turnover statistics,” EconProf. But since the two measures were passed, there has been no incentive whatsoever for ANY heir of their parent’s or grandparent’s CA home to sell it (if the home was purchased prior to 1988 and the earlier, the better). That’s what we’re all going to continue to see in all the most conveniently-located areas from here on out (especially those areas in heavily urban coastal counties). We did it to ourselves!
