FlyerInHi, the original intent of Prop 13 was to keep senior citizens who could take care of themselves in their homes until they die. It was intended to be a “tax break” for this subset of owners. But because of the 2% annual appreciation cap set since then and no limitations on age of buyers who qualified for this break beginning FY ’76/77, MY OWN (YOUNG and ABLE-BODIED at the time) generation bought properties with this permanently low assessment in place. Not only did they buy properties with the 2% appreciation cap in place, beginning in 1986, persons of all ages later INHERITED their parents’ properties with their assessment in place and their grandparents’ properties beginning in 1996 with their assessment in place. In fact, property owners who have these artificially-low assessments don’t even have to be dead to pass their properties, along with these low assessments to their children and grandchildren. This had, has and will have the effect of creating generations into infinity who are YOUNG, ABLE-BODIED and now have one or more extremely valuable “subsidies” that their similarly-situated neighbors don’t.
The law was poorly written in that it included RE of all stripes, including huge swaths of vacant land, large multifamily dwellings, agricultural land, commercial buildings and land, waterfront plots, land bordering National forests and everything else in between and did not require the owner’s residency in or on said property. This had the effect of making average Joes and Janes with limited educations and means property RICH, along with their heirs, because they could hang onto whatever they could buy up in the seventies (or already bought during or prior to that) INDEFINITELY whether they elected to use or rent out the property … or not. Carrying costs, aside from minimal taxes, fire insurance and occasional weed mowing and possibly erecting a chain link fence around the perimeter, were vitually nil. These owners don’t even have to maintain these (sometimes vacant) properties if they don’t wish to, aside from complying with city/county ordinances on the exterior. I currently have SIX of these properties (all fairly decent-sized SFRs) around me within a five minute walk. One of them has been “vacant” for nearly 15 years. A $385 annual tax bill and $420 annual insurance bill is a LOT cheaper than renting several storage units, btw, for an owner who is currently living with a relative or new spouse and/or living out of the country. And it doesn’t even need to be remodeled for tenant occupancy!
A 30 or 40-something owner of a 70-unit apartment building in West LA that his parents (who purchased it in 1971) left him doesn’t have to worry about a lot of vagaries of the local rental market in order to keep it. Even if he mortgages it, his taxes are likely only ~$7500 versus the $85,000++ that they would be if he was paying market-rate taxes. If vacancies happen to be higher one year or a few units are currently out of commission because of a water leak, so what! He/she can afford to give one or more resident managers nice salaries and premium units into oblivion so he can avoid all the common management headaches and freely travel. He can also afford to engage in “rent control” if local ordinances dictate he must.
Flyer, if you think all the CA property owners benefiting from extraordinarily low assessments pursuant to Prop 13 and its progeny don’t use as many services as folks who pay market-rate property taxes, you are mistaken. In fact, the opposite is generally true. Most of these folks aren’t residents who are necessarily “educated,” had or have “careers” and thus pensions or planned their lives out in detail in order to be worry free. The vast majority of them simply were in the right place at the right time to buy a $4K to $100K (YES, I said four-thousand to one hundred-thousand) single-family home in CA … OR had parents or grandparents who did and deeded it to them or left it to them upon their deaths. It’s not uncommon at all to find a single age 50+ homeowner in Mission Hills or Pt Loma who has lived in the same house nearly all of their lives or inherited their childhood home and possess a GED or less. They’re paying $680 year in property tax and might use lifeline utilities, meals on wheels, Medi-Cal or CMS, community clinics, an EBT card, a “disabled” bus pass or placard, shop in 99-cent and thrift stores, etc. You can’t eat your house.
Only a small fraction of these properties ever hit the market and those are the ones whose heir(s) have permanently left the county it is situated in and want it sold. The rest will be handed down into oblivion and we are talking about hundreds of thousands of properties here, many of which are situated in the very best streets in the very best locales in the state. You can’t blame parents or grandparents for taking advantage of Props 58 and 193. How else will many of their (renter) children and grandchildren be able to afford to live near them without moving whenever the rent is raised? They want them to have stable homes.
I believe Prop 13’s progeny is THE major reason why residential RE listings will remain tight (and thus very valuable) in CA coastal counties, especially in the most coveted areas.
