Real Estate Round-Up: One last update on Prop 5 and Prop 10

By now you have received your voter booklet for November’s election. As I read through it, I was reminded of the inaccurate portrayal of the financial impact Prop 5 will have on our cities and communities.

Back to basics; the Legislative Analyst Office states that Prop 5 will cost initially $1,000,000 and up to $1,000,000,000 in the future. This figure is based on a static analysis, which means, only the negative impact when a home is purchased utilizing a carried over property tax basis is calculated. There is no calculation for the positive impact on those properties that were sold that held a lower property tax basis and will now have a higher property tax basis.

Here’s an example: Mr. and Mrs. Smith sell their home for $900,000 in Fallbrook. They purchase a condo in San Francisco for $1,200,000 but bring their $500,000 tax basis with them. Their new tax basis would be based on $500,000 for the first $900,000 of the San Francisco condo and an additional 1 percent on the additional $300,000 of the total $1,200,000. The San Francisco property tax basis would be slightly less than the full 1 percent. That number is what is calculated into the LAO and reported in your booklet. But, what’s not calculated into the LAO number is the tax basis on the home Mr. and Mrs. Smith sold.

Remember, Mr. and Mrs. Smith’s tax basis in Fallbrook was based on $500,000. They sold it to Ms. Jones for $900,000, a buyer who did not bring a property tax basis with her. The Fallbrook property now has a new updated tax basis of $900,000. That positive impact is not calculated into the LAO’s figures as reported in the booklet. This total analysis is referred to as a dynamic analysis. The LAO never reports dynamic numbers.

The property tax basis on the San Francisco condo would be negatively impacted but the Fallbrook property would be positively impacted. For me, that sounds like, at the very least, a neutral number. What do you think?

San Diego County already accepts property tax basis transfers. Prop 5 would allow that transfer to exist across the entire state. There might be individual losses, but there will also be individual gains. The ability to help seniors move into a home better suited to their needs without facing dramatically higher property taxes, just makes common sense to me. The fact that this proposition also helps severely disabled people as well as disaster victims, makes it a winning proposition.

I’m asking you to spread the word, so we can pass this now.

Prop 10 seems to have an accurate message in the media and in the booklet. The simple fact is that Prop 10, if passed, will mean fewer rental properties because there will be no incentive for builders to create more housing. Less housing will result in higher rents on those that do exist. It will also impact every rental property, not just those owned by “big corporate landlords” but those owned by you and me. At a time when housing availability and affordability is critical, we can’t afford to do anything that will make that situation worse.

I hope this article has provided solid trustworthy information that will encourage you to vote yes on Prop 5 and vote no on Prop 10. Please tell your friends to do the same. Prop 10 seems to be on solid ground, but Prop 5, is going to need everyone’s help to push it over the finish line. Both will have a big impact on real estate availability and affordability which is the biggest issue the state has faced in generations.

Kim Murphy can be reached at [email protected] or (760) 415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.