Prop 13: Should it stay or should it go? Irvine Real Estate – Irvine Homes for Sale

by Robert Mack on January 10, 2011

in Buyers, Latest News, Sellers

Industry insiders are divided over Prop. 13 reform, a prospect raised this past week by incoming Gov. Jerry Brown.

The 1978 measure caps property tax increases at 2% a year so long as you own your home or building. But once the property is sold, its full value is taxed.

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Some industry leaders say Prop. 13 cushions property owners from government raids on their piggy banks. Changing it will hurt property values, they say.

Others say it’s unfair to newer buyers and suppresses transactions that otherwise would occur.

Brown, who was governor when Prop. 13 passed, said he wants to redistribute to cities and counties powers lost to the state after the measure’s implementation.

We asked industry watchers what form any reforms would take and what impacts those changes would have on real estate …

Mike Cocos, General Manager, ERA North Orange County:

“They may have a different tier for commercial property. Prop. 13 came into being in 1978 for a good reason. Property owners were the piggy banks of cities and counties, and they revolted. What will change if Gov. Brown modifies it?

“Some cities like Bell, City of Industry, Vernon, City of Commerce would abuse any change to commercial property tax rate. What will it be based on?  Who gets to change the rates, how often, why?

“Prop. 13 should not be tampered with.”

Mark Schniepp, economist and principal of the California Economic Forecast:

“Despite the sacred cow that it is, Prop. 13 is inherently unfair, and over time, has led to market distortions.

“To avoid property taxes, homeowners remain in their homes longer than normal lifestyle changes would dictate. This prevents housing turnover and causes most of the tax burden to be paid by new homeowners rather than equitably paid by all.

“A reform to gradually increase the property assessed valuation to market value would be in order to bring equity to how the tax base is distributed among homeowners. This reform could be applied gradually to ease the burden of the annual tax increment on assessed valued properties substantially below market value. The spirit of Prop. 13 would still be maintained under this reform because the tax rate would not be altered.

“The real estate market would experience more turnover because the incentive to remain in the home to avoid property tax consequences would be eliminated. This would also be true of commercial buildings.”

via ocregister.com for the complete article

What do you think?

Posted on Irvine Orange County Real Estate Market News

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