The discussion on the state’s housing crisis hosted by the California Realtors Association in Los Angeles last week eventually got around to Proposition 13—as you knew it would. As I reported, there was some agreement among panelists on solutions to the housing crisis but agreement melted away when the famous property tax measure became part of the debate.
Chris Hoene, Executive Director of the California Budget & Policy Center said people can’t scream and yell about housing affordability without taking on the biggest financing problem in the state—the cap on property taxes. He argued local government needs the power to leverage the local property tax to fund essential services.
However, Rob Lapsley, president of the California Business Roundtable, countered that California has the highest taxes in the country. Rather than going after one piece of the tax code, Lapsley said there are other problems with the tax code. As for property taxes, he said, “To take it on as a single issue is absolutely the wrong thing to do.”
Los Angeles City Controller Ron Galperin called Prop 13 a “vexing” issue. He said that when the measure passed in 1978, 39-cents of every property tax dollar in Los Angeles came from residential property owners. Today, he said the figure is over 50-cents.
Yet, research from the California Taxpayers Association (CalTax) indicates the oft-discussed tax shift from commercial to residential property is not as opponents of Proposition 13 claim. Using statewide data from the Board of Equalization, CalTax reported that homeowner property, those properties occupied as a principle resident that claim the homeowner exemption, made up 37.1% of the property tax in 2015-16 down from 41.8% in 1979-80.
Hoene said that residential property turns over more frequently than commercial property justifying a split roll property tax, which would treat commercial property differently than residential property. He suggested phasing in the split roll over time to lessen the adverse affects on the business community.
Galperin acknowledged that one of the complicating issues with raising taxes on commercial property would be its affect on jobs.
Lapsley argued that the split roll talk was motivated by a few businesses that took advantage of the change-of-ownership law. Lapsley said an effort to prevent such a maneuver was stalled by split roll advocates. They want to use the story of a few businesses trying to avoid increased property taxes using the current change of ownership law to undo property tax protections for all businesses, Lapsley explained. He promised to come back with a new bill to fix the change of ownership issue.
While Proposition 13 has protected homeowners from potentially soaring property taxes as the cost of housing continued to rise, the housing crises could bring more pressure on Prop 13. City Controller Galperin noted Los Angeles city is seeing more rentals and less homeownership because of the cost of buying a home.
With a larger non-homeowner majority in place will these voters be as concerned about preserving the Proposition 13 protections?