Prop. 19’s property tax transfer a ‘godsend’ for Southern California seniors

At least 8,900 property tax transfers under Prop. 19 have been granted by assessor in Los Angeles, Orange and Riverside counties.

By JEFF LAZERSON | jlazerson@mortgagegrader.com | MortgageGrader.com | June 05, 2023

Article originally posted in Orange County Register on June 01, 2023.

Bruce and Teresa Steele of Rancho Palos Verdes wrote a heartfelt and thoughtful email to me last Sunday about how the merits of Proposition 19 hugely helped them. They told me that another column that looks at its benefits would be good for readers.

You see, Prop. 19 allows homeowners 55 and older, the severely disabled or the victims of a wildfire to move their lower Prop. 13 tax base up to three times anywhere in California.

Before the law was enacted in 2021, homeowners only got one base tax transfer and it only worked if the new home was of equal or lesser value. Also, only a handful of counties at the time allowed the tax transfer. Today, owners can buy up with the price differential added to their property tax rate.

Here’s an abbreviated version of the Steeles’ story, based on email excerpts and a phone interview with Bruce Steele.

“For my wife and I, Prop. 19’s relief for retirees who want or need to change residences was a godsend,” Bruce said. “When we retired, we moved into a west Torrance neighborhood (in 2014) from a Redondo Beach townhouse. We thought it would be the last one we would ever move to. We were wrong.”

Bruce explained that shortly after they moved into the townhouse, local parents found an elementary school access point by the Steele’s home, which became flooded with traffic twice a day during the week. His neighborhood, Bruce said, became a cut-through street “subjecting us to rude and dangerous drivers.”

When Prop 19. was enacted, the Steeles were able to sell their Torrance townhome and buy a home in Rancho Palos Verdes, for which they paid $1.9 million. They bought the townhouse in Torrance for $950,000 and sold it in April 2021 for $1,660,000.

“With the help of Prop. 19 and the sale of some Oregon property, it did not create a property tax obstacle to our move,” Bruce said. “Otherwise, we might have had to move to a less desirable location or leave California.” He noted their townhouse was bought by a young family with children.

So far, thousands of homeowners age 55 and older in Southern California have taken advantage of Prop. 19’s tax-transfer benefit since the law was enacted.

More than 2,400 homeowners in Los Angeles County have been assessed and granted a tax transfer, according to Stephen Whitmore, public information officer at the county’s Office of the Assessor. There are 400 pending with the appraisal team now, he said.

The assessor’s office receives about 100 new transfer requests per month, Whitmore told me.

Orange County’s total transfers to date are approximately 4,520 with about 200 new transfer requests each month, said Neal Shah at the Orange County Assessor’s Office. The office has a backlog of 91 transfers.

In Riverside County, transfers total 2,009 with an average of 80 new monthly transfer requests, according to Sean Downs, chief appraiser at Riverside County Assessor-Clerk-Recorder. San Bernardino County officials could not provide any data by press time.

The above transfer data, by the way, excludes grandparent or parent/child transfers eligible under Prop. 19.

There are a few distinctions regarding the tax transfer. Homebuyers must file for the tax exemption in the first year of a new purchase — it’s not automatic. You have up to three years to file the base year transfer papers with your county assessor. The good news? There is no price cap with respect to the new home compared with the former home’s value.

If you are buying down in value “or equal or lesser value,” then the original home’s factored base year value may be transferred to the replacement home without any value adjustment.

You also can buy your up-leg residence first and then sell your former primary residence. Or, you can sell your departing residence first and then buy your up-leg home, so long as either of these is accomplished within a two-year window.

Here’s another example: A homeowner sells their Laguna Niguel home for $1 million with a factored base value of $500,000. Within the first year of the sale, the former Laguna Niguel resident buys a Newport Beach home for $2 million.

Here is the math: $1,000,000 x 105% = $1,050,000 (if the replacement residence is bought in year two, then you factor 110%). Take the full cash value of the replacement home of $2 million minus the adjusted cash value of the original property or $1,050,000. The difference is $950,000. Now add the $950,000 difference to the base value of $500,000. Your new property tax base is $1,450,000. That’s not bad when you consider the homeowner could have been paying property taxes on a $2 million home. So, thank you Prop. 19.

Whitemore also noted that if a senior over the age of 55 receives a property tax benefit due to Prop. 19 and then later moves out but continues to own the property, then that home will continue to enjoy Prop. 13 protections.

The California State Board of Equalization has a wealth of information at boe.ca.gov/prop19. You also can contact your county assessor’s office to clarify any questions.

Mortgage rates

The average long-term U.S. mortgage rate climbed this week to its highest level since November.

The average rate on the benchmark 30-year home loan rose to 6.79% from 6.57% last week, according to Freddie Mac. A year ago, the rate averaged 5.09%.

It’s the third consecutive rate hike, lifting the average rate on a 30-year home loan to its highest level since it surged to 7.08% in early November.

The average rate on 15-year fixed-rate mortgages, popular with refinance loans, rose to 6.18% this week from 5.97% last week. A year ago, it averaged 4.32%, Freddie Mac said.

The Associated Press contributed to this report.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.

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