2018 California Propositions Summary: Property Tax (Prop 5) and Rent Control (Prop 10)

This year, there have been a slew of ballot initiatives throughout the country. So far this year, I have written on two ballot initiatives: Washington state's gun reform initiative and San Francisco's gross receipts tax initiative to fund efforts to fight homelessness. Today, I would like to briefly cover two initiatives coming up in the State of California.

Proposition 5: Property Tax

Proposition 13 was a 1978 ballot initiative that slashed property taxes. The Proposition 5 that is to be voted on this upcoming November would expand the property tax exemption (see below). When older individuals buy new homes, it often means taking on a higher property tax rate. What Proposition 5 would do is expand the removal of the transfer requirement, i.e., continue to pay the rate on the current home instead of the future home. The idea is to create savings for the homeowner. This does, however, deprive the State of tax revenue. According to the Legislative Analyst Office (LAO), the local governments will lose over $100 million annually in the short-run, and possibly $1 billion annually in the long-run. However, the State coffers will have an increase similar to the figure that the local governments lose. Also, allowing for this Proposition would let those 55 and older move more freely, which would be a particular help to those in nursing homes or those on a fixed income. Read more on the Proposition at Ballotpedia.

Proposition 10: Rent Control

In California, there is limited permissibility of rent control through the the Costa-Hawkins Rental Act. If Proposition 10 passes, rent control will expand to free-standing houses, condominiums, and townhouses, as well as housing first occupied after January 1, 1995. As I wrote over four years ago, rent control harms the very people it was meant to help, mainly those in low-income households. The LAO's findings were that there will be a potential loss of government revenue in the tens of millions. The LAO also anticipates lower-quality housing and greater geographical immobility. In all, my hope is that Californians vote "No" on Prop 10.