California Voters Pass Proposition 19, Expanding Property Tax Breaks for Seniors

Voters approved Proposition 19, expanding property tax savings for older Californians who are looking to downsize to a new home — and bring their lower property tax rates with them. The measure's passage also ends an inheritance tax loophole, potentially increasing state tax revenue by tens of millions of dollars, a large chunk of which is expected to go to a dedicated wildfire fund.

“Firefighters across California are thankful to voters supporting Proposition 19," said Brian Rice, California Professional Firefighters president, in a statement. "The wildfires California has experienced in the past few months make it abundantly clear that additional resources are needed. The funds from Prop. 19 will make a difference in fire protection and emergency response to safeguard millions of California homes and lives."

The Associated Press called the contest Wednesday, after the measure received 51% of the more than 15.3 million votes cast. Its passage gives a big victory to the California Association of Realtors, which made major changes to a similar initiative in 2018 that voters rejected by 20 percentage points.

"Voters passed Proposition 19 because it is a win-win for California, providing needed housing and tax relief for seniors, wildfire victims, and generating much needed revenue for schools, fire districts, cities, and counties as they face budget shortfalls due to harmful economic impact of COVID-19,” said Jeanne Radsick, president of the California Association of Realtors in a news release.

The revamped proposal, which includes tax hikes for property heirs, passed the state Legislature with bipartisan support and got the endorsement of Gov. Gavin Newsom and the California Democratic Party.

Proposition 19 packs a lot of ideas into one measure: It would give new property tax breaks to older homeowners who move, increase property taxes for people who inherit property from their parents, and generate additional revenue for fighting wildfires.

Residents 55 and older will now be able to carry their low property tax assessments with them when they move. The exemption is expected to fuel home sales by encouraging empty nesters and other homeowners to downsize to smaller homes without incurring a huge tax increase.

Proposition 19 would also expand those property tax benefits to homeowners who have lost property from natural disasters like wildfires or for those who have a severe disability. But those affected homeowners make up a tiny share, less than 1%, of the total number of households expected to benefit from Proposition 19, according to analysis from the California Budget & Policy Center.

Normally when people in California buy a new home, their property taxes go through the roof. That’s because California assesses property taxes based on the value of your home when you bought it — not its current market value — and those taxes can only go up a certain amount each year. So the longer Californians have owned their homes, the less they pay in property taxes. This is the legacy of Proposition 13, which voters approved in 1978. That landmark measure froze property taxes at 1.1% of the sales price and capped increases at 2% a year for inflation until a property is sold, a system that can create huge savings for people whose homes greatly appreciate.

The second piece of Proposition 19 would remove a tax break for people who inherit property, and opt to rent it out or keep it as a second home, instead of living in it. The nonpartisan Legislative Analyst’s Office estimates it would bring in tens of millions of dollars a year to state and local governments. A big chunk of that revenue would go to wildfire protection and local schools.

Josh Pulliam, consultant for the Yes on 19 campaign, said the 2020 version had “much broader appeal” than the defeated 2018 measure, and resulted from backers of that measure taking into account changes that other groups wanted to the 1978 tax-setting rules, which are enshrined in the state constitution.

“It was about finding common ground, so you ultimately have a better result,” he said.

Supporters raised $63.8 million, including $58.6 million from the California Association of Realtors and $4.9 million from the National Association of Realtors. Opponents raised less than $50,000.

Advertising for the measure saturated airwaves leading up to the Election Day, with a message on how the money would aid in fighting wildfires.

Supporters also said removing these restrictions would encourage more home sales and free up inventory in a state with a severe housing shortage.

Opponents, though, argued that Proposition 19 would serve the interests of the real estate industry, which would benefit from the increase in home sales expected from this measure.

Opponents of the measure, like the Howard Jarvis Taxpayers Association, also said it unfairly taxes heirs who receive property from their parents or grandparents. A handful of newspaper editorials, including the San Jose Mercury News and the Los Angeles Times, argued it also pokes more holes into an inequitable tax code that already benefits homeowners who tend to be whiter and wealthier than renters.

This post contains additional reporting from the Associated Press.