Proposition 13 study says property tax benefits vary by caste

by Jean Kuang | CalMaters

While homeownership remains a challenge for people of color in California, a new report argues that the state’s landmark law limiting property tax increases keeps those who receive it from receiving benefits equally. Huh.

Under Proposition 13, a report released today says, white homeowners receive an annual property tax break that is on average 80% more than black homeowners and more than twice the tax break Latino homeowners receive. .

Researchers at the Opportunity Institute and Pivot Learning say this is another way the coveted law contributes to uneven wealth creation in a state with the second-lowest homeownership rate in the country.

The Opportunity Institute is a not-for-profit organization based in Berkeley that promotes social mobility and equality through education. Pivot Learning in Oakland, is an education consulting nonprofit.

Over the past four decades, Proposition 13 has been extensively studied for its effects on government revenue, the housing market and generations of homeowners.

Recently, advocates of reform have been focusing on ways to widen racial inequalities.

Another report published earlier this year focused on Oakland and found that wealthy, white neighborhoods benefited more from the Proposition 13 tax break than poorer, ethnically diverse neighborhoods.

The new findings are part of a broader report arguing that Proposition 13 has led to racial disparities in wealth-building and school funding across California.

Researchers from two education nonprofits used census responses to the American Community Survey to calculate the average property tax burden of different demographic groups of homeowners across the state.

uneven load

He found a lower tax burden for high-value homes in municipalities across the state. They found, on average, a lower tax burden for white households than for black or Latino households.

The study noted that the average white California homeowner pays $3,507 less annually in property taxes than they would at the true value of their homes because of Proposition 13. That’s well above the statewide average savings of $2,800 a year, said Carrie Hanel, senior director of policy and strategy at the Opportunity Institute and an author of the report.

In contrast, black homeowners had an average property tax break of $1,900 a year. Latino homeowners saved an average of $1,560 per year.

The study is based on 2019 census data for the entire state and survey responses in which individual owners reported their home values ​​and the amount paid in property taxes.

Black and Latino homeowners hold disproportionately low shares of housing property.

Between 1980 and 2019, the share of state housing assets owned by Latinos more than doubled from 8% to 16%, the researchers said in the new report. But during that time their share in the population increased by 20 percentage points. The share of black homeowners in home values ​​declined slightly during that time, as did the black population.

In some communities, such as the metropolitan area that includes San Bernardino and Riverside, the majority of new homebuyers are Black, Latino or Asian, Hanel said, although the longest-lived homeowners remain white.

homeowners of color

State officials have stated the goal is to promote homeownership among black families. Lawmakers recently passed a budget measure with a new program to help new buyers reduce payments.

“People of color…they tend to be new homeowners and have low incomes,” said Adam Briones, CEO of California Community Builders, which advocates for wealth-building in communities of color. He was not included in the new report.

“They have faced redlining and other forms of discrimination,” he said. “To the extent that the tax system increases that discrimination, it extends a race-neutral policy that has a race-negative effect.”

Proposition 13 also curtailed the way local governments assessed property values ​​before taxing them.

It has effectively stabilized the taxable property values ​​of long-time homeowners since it was passed by voters in 1978 for fear of a tax increase as home values ​​rose. Appraised values ​​cannot increase by more than 2% annually — much less than the rate at which California homes often appreciate.

For the most part, properties are not revalued at their true values ​​until they are sold — giving new owners a higher tax burden than their more established neighbors.

growing inequality

Supporters say Proposition 13 has helped some disadvantaged communities. Keeping taxable values ​​artificially low is the best way to keep low-income homeowners and homeowners of color out of their homes, said John Couple of the Howard Jarvis Taxpayers Association.

“Proposition. 13 is one of the most powerful forces preventing gentrification and preserving minority neighborhoods,” said Kaupal.

In general, all homeowners get tax breaks through Proposition 13 as long as the homes appreciate.

The most obvious disparity is the higher tax burden borne by younger, new home buyers than by older, longer-established ones.

Haenel said that generational disparities can lead to racial beliefs because not all buyers have equal access to the housing market.

The longer a person holds a house and the higher its value rises, the higher the tax benefit. The report said the homeowners who benefit the most are non-Hispanic white residents.

On the other hand, black and Latino homeowners are more likely to become recent homeowners and to own homes of lower value than white homeowners, the study said, leading to a higher tax burden.

“It’s really about structural inequalities that allowed Proposition 13 to increase inequalities in wealth acquisition,” Hanel said.

A study published in 2009 by Dowell Myers, a professor at the University of Southern California’s Sol Price School of Public Policy, found similar results.

“Proposition. 13 is timeless,” he said. “It’s going to be exactly the same, but perhaps with increasing inequalities.”

Rise in Asian Homeowners

One difference between Myers’ study and the recent results is the increase in housing wealth among Asian Californians.

The share of Asians in the state’s housing wealth has increased from 4% to 19% in four decades, the researchers found in the new report, more than their share of population growth. Researchers suggested that it is driven by high-income East Asian and South Asian migrants.

While Asians in the 2009 study received lower-than-average property tax breaks, the demographic group in the new report now receives higher-than-average property tax breaks, though slightly less than the typical white homeowner.

Now, as in the late 1970s when Proposition 13 was passed, home values ​​in California are skyrocketing.

Any change to Proposition 13 would have to be approved by voters, but it remains popular with most. A poll last month by the Public Policy Institute of California showed that 64% of potential California voters believed Proposition 13 turned out to be a mostly “good thing.”

An attempt to partially rectify this, a measure of revaluation of commercial property values ​​only, was defeated in the ballot box in 2020 with 52% of the vote.

Myers said that if advocates want to reform Proposition 13, they should appeal to older white householders—and he doubts that focusing on generational inequalities will be effective.

But most advocates say there are ways for homeowners to scavenge assessments of market values ​​without triggering huge tax hikes.

The report only suggests an increase in taxes on “extremely high-value properties” or second homes, or a phased increase in tax over time.

State and local governments can also defer tax increases until an owner sells his property.

“We have to be careful,” Briones said, “but my point of view is that it’s not so difficult to amend the policy to take into account the needs of low-income homeowners. It’s all very possible.”

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