Your Real Estate Expert for Berkeley and Beyond
“Marilyn is exceptional. Her knowledge base, enthusiasm for her job, professional ethics, organization, sensitivity to our aesthetic requirements, loyalty and gentle perseverance set her apart.”
-- Bill and Carol Seidel
Marilyn Garcia, PhD Broker Associate, Realtor® CA DRE LICENSE #01355514
The Grubb Company 1656 Shattuck Avenue Berkeley, CA 94709
Direct: (510) 390-5406
REAL ESTATE ANSWERS: How are property tax assessment transfer rules changing due to Prop. 19?
How are property tax assessment transfer rules changing due to Proposition 19? If you are one of the many people in California who at some point considered moving but decided not to because your property taxes would increase sharply, you could be in luck now. Proposition 19, which passed in the last election and goes into effect April 1, 2021, allows a homeowner who is 55 or older, severely disabled, or whose home was substantially damaged by wildfire or natural disaster to transfer their property tax assessment to a new replacement home with fewer restrictions than is currently the case. [...]
REAL ESTATE ANSWERS: What’s changing as a result of the Berkeley measures on the 2018 ballot?
There were 2 local measures on the November 2018 ballot that were approved by voters that will impact local real estate going forward. The first was Measure P, which passed with 72% of voters saying yes. Measure P increases the Berkeley city transfer tax on property sales at prices over $1.5M, from 1.5% of the sale price, to 2.5%. Property sales at prices of $1.5M or less will still be taxed at the old rate of 1.5%. The measure says that the funds raised are intended to be used for “general municipal purposes such as navigation centers, mental health support, [...]
REAL ESTATE ANSWERS: How are property tax assessment transfer rules changing due to Prop. 19?
How are property tax assessment transfer rules changing due to Proposition 19?
If you are one of the many people in California who at some point considered moving but decided not to because your property taxes would increase sharply, you could be in luck now. Proposition 19, which passed in the last election and goes into effect April 1, 2021, allows a homeowner who is 55 or older, severely disabled, or whose home was substantially damaged by wildfire or natural disaster to transfer their property tax assessment to a new replacement home with fewer restrictions than is currently the case. Here are the main ways the rules will be different when it goes into effect:
(1) Currently, to be eligible for an assessment transfer, your new property must be either in the same county as the home you sell, or in one of the very few counties that allow transfers in from other counties. Under Prop. 19, your new residence can be anywhere in the state.
(2) Under the current rules, you can only transfer your assessed value one time. Under Prop. 19, you can transfer your assessed value up to three times (or potentially more for those who lost a home to fire).
(3) Under the current rules, your new property must be of “equal or lesser value,” or else you do not qualify for a transfer. Under Prop. 19, the new property can be of any value. If you pay more for your new home than what your old home sells for, you keep your old tax assessment for the portion of the new property up to the value of your old property, and the amount over is added to your tax base. Here’s an example. Suppose your old house sells for $1M, and the assessed value on that property was $500K. If you qualify for a transfer and buy a new home for $1.2M, the assessment on the new property will be $700K (your old assessment of $500K on the first $1M, plus the amount over the value of your old house, $200K). If you buy a property that is of equal or lesser value, you keep your old assessment with no adjustment. To complicate things a bit more, it may end up being the case (as it is now) that there is an inflation factor if you sell your old property first. Under current rules, you can actually spend 5% more than the sale price of your old property in the first year, or 10% more in the second year, and still keep your old assessed value. Whether this will be the case under Prop. 19 is yet to be completely determined.
There are, of course, some restrictions. To do an assessment transfer at all, you need to be 55 or over, severely disabled, or have lost a home to wildfire or natural disaster. You have to buy your replacement home within two years of the sale of your previous home, and both properties have to be your primary residences. You can, though, buy the new property before selling the old property, or vice versa.
Prop. 19 is a great opportunity, but if you’re thinking of taking advantage of it, be sure to talk to a qualified California real estate attorney and/or a professional tax advisor about how this applies to your specific situation. While you’re talking to your tax professional, make sure you also discuss what capital gains taxes may be triggered by a sale.
REAL ESTATE ANSWERS: What’s changing as a result of the Berkeley measures on the 2018 ballot?
There were 2 local measures on the November 2018 ballot that were approved by voters that will impact local real estate going forward.
The first was Measure P, which passed with 72% of voters saying yes. Measure P increases the Berkeley city transfer tax on property sales at prices over $1.5M, from 1.5% of the sale price, to 2.5%. Property sales at prices of $1.5M or less will still be taxed at the old rate of 1.5%. The measure says that the funds raised are intended to be used for “general municipal purposes such as navigation centers, mental health support, rehousing and other services for the homeless, including homeless seniors and youth.” It also establishes a Homeless Services Panel of Experts to recommend services.
Berkeley now has the highest transfer taxes in the state except for properties that sell for more than $10M in San Francisco or Richmond. San Francisco properties that sell for less than $10M have a lower transfer tax than in Berkeley. In Richmond, properties selling for less than $3M have a lower transfer tax, and properties in the $3M-$10M range match Berkeley’s 2.5% tax.
As a result of Measure P, I think we’ll be seeing a real discontinuity in the market at $1.5M. The difference between a sale at $1,500,000 and a sale at $1,500,001 is an extra $15,000 in transfer taxes! I expect that a lot of buyers who might have made an offer in the low $1.5M range will decide instead to not go over $1.5M. Since the city transfer tax is typically split 50/50 between the buyer and seller, both parties have an incentive to keep a sale price under that figure. Buyers will be trying to find creative ways to sweeten their offer in a multiple-offer situation without crossing that threshold. For properties valued well above $1.5M, the buyers will just have to factor in the higher costs (and the sellers the lower proceeds).
The other local real estate measure that passed was Measure Q. Measure Q was written to address how Berkeley rent control would proceed if the statewide proposition to repeal the 1995 Costa Hawkins Rental Housing Act passed. The statewide proposition did not pass, so Costa Hawkins is still in effect and most of Measure Q ended up being not relevant. (You likely saw this when you voted in November, but if you’d like a refresher, Costa Hawkins most notably prevents rent control from being imposed on single family homes and condominiums, allows rents to be reset to market rates when a unit is rented to new tenants, and prevents rent control from being imposed on units constructed after February 1995.)
However, one part of measure Q, intended to encourage construction of new accessory dwelling units (ADUs), will go into effect. For properties with one legal and permitted ADU, if the owner resides on the property, the rental unit will be exempt from rent and eviction controls. The exemption will apply to tenancies that started November 7, 2018 or later.
Your Real Estate Expert for Berkeley and Beyond
“Marilyn is exceptional. Her knowledge base, enthusiasm for her job, professional ethics, organization, sensitivity to our aesthetic requirements, loyalty and gentle perseverance set her apart.”
-- Bill and Carol Seidel
Marilyn Garcia, PhD Broker Associate, Realtor® CA DRE LICENSE #01355514
The Grubb Company 1656 Shattuck Avenue Berkeley, CA 94709
Direct: (510) 390-5406