Dave Nystrom | Contributed

Homeownership is the cornerstone of the American dream. For many Californians, however, Proposition 19 is turning that dream into a nightmare, making unaffordable housing more unaffordable.

The deceptively named “Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act,” aka Proposition 19, was on the California ballot in 2020. Voters who approved it likely had no idea they also gutted their property inheritance rights and longstanding caps on tax assessments established by Proposition 13 in 1978.

In short, all inherited property from parents or grandparents will be reassessed under Proposition 19, save for one narrow exception: move into the deceased’s principal residence within a year, but only the first $1 million in value is waived.

Case in point: In 1968, my father was in the U.S. Navy, assigned to a base in California, and he bought a modest home for $27,000. Reassigned to other duty stations, my folks eventually retired in Maryland, and I moved into the home as their tenant when offered work nearby. The home’s present value is obscene. When inherited, property taxes will skyrocket 1,500 percent, making living in it unaffordable for me and my family. Where do we go? Rentals are expensive. If we sell it, other homes cost the same or more. If we lease it out, the higher taxes offset the rent. Sadly, I cannot afford to inherit my current home and stay.

In fact, the high cost of housing is driving a California exodus and nearly half of residents are thinking of leaving. Without a dramatic increase in the supply of homes, prices will continue rising, and Proposition 19 only adds cost to the crisis. While the upper 1 percent can afford Proposition 19, the other 99 percent of us can’t.

Jeff Prang, the Los Angeles County assessor, has become one of the biggest proponents of fixing the measure, testifying for restoring protections on inherited family homes and businesses to keep them affordable. San Diego County Assessor Jordan Marks agrees: “We have a lot of communities that can’t afford to stay in the same place, and that’s leading to gentrification in many ways. And so we’re seeing these communities be broken up because they can’t afford the increased property taxes.”

Behind the “Potemkin village” of Proposition 19 was the California Association of Realtors, which spent millions lobbying and campaigning for its passage as supposed champions of homeownership and property tax equality. Their real motivation? Your money.

California properties have surged in value to where the median price is approaching an astounding $900,000, worse in cities. San Diego County officially crossed the million-dollar threshold in September 2023. Add in high property taxes and it becomes too expensive to move. Thus, Californians have the longest tenure for homeownership nationwide. Proposition 19 was devised to increase property turnover (ergo more fees to real estate agents and taxes to legislators).

Despite officials, groups and even the Los Angeles Times endorsing “No” on Proposition 19, it passed, barely, with 51 percent of the vote. Rushed into effect by Sacramento’s eager tax authorities in 90 days, the law was not limited to new owners and property transfers after the date of implementation — all prior tax protections on inherited properties, no matter when purchased, were eliminated. Living trusts do not safeguard from reassessment. A cottage industry of estate lawyers has since emerged, marketing complex and costly alternatives.

Three years on, how is Proposition 19 affecting Californians?

More seniors are on the move. Proposition 19 allows those 55 and older to sell their principal residence and apply its lower annual tax basis to the replacement property, plus the difference if more (this includes disaster victims, disabled, and disability-rated veterans). Done up to three times, their sold homes are fully reassessed, increasing taxes and ownership costs for buyers. Real estate agents profit coming and going.

While seniors gain tax breaks, families pay for it by increased property taxes on heirs. It gets worse for millions of small business owners, the backbone of California’s economy. Proposition 19 can make restaurants or other businesses owned by multiple generations of families suddenly unaffordable and uncompetitive due to higher taxes from reassessment when inherited. The result is lost family legacies, gentrification, higher rents and evicted tenants.

Bottom line: The trickle-down cost of Proposition 19 is a slow-motion train wreck deepening the unaffordable housing crisis for Californians. Hoodwinked, the working class is paying the price, losing hard-earned generational wealth to the affluent, while real estate agents, special interests and legislators get a bigger piece of the pie.

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The loss is another blow to organized labor, which also came out on the losing side of the most expensive ballot question in state history. It would have required Uber, Lyft, DoorDash and other app-based delivery services to treat their drivers as employees rather than independent contractors.

Since 1978, California has limited tax increases to 2% a year until a property is sold. With prices climbing at a much higher rate, taxpayers who have held homes and businesses for many years pay far less than what the market value would determine. Proposition 15 would have allowed local governments to reassess commercial and industrial property every three years, while residential property, including home-based businesses, would remain under 1978 rules. The change would have generated up to $12.5 billion in revenue.

Supporters argued a “split-roll” system would help fix inequities that shield wealthy corporations from paying a fair share and deprive tax revenue for public schools and local governments. Several polls released before or during early voting showed the measure ahead, though not by much.

The No on 15 campaign had a simple message: “Stop Tax Hikes,” its red-and-white yard signs read. Rob Lapsley, president of the California Business Roundtable and co-chair of the No on Prop 15 campaign, said the outcome signals efforts to dismantle the 1978 tax system will fail. “From day one, we knew that if voters understood the harm this deeply flawed tax hike would impose on California’s economy and its families, farmers and small businesses, voters would reject this ill-advised effort,” he said. The Yes on 15 campaign said Tuesday that it took on “the third rail of California politics” and achieved a level of support that many thought could never be achieved. “It represented a big step forward for a more equitable and prosperous state, and it provides a framework and base of power for future work and reform to truly take on the biggest challenges of our times on behalf of all Californians,” the campaign said.

As expected, the measure performed far better in Democratic strongholds, including Los Angeles and the San Francisco Bay Area. But it still fell short in many areas that went solidly for President-elect Joe Biden, who endorsed it along with his running mate, U.S. Sen.

Kamala Harris of California. In San Diego County, the state’s second most populous, voters rejected Proposition 15 by 13 percentage points, while backing Biden over President Donald Trump by 23 points. In Sacramento County, No votes outnumbered Yes votes by 7 percentage points, while Biden won by 29 points. The voter-backed 1978 Proposition 13 sparked a nationwide tax revolt and held enduring popularity. Jerry Brown, California’s governor from 1975 to 1983 and 2011 to 2019, said several years ago that Proposition 13, enshrined in the state constitution, is “a sacred doctrine that should never be questioned.”

But backers of Proposition 15 mounted a formidable challenge by targeting only commercial and industrial properties, with exemptions aimed at small businesses. The measure would have raised $8 billion to $12.5 billion a year. After costs to counties to reassess property and some tax cuts for business equipment, local governments and schools would net $6.5 billion to $11.5 billion a year in a 60-40 split. Businesses would have been exempt if the property owner had $3 million or less worth of commercial property in California.

For businesses with fewer than 50 employees that occupy half a building’s space, the changes wouldn’t take effect until 2025. For others, they would begin in 2022. Supporters raised $56.3 million by Oct. 16, fueled by the California Teachers Association, Service Employees International Union and the Chan Zuckerberg Initiative started by Facebook founder Mark Zuckerberg and wife Priscilla Chan.

Opponents raised $60.9 million, led by business groups including the California Business Roundtable and the California Farm Bureau. Another ballot measure that would allow homeowners who are 55 and older, disabled or wildfire victims to transfer a primary residence’s tax base to a replacement home was narrowly ahead.

-ELLIOT SPAGAT Associated Press

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