People often assume that Prop. 13 yields large benefits for all homeowners, but “that’s just not the case,” said Jacob Denney, co-author of the report and economic policy director at the San Francisco Bay Area Planning and Urban Research Association.
“Where you live within your city matters,” he said. And race and ethnicity matter, too.
For example, Oakland homeowners in white neighborhoods pay taxes on homes that, on average, are assessed at $693,924 below their market value, the study says, resulting in $9,631 per home in property tax breaks.
Homeowners in Latino neighborhoods also pay taxes on homes that are under-assessed, but by an average of $216,430, resulting in about $3,000 in tax breaks per home — a third of the savings in white neighborhoods, according to the analysis.
While the study identifies neighborhoods as white, Black, Latino or Asian, in most cases those races or ethnicities did not make up the majority of the population but represented large proportions of those parts of the city.
More white residents in Oakland benefitted in general from Prop. 13 because more own their homes than other racial groups. White residents make up 28% of the city’s population but represent 43% of its homeowners, the report found.
Latino, Black and Asian residents are more likely to rent, a likely legacy of redlining, Denney said, referring to a banking practice which kept residents of poor and largely minority neighborhoods from obtaining bank loans to purchase or refinance their homes.
“The wealthiest neighborhoods receive the most (tax breaks), which helps them build more wealth for their communities that were already benefiting from lots of wealth,” Denney said.
Added Levin in the report, “Even when people of color do own their homes, their tax savings from Prop. 13 are smaller than those of majority white communities.”
Low property taxes from Prop. 13 also mean fewer tax dollars for Oakland. Critics say removing the proposition would be a gamechanger for the city.
The report found that if Oakland homes were taxed at their current market value, the city would gain an estimated $400 million in annual revenue. That’s more than the city’s current budgets for its transportation, fire, housing and community development, and human services departments combined.
But such solutions are complicated.
Low-income households may be getting a far smaller subsidy, but it’s a subsidy nonetheless.
Doing away with Prop. 13 altogether would have far-reaching implications, including the potential to make property taxes unaffordable for low-income families and retired seniors who rely on a fixed income and low-property taxes to keep their homes, said Susan Shelley, a spokesperson for the Howard Jarvis Taxpayers Association, an organization working to protect Prop. 13.
“You can look at the data any way you want,” she said, raising property taxes would “knock the middle class of California out of homeownership.”
Levin said he hopes for “a system that makes California look like the other 49 states … Every other state does it another way and they do fine.”
Other states have higher caps on property taxes and assessed values, and many have higher rates for commercial properties. Massachusetts, for example, allows cities to tax commercial property at nearly double the rate of residential property, while New York allows for an annual reassessment increase of 6% instead of California’s 2%.
But in California, Prop. 13 remains popular.
A 2018 poll from the Public Policy Center of California found 57% of adults thought the measure was “mostly a good thing,” while 23% believed it was “mostly a bad thing.”
In 2020 a ballot initiative that would have changed part of it by requiring that commercial properties be taxed at their market value lost 52-48%, a difference of more than 600,000 votes.
Denney said, “The conversation we have to have with the people of California is: Is the personal money saved worth it?”
This article is part of the California Divide, a collaboration among newsrooms examining income inequality and economic survival in California.
