California homeowners face rising transfer taxes on sales

Homeowners in California face potential new financial challenges, as increased transfer taxes could threaten their equity. Proposition 13 limits property taxes, but rising transfer taxes are being imposed when homes are sold. California homeowners pay property taxes every year, even with Prop. 13’s restrictions. Without these limits, many would see significantly higher property tax bills. Prop. 13 keeps the tax rate at one percent and limits taxable value increases to two percent annually. This helps homeowners build equity without worrying about high taxes based on current market values. However, transfer taxes come into play when a homeowner sells property. Unlike traditional property taxes, transfer taxes are charged during property sales. In 1978, Prop. 13 aimed to prevent new taxes on property transactions. Yet, a recent California Supreme Court ruling allowed cities to impose transfer taxes, creating a loophole. Many cities now charge substantial transfer taxes, with rates over $45 per $1,000 of property value. Some local governments are using new methods to impose these taxes without needing a two-thirds voter approval. This trend is evident in cities like Los Angeles, where Measure ULA introduced high transfer taxes on all properties worth over $5 million. Although sold as a "mansion tax," this measure affects both commercial and residential properties. The intended revenue for homeless programs has not met expectations, leading to chaos in the real estate market. Even city officials are reconsidering the impact of this measure. As transfer taxes rise, they threaten to reduce homeowners’ equity. Powerful interests are pushing to increase these taxes, aiming to make up for revenue that Prop. 13 previously prevented. Homeowners should remain aware of this growing issue.