Crystal Schip

In this world, nothing is certain except death and taxes.

Benjamin Franklin

One of the things I enjoy most about being a real estate agent is the cooperation between (most) agents across the city.  Coming from a world that was largely adversarial (oh, trial lawyering), it’s refreshing to experience kindness and collaboration when dealing with colleagues on the “other side.”  There are still days when I have to put my advocacy hat on and “fight” for my client, but for the most part, agents here tend to be solution oriented and want to reach an agreement.

Here in SF, we have a Facebook open forum for realtors.  It’s a place that I visit almost daily to check in on the latest chatter in our market.  Agents ask for vendor recommendations or advice on myriad challenges they are facing in a transaction.  There is an occasional sprinkle of #realtorhumor.  And there is usually some new post that has sparked lively discussion.  I always learn something, and if you’ve been with me for a while, you know I’m addicted to learning.

The other day, I noticed a post about property taxes, and it pulled me in.  Not every post entices me to “view more comments,” but this one did.

To summarize, the author of the post was triggered by a property tax bill for $414 per year that she found in a seller’s disclosure package.  $414 PER YEAR! 

Given that the median sales price for a house in San Francisco is around $1,800,000, the average property tax bill for someone buying a new house is around $21,000 per year.  It would take the older homeowner 50 years to pay what the new homeowner pays in just one year.

You may be asking, “how is that even possible?” Under Prop 13, property is reappraised for tax purposes only when a change in ownership occurs (and a few other situations that I won’t get into here).  Otherwise, the assessed value of a property may increase by no more than 2% per year.  

Side note: The base for property tax is generally equal to the purchase price.  So, if you buy a $2,000,000 home, your base for property tax purposes will typically be $2,000,000.

This means that residents who have been in their homes for decades, or children who inherit a primary residence from parents who were in the home for decades, are paying very low property taxes.  They may be driving on the same roads and sending their kids to the same schools as others who are often paying 10 (or in this case, 50) more times the amount of property taxes.

With the second installment of property taxes due in just days, it was a timely opportunity to reflect on where I stand on the issue, how I’m affected, and in particular, how my clients are impacted. 

In line with my tendencies towards moderation, I see both sides of the debate here.  

Without this rule, many people and families would not be able to afford living in San Francisco.  How could a senior living on social security afford to pay upwards of $20,000 per year in property tax?  How could an artist or a teacher ever afford such a tax bill? Would the city become even further exclusionary to seniors and low and middle income households? Without a doubt.

But I don’t think the post’s author was arguing for raising taxes for the elderly.  I think her post was actually arguing against the rule that allows the tax assessment to be passed down to their children/grandchildren.  

A fair number of my clients and friends’ families have been in San Francisco for decades.  Indeed, my husband is a third generation San Franciscan.  Admittedly, we personally benefit from being able to inherit tax assessments (much less of a benefit now thanks to Prop 19 passing).  Disallowing the inheritance of property tax assessments would directly and negatively impact my clients, my family, and my posterity.

As we all know, it has become increasingly difficult or impossible, for low and middle income households to survive, much less thrive, in San Francisco.  Families who have lived here for generations and take pride in the city are being forced to move because they simply cannot afford it.  Are we a city who only wants the wealthy?  

I certainly do not want that.

On the other hand, my buyer clients are facing a severe shortage of housing inventory.  I have several buyers who are ready to write offers, but simply have nothing to buy.  Then when a home does come up, they are fighting tooth and nail against several other buyers who are equally eager, driving prices (and therefore property taxes) up up up.  (Fortunately, we’ve found homes off market for some of our clients.) Incentivizing people to remain in their homes for decades by keeping property taxes low certainly does not help to solve this supply and affordability problem.  Nor does it seem fair to pay a disproportionate share for resources, such as roads and schools.

As in real estate negotiations (and life), there must be a happy middle ground.  

I think Prop 19 reaches a middle ground, and perhaps that is why it passed.  It allows children to inherit tax assessments for their primary residences, but not for second homes or rental property.  

While I have my own gripes against Prop 19 and how it impacts rent controlled properties (and the owners of them who rely on these properties for their income), I think it is ultimately a step in the right direction towards finding some middle ground on a very complex issue, and that is something I can be thankful for.

What do you think?