Proposition 13

September 10th, 2013 by Tatyana Levin

capitol

California, specifically Los Angeles is truly a great place for investment.  The weather is constantly and predictably beautiful, the scenery is enviable, and Los Angeles is a destination.  It is a place that families go to vacation and where people from around the world dream of moving and spending their lives.

 

Southern California’s great reputation and natural assets also bode well for Southern California property investors.

 

In 1978, Proposition 13 was passed, and it changed California’s property tax system.

 

Rather than taxes increasing with the wave of a politician’s hand or a quick (or slow vote), property taxes are effectively frozen and can only increase at a rate of 2% a year which means that property taxes are barely more than they were 35 years ago.

 

According to the National Bureau of Economic Research, “as long as property values increase by more than 2 percent per year, homeowners gain from remaining in the same house because their taxes are lower than they would be on a different house of the same value.”

 

Although California misses out on a serious revenue stream which is clearly affecting the state, it certainly has positive consequences for property owners.

 

“It also affects the rental market, both directly because it applies to landlords and indirectly because it reduces the turnover of owner-occupied homes.”

 

Property owners get to be benefit from this law in many ways.  Not only do those who own property have to pay very little in property tax, property owners who rent out units in their buildings enjoy a good rate of renter retention.

 

Until Prop 13 is overturned, property owners can enjoy the benefits.

 

Tatyana Levin

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