Do progressives support gentrification?

Written by Apartment Management Magazine on . Posted in Blog

Support is growing for the idea that parents can help their families climb the economic ladder by building generational wealth through property ownership. Surprisingly, this support has even been spotted in the opinion pages of the Los Angeles Times.

It’s surprising because the Times has previously taken a highly negative view of families being able to pass along intergenerational wealth in the form of real property. In a lengthy 2018 article about the effect of a voter-approved measure that allowed parents to transfer property to their kids without reassessment and a tax increase, Times reporter Liam Dillon focused almost exclusively on how the measure had benefited some very wealthy families. In particular, he objected to actors Jeff Bridges and Beau Bridges renting the Malibu home they inherited from their father, actor Lloyd Bridges.

The article complained that “The inheritance tax break . . . has allowed hundreds of thousands – including celebrities, politicians and out-of-state professionals and some of California’s most prominent families – to avoid paying higher taxes.” The article paid scant attention to the vast majority of property owners, ordinary people who inherited the homes their parents worked for 30 years to pay off.

The L.A. Times editorial board called for the elimination of the parent-child transfer protection, asserting that “there is no compelling public purpose or societal good in passing tax breaks through generations.”

Given its hostility to the constitutional protections that helped to preserve intergenerational wealth, we were surprised that the L.A. Times recently ran an op-ed piece with a very different view from their own columnist, Erika D. Smith. She wrote, “Now, all of a sudden, Black people who grew up poor or working class and managed to buy a modest home in the ’60s and ’70s — and, in some cases, pay it off — are finding that they own property that’s extremely valuable. In many cases, it’s a first for their families, this prospect of passing along real wealth to the next generation. After all, it’s one thing to inherit a house worth $350,000 that needs $100,000 worth of work. It’s quite another to inherit the same house, but it’s now valued at $1 million. There are only a few cities in the country where that’s even possible for Black people.”

Unfortunately, the children inheriting those million-dollar homes will receive a new tax bill along with the sympathy cards. The Times got its wish last November when Proposition 19 was narrowly approved, following an ad campaign that sold it as helping wildfire victims, disabled people and seniors. Many voters didn’t realize that Prop. 19 also repealed the parent-child transfer exclusion from reassessment that had been in the state constitution since 1986. Now, with only a few exceptions, property is reassessed to current market value when inherited.

That’s why the Howard Jarvis Taxpayers Association has put forward a ballot initiative, the Repeal the Death Tax Act, that would once again allow parents to transfer a home, and a limited amount of other property, to their children without triggering property tax reassessments.

HJTA is the organization that put Proposition 13 on the ballot in 1978. It is still wildly popular for the protection it provides from sudden and shocking tax increases when the market value of property rockets higher. Under Prop. 13, property owners have the security of knowing the assessed value of their property can rise no more than 2% per year.

Recently, this column referenced the U.S. Supreme Court’s 1992 ruling in Nordlinger v. Hahn, which upheld the constitutionality of Proposition 13 against an Equal Protection challenge brought by progressive interests. Prop. 13, it was alleged, violated the United States Constitution because it protected longtime California homeowners from new tax assessments based on the current market value of their homes. This created a disparity relative to recent homeowners who moved into the same neighborhoods more recently.

The high court rejected the challenge, ruling that Proposition 13 advanced the “legitimate interest in local neighborhood preservation, continuity, and stability,” and that Prop. 13 restructured the state’s tax system to one that discouraged “rapid turnover in ownership of homes and businesses, for example, in order to inhibit displacement of lower income families by the forces of gentrification, or of established, ‘mom-and-pop’ businesses by newer chain operations.”

The parent-child transfer exclusion from reassessment promotes that same “local neighborhood preservation, continuity, and stability” by enabling families to keep property instead of being forced to sell by the shock of a higher tax bill.

It’s good to see the L.A. Times finally finding religion on the importance of the intergenerational transfer protection, especially for minority communities.

Better late than never.