By Alan Pentico, Executive Director, Southern California Rental Housing Association
An initiative passed narrowly by voters in 2020 to protect wildfire victims and seniors has opened the door to massive tax increases that threaten tenants and the roof over their heads. Proposition 19 removed important taxpayer protections from the State Constitution that for 35 years guaranteed parents or grandparents could transfer property to their kids without any change to the property tax bill. The removal of these protections has brought back the death tax to California.
Now, when property is passed from parent to child, it is reassessed to current market value, triggering a huge increase in annual property taxes. Too often, renters find themselves collateral damage to this untimely tax increase.
So, how does the death tax impact tenants? The answer is simple. Take for example Isabella, who rents a house from a “mom and pop” landlord. Her rental home was previously occupied by her landlord, Henry, and he kept it as a small investment property. Henry has personally made repairs on the rental property for more than 40 years and has kept the rent affordable for Isabella and previous tenants. Due to the death tax, when Henry passes away the home will be reassessed, property taxes increased, and his children will receive a huge property tax bill — resulting in higher rent for Isabella or forcing the children to sell the property. Either way, Isabella faces losing her home because of the death tax.
More than half of all renters live in single-family homes, duplexes, or apartment buildings that are owned by small landlords. When these small rental property owners pass away, the death tax will have a significant effect on California’s rental housing market. The sky-high property tax increase resulting from reassessment will lead to many of these properties being sold. For the residents living there, rent may be raised under new management, or a developer may turn it into something else entirely.
Californians already pay the highest rent prices in the country, in addition to the highest gas and among the highest personal income and state sales taxes. The cost of living that Californians endure is astronomically high, and the death tax is an additional burden on beleaguered families.
The housing crisis in California is no secret. With the average home price across the state being over $800,000, renting is the only option for many. The threat the death tax poses to those already struggling to find an apartment or home to rent cannot be overlooked. It threatens the availability of housing for renters by creating a barrier of unaffordability for property owners. If property owners cannot afford to keep their own buildings, their residents face the prospect of rent increases or eviction.
The need to restore fair tax practices has never been stronger. Imposing taxes on grieving families is unjust and the effect on renters is unfair. The Howard Jarvis Taxpayers Association (HJTA) is committed to protecting renters and property owners from the impact of the death tax, which is why they have introduced the Repeal the Death Tax Act.
The Repeal the Death Tax Act will allow parents to transfer their home or rental property after death to their children without an unaffordable tax increase. This will provide security to residents who live in these properties and will protect them from the threat of eviction or increased rent.
This ballot initiative has a broad base of support from leading statewide organizations. Visit www.HJTA.org/RepealTheDeathTax to learn more about the initiative and how you can sign the petition to qualify this commonsense measure for the November 2022 ballot.Alan Pentico, CAE, is the Executive Director of the Southern California Rental Housi