When it comes to property taxes, California has a unique set of rules that can seem confusing and unfair. Prop 13 caps the amount of property taxes that can be collected in California each year, allowing only a maximum of 2% increase in assessment value per year. This means that if you buy a house for $600,000 in 2023, your neighbor who bought the same house next door for $150,000 in 1993 will pay a lot less than you in property taxes.
This is especially true for those lucky enough to have bought property in the 50s or earlier. Take my coworker, for example, who is an only child and inherited two waterfront homes in the Bay area from his parents. Despite owning probably $10 million in real estate, he pays something piddly in property taxes, like $10k/year.
Now, fast forward 20 years. Your new neighbor will be paying $10k in property taxes, and you will still be paying $5.4k. This can be incredibly frustrating, and it’s easy to understand why. But that’s Prop 13 for you.
The truth is, the same thing that’s happening to you right now is also happening to your future neighbors, who will be saying the same thing you are saying right now. Property taxes are the government’s way of reminding citizens that they never actually own the property.
If you don’t like the rules in California, you can always move somewhere else. Take Texas, for example, where property taxes are increased indiscriminately by 10% every year. But no matter where you go, you won’t be able to escape the fact that property taxes are a reality of life. So, take a deep breath and remember that Prop 13 is here to stay.