Public Interest Briefs

Stephanie Nordlinger struggled and saved for 15 years to buy a house on her own. She bought that house–only to find that she was paying five times as much in property taxes as some of her neighbors. 

Nordlinger lives in Baldwin Hills, but her plight is familiar to anyone who has bought a home in the past few years. Proposition 13, an initiative passed by California voters in 1987 to prevent unfair taxation of property owners, has done quit the opposite.

“It has benefited people who have stayed put and hurt people who are starting out,” Nordlinger said.

This is because the initiative limited taxes to 1% of a property’s “full cash value,” but established only two ways of determining that value. For people who have owned their homes since 1975, full cash value is the 1975-76 assessment plus a maximum increase for inflation of 2% a year. For people like Nordlinger, who bought her house in 1988, full cash value is the price they paid.

Many commentators ironically call it a “welcome stranger” system, meaning that new property owners are welcome additions to a community because they bear an unfairly high tax burden.

Southern California real estate values have gone up far more than 2% a year, especially in the late 1980s, creating extreme differences in the assessed valuations of houses in the same neighborhood. 

In a study commissioned by CLIPI, economist David Gold found that new homeowners throughout Los Angeles commonly pay property taxes 10 to 17 times as high as neighbors who have owned their homes for many years. In other words, while one family might pay as little as $400 per year in property taxes, their next-door neighbors could pay almost $7,000 for an identical house! The ClIPI study also revealed that new owners of commercial and industrial properties pay 10 to 15 times the taxes of more established owners, while new vacant lot owners pay as much as 250 to 500 times the property taxes paid by long-time wonder of comparable properties,

Nordlinger knew these inequities existed but, as an attorney, she also knew the state Supreme Court had upheld Proposition 13 in 1978. She thought another attempt to overturn it would likely prove futile. But in January of last year, the U.S. Supreme Court strongly hinted it would look favorably on a challenge. The court’s so-called “Allegheny” ruling invalidated a tax assessment system in West Virgnia that was very similar to Proposition 13.

(continued in full brief)