Real Estate Insights

April 2025

A quick 4 minute read

Fun with Property Taxes

Love 'em or hate 'em, all homeowners must pay property taxes. For most of us, they represent one (actually, two) of the biggest checks that we write every year. Beyond grumbling about writing large checks though, do you know the interesting history of property taxes and where the money actually goes? Well, read on!

According to my research, the first property taxes in California date back to 1850. However, they really become interesting on June 6, 1978, when 65% of California voters passed Proposition 13. Prop 13, the People's Initiative to Limit Property Taxation amended the California Constitution in two important ways:

1. Property taxes were limited to 1% of a property's assessed value as of 1976 - allowing for reassessment when a property changes hands or undergoes new construction.

2. Annual property tax increases cannot exceed 2% per year.

The impact of this is that longtime homeowners pay substantially lower property taxes than more recent homeowners. For example, we have owned our home for about 18 years, and we most certainly have benefited from the 2% cap on property tax increases. And our neighbor who has owned her home for 60+ years has really benefited. Her property tax bill is about 1/8 as much as our "not nearly as bad as it could be" bill! (Fun fact - you can look up anyone's property tax bill using your county's secured property tax website).

That's the quick history, but where does the money go? While it varies a bit by county, roughly 50% of our property tax dollars go towards local K-12 schools - and all of our property values benefit from having strong schools. Our respective counties and cities are the next largest recipients of our property tax dollars, each receiving less than half of what our local schools receive. Personally, I feel a little bit better knowing that our money is feeding back into those organizations and services that we actually utilize and rely on.

Prop 13 property tax limitations are not without controversy though. With schools seemingly always operating under very tight budgetary constraints and constantly seeking new/additional revenue sources, Prop 13 has come under fire as substantially limiting school funding. Proposed changes to Prop 13 do come up periodically but have so far been unsuccessful. If you want to learn more, google "CA Prop 15" and read up on the failed split roll property tax initiative from 2020.

If this article has you thinking, "where can I go to escape property taxes?", Hawaii might be your best option. According to Rocket Mortgage, Hawaii has the lowest effective property tax rate in the country. You will definitely want to avoid New Jersey though since they have the highest property tax rate! And California? We rank 19th, so, yeah, way better than New Jersey's effective rate of 2.23%!

Finally, if you just can't get enough of this, at UCLA you can take Law 536 - Proposition 13: Law, History, and Politics, a 3-unit semester-long class! Search results can be a little too specific sometimes...

Local Market Trends

We have access to a tremendous amount of real estate data, most of which is way more current than you read in the press. If you want to take a deeper dive into the latest numbers, start here:

San Mateo County Real Estate Report

Santa Clara County Real Estate Report

Links not working? Email jbarman@compass.com and I will send you a PDF of the same info.

Want to see the data for a specific city? Let us know and we will gladly forward that along!

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Janie and John Barman

DRE #01270223 & #01281597

Realtors®

M: 650.759.1182

jbarman@compass.com

JanieandJohn.co