About 24,000 single-family homeowners in San Luis Obispo County could see their property taxes increase more than 2 percent next tax year as the real estate market continues to recover and property values improve, according to county Assessor Tom J. Bordonaro Jr.
“This market is not coming back like a lion, and yet it’s not a lamb. It’s somewhere in between,” Bordonaro explained. “It’s more of a slow and steady increase in the county.”
Overall, the county saw an 8 percent increase in home values last year, Bordonaro said, although he couldn’t say just yet which specific cities or neighborhoods have seen a swifter recovery.
The homeowners affected have been enjoying lower property taxes the last few years because the value of their properties fell during the economic downturn.
“My message to everybody is if you have been reaping the benefits of this decline-in-value assessment, you could be seeing your taxes increase more than 2 percent,” Bordonaro said, adding that the actual amount will depend on the individual property.
“I don’t think most homeowners will see any more than (an) 8 percent increase,” he added, although others may see increases higher than that.
According to Bordonaro, property taxes are driven by Proposition 13 and Proposition 8, both passed by California voters in 1978.
Proposition 13 establishes the base year value, the property’s market value at the time of purchase — and caps the growth of that property’s assessed value at no more than 2 percent a year — unless there’s a change in ownership or new construction, or its market value dips below its base year value.
Proposition 8 allows a property to be temporarily reassessed at a lower value, requiring that either the adjusted base year value or the current market value determine the property’s annual assessment.
A decline-in-value occurs when the market value of the property on Jan. 1 is less than the adjusted base year value. “The taxpayer receives the lesser” of the two, Bordonaro said.
According to the county, local home values reached an all-time high in 2006. Then the crash hit.
Although the real estate market dipped in 1992, Bordonaro said, “(That) didn’t hold a candle to what we saw in this last economic downturn.”
At the end of 2007, the county Assessor’s Office began the process of reviewing local residential properties to determine if they had declined in value — reviewing more than 26,000 properties that first year.
The county reviewed those properties every subsequent year and provided tax relief as needed.
By January 2012, the county was reviewing more than 56,000 properties annually.
At that point, Bordonaro said, about a third of those homes were enjoying reduced property taxes because their assessments fell below their base year value.
Since 2007, properties countywide have cumulatively dropped more than $4.5 billion in assessed value, he said.
The turnaround in property values began last year.
By March, Bordonaro said, the residential real estate market had seen a resurgence due in part to first-time home buyers and investors seeking rental properties. (Some condominiums and subdivisions are still dropping in value.)
As a result, the owners of slightly more than 24,000 residential properties assessed below their Proposition 13 value could see tax increases above 2 percent. They constitute nearly a third of the 85,000 or so single-family properties in the county that are 10 acres or less.
Those homeowners will receive postcards explaining the change next week. They also will get annual notifications of assessed value, which include their property’s assessed value for the fiscal year ending June 30, 2014, and the Proposition 13 value for the same fiscal year.
The county Assessor’s Office will also send notifications of assessed value to about 6,000 other residential property owners who could be affected — those who own multi-family housing or properties larger than 10 acres, for example.
Although residential property values are improving overall, Bordonaro said, “The commercial side of things is lagging.”
“Commercial properties didn’t start dropping until after the residential market started dropping, so the recovery will come later,” he said, adding that he’ll have to wait until January to see if there’s a similar recovery in the commercial market.
Find out more
For more information, call the San Luis Obispo County Assessor’s Office at 805-781-5643.