Few ballot measures have shaped California as thoroughly as Proposition 13. Passed by voters in June 1978 during a period of rapidly rising home values and tax bills, it rewrote the rules for how property is assessed and taxed, and it set limits on how state and local governments can raise money. More than four decades later, its effects are visible in how cities and counties fund services, why neighbors in identical houses can pay very different tax bills and how debates about housing and revenue are framed.
What does Proposition 13 do?
The measure amended the state constitution in several ways. Its main provisions are:
- A one percent cap on the general property tax rate. The maximum tax on a property is one percent of its assessed value, not counting additional charges for voter-approved debts such as school and local bonds.
- A limit on yearly assessment increases. Once a property’s assessed value is set, it can rise by no more than two percent a year, or by the rate of inflation if lower, regardless of how much the market value grows.
- Reassessment on change of ownership or new construction. The assessed value resets to the current market value when a property is sold or when new construction is completed, and then the two percent annual limit applies from the new base.
- A supermajority for taxes. State tax increases require a two-thirds vote of the Legislature, and local special taxes require two-thirds approval of voters.
Together, these rules replaced a system in which assessments tracked market values each year with one based on the price at the time of acquisition, which is why property taxes in California are often described as based on “acquisition value.”
How does assessed value work?
The county assessor sets a property’s assessed value. In San Diego County, the assessor, recorder and county clerk is an elected official whose office keeps property records and determines values, while the treasurer-tax collector sends the bills and collects the money. The assessed value is not necessarily what the home could sell for. If a house was bought in 1995 for a price that has since tripled, the assessed value may be only modestly higher than the original purchase price, grown at no more than two percent a year.
The result is a gap between market value and assessed value that widens the longer someone owns a property in a rising market. Two houses of the same size on the same street can carry sharply different tax bills depending on when each was last sold. Supporters see this as a protection for homeowners, especially those on fixed incomes, who might otherwise be forced out by tax increases. Critics see it as unfair to newer buyers and a disincentive to sell.
What happens when the market falls?
A companion measure on the same ballot, Proposition 8, allows assessors to temporarily lower a property’s assessed value when its market value falls below the Proposition 13 value, as happened after the housing crash of the late 2000s. The assessor reviews such properties each year, and as the market recovers the assessed value can rise faster than two percent until it reaches the Proposition 13 value again. This is why homeowners may receive a notice that their value has been reduced, or increased, in a way that does not match the two percent rule.
What did later measures change?
Voters and the Legislature have adjusted the system over the years. Several changes have created exceptions to the reassessment rule:
- Transfers between spouses and between parents and children have been excluded from reassessment under rules adopted by voters in the 1980s, which have since been revised.
- Homeowners over 55 and some disabled homeowners were allowed to move within a county, and later between some counties, and keep their old assessed value on a replacement home.
- In 2020, Proposition 19 expanded the portability of those benefits for people 55 and older, people with severe disabilities and victims of wildfires and disasters, allowing them to transfer their assessed value anywhere in the state. The measure also narrowed the parent-to-child exclusion, so that inherited homes are generally reassessed unless the child uses the home as a primary residence, with a limit on the value that gets the break.
Because these measures changed the rules in different directions, the system today is a patchwork. Homeowners considering a sale, a transfer or an inheritance should consult the county assessor or a qualified adviser, since the details matter.
How has Proposition 13 affected local government?
The measure moved much of the control over property tax from local governments to the state. Rates are fixed, so cities and counties cannot raise property tax rates by themselves, and the state decides how the property tax revenue is divided among schools, cities, counties and special districts. The effect was especially pronounced for schools, which lost a major local revenue source and became more dependent on state funding, a dynamic that connects to how the state budget is built.
Local governments have turned to other sources, including sales taxes, fees, assessments and special taxes approved by voters. Many of those need a two-thirds vote, a high threshold that has defeated some local measures despite winning a majority. They also have an incentive to favor development that generates sales tax or hotel tax revenue rather than housing, a pattern sometimes called the “fiscalization of land use.” Critics of the system argue that it distorts land-use decisions, while supporters say voters should have a strong say in tax increases.
For San Diego, the effect appears in the budgets described in how the city builds its budget and the county’s finances, which rely on property tax revenue but cannot raise the rate.
What are the debates now?
Proposition 13 remains politically sensitive. Some policymakers have proposed changes to the treatment of commercial and industrial property, which owners tend to hold for longer and which can benefit from the same assessment rules, an idea often described as “split roll.” Voters rejected a split-roll measure in 2020, though similar ideas continue to be discussed. Others have raised concerns about the effects on housing turnover and the affordability for younger buyers. Supporters respond that the measure protects homeowners from sudden tax spikes and has held down the cost of owning a home.
What should homeowners know?
A few practical points apply to most owners. The property tax bill includes the one percent base plus any voter-approved bonds and fees, so the total rate is often a bit above one percent, and it varies by location. Assessed values are available from the assessor, and an owner who thinks a value is wrong can request a review or file an appeal within a time limit. New construction can raise the assessed value for the added portion, a point that matters to those building an addition or an accessory unit, discussed in the guide to accessory dwelling units.
Proposition 13 is a case study in how a single ballot measure can reshape a state’s finances, politics and housing market. Understanding it helps make sense of why California government works the way it does and why proposals to change it provoke such strong reactions.
Sources: California Constitution; California State Board of Equalization; San Diego County Assessor/Recorder/County Clerk; California Legislative Analyst’s Office
