A housing slump that’s erased millions in equity will mean lower
property taxes for more than 10,000 Santa Clara County homeowners
this year.
Gilroy – A housing slump that’s erased millions in equity will mean lower property taxes for more than 10,000 Santa Clara County homeowners this year.
While that might strike cash-strapped Silicon Valley residents as good news, it also means school districts, cities and other agencies will lose millions of dollars in revenues.
“It means less money for everyone,” said David Ginsborg, deputy to the Santa Clara County Assessor. “And it’s not necessarily good news for homeowners. Nobody wants to be losing equity.”
Last year’s tax roll of $265 billion included a 9 percent increase from the year before. This year, the increase is expected to be 7.5 percent.
“It indicates a softening of the real estate market,” said Santa Clara County Assessor Larry Stone. “Properties purchased in the last two or three years have declined in value.”
In California, Proposition 13 limits property taxes to 1 percent of a home’s value. The value is based on the original purchase price, plus a 2 percent annual increase for inflation.
When the market causes a home’s value to dip below the original purchase price, Proposition 8, passed in 1978, allows for rollbacks.
Last week, the Santa Clara County Assessor’s Office mailed 466,614 notification cards to property owners to show taxable values of their homes, buildings and lots.
In Gilroy, 524 property owners will pay lower taxes this year, according to the county.
In Morgan Hill, 275 homeowners will see a decline.
The softest real estate market in a decade is leading cities to make conservative assumptions in their budgets.
“I still see growth in property taxes, but I’m expecting it to be moderate for the next year,” said Morgan Hill Finance Director Jack Dilles.
Gilroy finance officials were unavailable Thursday to provide statistics. This year, Morgan Hill officials are estimating a 4.2 percent increase in property taxes. Last year, the city budgeted for a 5 percent increase.
But the effects could be more widespread. Dilles said people spend less money when homes lose equity, a psychological factor that results in less sales tax revenue.
The economic downturn reflects a cooling period in 1995 when close to a third of the county’s residential properties were adjusted for lower taxes.
“A timeline is difficult to do, but it’s definitely a cycle,” said Peter Gallo, president of Gilroy-based Gallo & Gallo Real Estate Appraisals, Inc. “We’ve seen this before … it’s definitely a buyers’ market.”
Until the economy improves enough to allow more people to afford new homes, along with the property taxes that go with them, Gallo said the market will remain cool.
He pointed out on a $1 million home, the owner would pay about $1,000 per month in property taxes the first year.
“For people to afford that,” he said, “they need
to have the jobs to pay for it.”
