Younger residents and families assume enormous financial risk to live in Berkeley. Many assume this risk to live close to family members and relatives. With an average home price of around $1.2 million, it is common for new homebuyers to empty their retirement accounts, receive loans from family members and commit 50-70% of their income toward housing costs. The Republicans’ war-on-California will make matters worse as these residents will lose critical state and local income and property tax deductions this April tax season, now with deductions capped at $10,000. To live in Berkeley, many new buyers continue to sacrifice investments in retirement and their children’s college fund.
Mayor Jesse Arreguín and the City Council are now asking these residents to assume additional costs in Measure O — a 36-year $270 million bond ($135 million + interest). Measure O taxes residents based on the assessed value of their home. Newer residents would be taxed at their purchase price, with their cumulative out-of-pocket cost over the life of the bond measure being on the order of $20,000. In his campaign to sell Berkeley voters on measures O and P, Arreguín states:
“Measure O would cost approximately $97 per year for a home with the city’s mean assessed valuation of $425,000 and continue for 36 years.”
This argument obscures the inconvenient truth that newer residents will pay 3-10 times more over 36 years than older residents because their baseline assessment is much higher, and everyone’s assessed value can rise at a rate 2% per year. Residents fortunate enough to have assessments at or below the mean value will see their Measure O tax bill rise to around $350 annually by 2050. Newer residents will potentially see their bill rise to $860 annually. There is no provision in Measure O to cap assessments, so as the table below illustrates, the actual annual costs to Berkeley’s newest residents, based on a 2018 purchase price of $1.2 million, will escalate to more than eight times the mayor’s estimate by 2050 (if housing prices continue to rise rather than drop).
An analysis using ONLY the city of Berkeley home assessments suggest a HIGHER median value approaching $550K not the lower amount of $425K quoted by the mayor. It is important to note that Measure O ONLY impacts Berkeley homeowners and taxpayers. The $425K assessed values are based on owner-occupied single-family residences of 1900 square feet in the cities of Oakland, Albany and Berkeley. A mismatched cohort? A bit deceptive?
As stated, the current new average home purchase prices is nearly $1.2 million. In other words, the existing or older homeowners get whacked with a higher tax on their current and future assessed value and the new home buyers OR future homeowners, (existing renters or newcomers to the area), who enter the home market get whacked to a greater extent by having an initial assessed value significantly higher than the mean. These additional new taxes do not even take into account the soon-to-appear-on-our-tax-bills Measure T1 this coming tax season.
If families who purchase this $1.2 million home, have the option of voting NO on Measure O and could invest their hard-earned incomes for their kids’ college educations and/or their retirements they could have an additional $117,189 to dedicate towards retirement or their children’s education. (7% per CalPERS pension calculations.)
After missing opportunities to make developers fund affordable housing and wasting existing resources on litigation, the mayor is asking Berkeley home buyers for $270 million of their hard earned dollars. By design, Measure O requires younger residents and families to shoulder a disproportionate share of the costs. In the name of affordability, our mayor is making Berkeley unaffordable for working families.
Berkeley does need affordable housing but Measure O is not fair to homeowners currently or in the future. There are other means to an end and, with federal caps looming on our deductibility of state and local income and property taxes, this is just bad business and definitely bad for Berkeley property owners.
Berkeley needs more accountability for pet projects, bond measures and our mayor and City Council need to start listening to their taxpayers’ needs in general. Let us not forget that Berkeley also needs safer streets (less crime), better roads, sidewalks and bike routes that don’t damage your car, bike, or yourself going to the voting polls on Nov. 6.