STATE CAN EASE BURDEN FOR FIRST-TIME HOME BUYERS.

Byline: Audra Strickland 

FOR most families, owning a home is a vital component of the American dream. However, with the median home price in California at almost half a million dollars, the dream of homeownership for millions of Californians quickly turns into a nightmare. Finding money for the down payment is difficult enough, but add to that home price the cost of homeowner's insurance, private mortgage insurance, property taxes and association fees, and you have the worst housing crisis in our state's history.

California's housing problems are not a recent creation, with the most sweeping reforms dating back to the Proposition 13 revolt of the 1970s. The beginning stage of the 1970s property tax revolution was the creation of the Homeowners' Tax Exemption. The exemption allowed homeowners to exempt the first $7,000 of the home's purchase price from their property tax bill. Such an exemption gave families roughly a 25 percent reduction in their property tax bill.

Yet, as California's home prices have risen astronomically, the Homeowners' Tax Exemption has remained static.

Compare the average real estate transaction of today with that of 1972, the last time the Homeowners' Tax Exemption was increased. In 1972, the average home sale price was $28,810; today, the average down payment alone is $80,000. With today's down payment almost three times as much as the entire cost of a home in 1972, it is clear that what was once major tax relief has quickly become a meaningless exemption.

Clearly, the Homeowners' Tax Exemption has not kept up with California's explosive real estate market. While California's current housing crisis has many causes - from increased home production costs to decreased new housing starts - the state of California should not be adding to home buyers' troubles. California's current property tax system makes it difficult for would-be first-time homeowners to achieve their dream.

In order to make homeownership more affordable, I have introduced Assembly Bill 62, which would reduce the tax burden for first-time homeowners. Assembly Bill 62 would increase the property tax exemption specifically for first-time property owners from a measly $7,000 to 25 percent of the home's purchase price. By increasing the property tax exemption by an average of 1,500 percent, more families will be able to afford their first home.

Preliminary estimates reveal that a 25 percent exemption would translate to an average annual tax savings of over $1,200 for first-time buyers. While reducing property taxes is music to struggling taxpayers' ears, the thought of decreased state revenue at a time of a major budget deficit can make any state and local government official shudder.

Yet, increasing the Homeowners' Tax Exemption does not necessarily mean less tax revenue for the state. In fact, making homeownership more affordable would encourage new housing starts, adding more properties to the state property tax rolls. In addition to the property taxes gained from new home purchases and new homeowners, the additional real estate transactions would increase state revenue by re-evaluating property taxes.

Lowering the tax burden for first-time buyers would help make homeownership a reality for thousands of Californians. For young families, the hardest property purchase is the first purchase. Saving enough money to buy a home is a foreboding task. However, once individuals have investments in the real estate market, they are able to use that equity to purchase other homes in the future.

Transforming California's families from home renters to homeowners builds equity in California's future. While California's housing crisis will not be solved by lower property taxes, re-evaluating the Homeowners' Tax Exemption is definitely the first step in housing reforms. Buying your first home can be an overwhelming task; the state of California must find ways to make that arduous task a little easier.