Property being adjusted under Proposition 8:
The graph below is used to illustrate Prop. 8 and 13 values for a house that was originally purchased for $400,000.
|Disclaimer: The graph above is used for illustrative purposes and is not a forecast of future or current market conditions.
The assessed value of the house will be enrolled at the lower of the two: Prop. 13 value or market value (Prop. 8) as of lien date (January 1) for each year. Prop. 13 limits an increase in assessed value to a maximum of 2% per year; exceptions to this rule would include new construction and change of ownership. Prop. 8 allows for a reduction to the enrolled value if and when the market value drops below the Prop. 13 value. Year 1
- $400,000 market value enrolled as assessed value. Year 2
- Even though the market value of the house has dramatically increased within the first year, $408,000 assessed value is enrolled under Prop. 13. Year 3-6
- $365,000, $355,000, $375,000, and $420,000 are respectively enrolled as the assessed value under Prop. 8. Year 7
– The factored Prop. 13 value is reinstated as the assessed value. Though the market value is at $500,000, the Assessor may only enroll the original value ($400,000) plus 2% for every year after the base year was established; roughly $450,000.
Property not being adjusted under Proposition 8:
Unlike the example above, the market value in the example below never drops below the assessed value under Prop. 13; therefore, no adjustment is warranted.