How does California Prop 13 affect my multifamily acquisition tax bill?

The three core Prop 13 rules

• •Base year value at acquisition — a sale resets assessed value to the purchase price (or appraised value for non-arm's-length transfers)
• •Annual increase capped at 2% — absent a change in ownership or new construction, assessed value grows ≤2%/yr regardless of market value
• •Tax rate capped at 1% plus voter-approved overrides — most CA CRE pays 1.10-1.30% of assessed value

The underwriting trap

Change-in-ownership events that trigger reassessment

• •Sale of the real property (the standard case)
• •Transfer of 50%+ of the ownership interest in the entity that owns the property — a critical partnership-transfer trap (49% does NOT trigger; 51% does)
• •Creation of a long-term lease (35+ years) — treated as a partial change in ownership
• •Trust modifications that materially change beneficial ownership
• •Under Prop 19 (2020), most parent-to-child CRE transfers now trigger reassessment

Long-term holders build 'Prop 13 equity' — the gap between a 2%-capped assessed value and a faster-growing market value. That gap is real and monetizable during the hold but is lost on a standard sale; a buyer structuring as a sub-50% partnership-interest transfer can sometimes inherit the seller's Prop 13 basis.