Proposition 8 was approved by voters in November 1978, five months after they overwhelmingly passed Proposition 13.
While Proposition 13 was intended to protect property owners in a time of rapidly increasing housing values, Proposition 8 was intended to give temporary relief to those who saw their home values reduced in a declining market.
Proposition 13 put a cap on property tax increases, while Proposition 8 allowed for a temporary property tax reduction under certain circumstances.
Under Proposition 13, taxes on property are one percent of the current value on the assessor’s books. This value is computed as the base value, usually the purchase price, increased by two percent in each subsequent year under normal market conditions. (Proposition 13 allows for this modest annual increase in assessed value to account for inflation.) This is called the Proposition 13 trended value.
Proposition 8 allows for a temporary decrease in the trended value (and taxes thereon) when the market value of a home declines to less than the assessed value on the assessor’s books. Homeowners most likely to fall into this category are those who bought their properties just before a substantial decline in real estate prices.
When the property value is restored due to increases in the market, the assessor can increase the taxable value, but again, never more than it would be if there had not been the temporary reduction. While this means homes that received a temporary reduction may experience an increase of greater than two percent in a single year, the Proposition 13 trended value is always the maximum amount on which the tax can be applied.
Basically, Proposition 13 provides a permanent ceiling on what the assessed value can be; but due to Proposition 8, the floor under the ceiling can move up and down.
While the tax reduction on qualified homes is temporary, the money saved by the homeowner during the reduction is permanent. Proposition 13 continues to protect all property owners.