Rent vs Buy in California

California's effective property tax of 0.71% is one of the lower rates in the country, but Proposition 13 (1978) caps annual assessed-value increases at 2% for existing owners. New buyers reset to the purchase price, so two neighbors in identical homes can pay very different tax bills based on when they bought. On the median $749,450 home, property tax for a new buyer runs about $443 per month, or $5,321 per year.

Average California rent is $2,400 per month, or $28,800 per year. Statewide rent control under AB 1482 caps annual rent increases on covered units at 5% plus local CPI, with a 10% ceiling. That tempers rent growth on covered properties, which strengthens the renter-side comparison: if your unit qualifies, the projected rent cost in the calculator may overstate what you would actually pay over a 7-to-10-year horizon.

Two additional cost layers do not show up in the state-level numbers. Mello-Roos special assessments, common in subdivisions built since the 1980s, can add hundreds of dollars per month to a homeowner's bill on top of regular property tax. Earthquake insurance is a separate policy from standard homeowners coverage; the California Earthquake Authority offers it, but participation is voluntary. Both belong in the calculator's monthly cost line if they apply to the specific property.

Proposition 13 caps annual increases in assessed value at 2% for existing owners and resets to market value at sale. For a new buyer, that reset is the headline event: the property tax bill jumps from whatever the previous owner paid to whatever 0.71% of your purchase price comes to.

In practical terms, this rewards long-stay ownership. A buyer who holds the home for 20 years sees the assessed value rise by no more than 2% per year, while a renter or short-stay buyer sees market-rate prices reset every transaction. The calculator's compounding works in your favor the longer you stay.

For short stays, Proposition 13 does not change the buy decision much: you reset at purchase and you sell within a few years. For long stays, especially in markets where market values rise faster than 2% per year, the cap meaningfully reduces the long-run tax cost of owning compared with continuing to face rent increases under AB 1482.