Mello-Roos taxes and even 1915 Act Assessments can dramatically increase the overall property tax rate, which increases annual costs of home ownership. As shown in this example, for a $300,000 home, a 2% actual tax rate would cost the owner an additional $3,000 per year, or an additional $250 per month.

If this additional expense was known up front, it would be planned for and not present a problem. However, in many real estate transactions, affordability calculations are based on the standard 1.25% rule of thumb, the prior year tax bill, or a tax rate quote from the County. Due to limitations in county systems, however, most counties only quote the ad valorem tax rate, which can be dramatically different than the actual tax rate that includes Mello-Roos, 1915 Act Districts, and other special assessments.

Additionally, in Mello-Roos districts, rates can increase dramatically from year to year based on the charge formula or additional bonds being issued to pay for different phases of improvements. While these formulas and additional bonds were approved by the original property owner(s), the increase may not be anticipated by the new buyer. The differences can result in an unwelcome surprise, or even a cost that makes the home unaffordable.

In addition to increased annual costs of ownership, the property owner also will run the risk of having an asset that is difficult to sell, or one that will sell for a discounted price when it is put on the market in the future.