Walk two blocks in Old Town Monterey and you can find a 100-year-old cottage with a property tax bill smaller than the one on the townhouse built in 2015 down the street. Buyers touring both usually assume the older home is just cheaper to hold because it is smaller, or because its assessed value never caught up with the market. That assumption is wrong often enough that it is worth walking through what actually produces that gap, because the answer changes what you should ask before you write an offer on anything described as a "historic property" on the Monterey Peninsula.
The real driver is a Mills Act contract, and it is not a feature of the house. It is a government agreement with a term, a set of obligations, and, as of the last public review anyone has done on it locally, a fairness question that Monterey's own city hall has put on the table.
The Contract Behind the Number
Under California's Mills Act, a city or county can agree to value a qualified historic property using an income approach instead of the standard market approach that applies to nearly every other home in the state. The assessor estimates what the property could reasonably rent for, divides that by a capitalization rate set annually by the state, and lands on a restricted value. The Los Angeles County Assessor explains that each year the assessor compares three numbers: that restricted value, the current market value, and the Proposition 13 factored base year value; whichever is lowest gets enrolled as the taxable value.
For a home that just sold at or near its true market price, that restricted value is almost always the lowest of the three, and often by a wide margin. That is why the mechanism benefits recent buyers of expensive historic property more than it benefits someone who has owned the same house quietly for twenty years. A longtime owner's Proposition 13 base value may already be lower than what the Mills Act formula would produce. A buyer who just closed at current market price has the most to gain, which is exactly the group the program was arguably not designed to subsidize when it was written in 1972.
Casa Boronda and the Question It Raised
As Monterey County Now reported, Monterey has been running its own Mills Act program since 1999, and the city's oldest private residence is a useful case study. Casa Boronda, built in 1817, sold in February 2023 for $3.3 million. At the time, it was one of 60 properties in the city carrying a Mills Act contract.
That same year, Monterey's community development director, Kim Cole, raised a concern about how the program's tax benefits were being used: some Mills Act homes advertised with low property taxes were receiving minor improvements before being resold at a profit within a short window. Her question was how the city should weigh those resales against the program's stated preservation purpose. In December 2023, Monterey and Carmel both paused new applications to study exactly that. Carmel's council voted 5-0 for its moratorium the same month, and separately delayed a pending Mills Act application for the Clinton Walker House, a Frank Lloyd Wright design, over the same equity concern.
Carmel's own planning and development director at the time, Brandon Swanson, put a number on the scale of the benefit: qualified properties in Carmel had seen tax reductions of 50 to 85 percent. As Monterey County Now reported, he also captured why cities are rethinking a fifty-year-old program now rather than a decade ago: in the 1970s, nobody wrote the law anticipating the property values California has today. That review is the most recent public look at the program's future either city has taken, at least based on what local reporting shows. It has not, as far as that reporting indicates, produced a public resolution one way or the other. Anyone counting on being able to apply for a brand-new contract soon should treat that as an open question rather than a formality.
What the Numbers Are Actually Telling You
Zoom out to the county level and a related pattern shows up in the sales data. Across Monterey County, the median sale price for homes that closed in the three months ending in June 2026 was $897,000, down about 2.7 percent from the same period the year before. But the median price per square foot rose 3.3 percent to $595, and the typical home found a buyer in 22 days, down from 37 a year earlier.
Those three numbers together describe a market where smaller, denser homes are trading fast and at a premium per square foot even as the overall median drifts down. That profile fits the compact, older housing stock concentrated in Monterey's walkable historic pockets, Old Town, New Monterey, Oak Grove, and the streets closest to Downtown, better than it fits larger, newer construction elsewhere in the county. A Mills Act contract is one plausible reason a smaller, older home holds its per-square-foot value even with deferred maintenance. It is not the only reason, but it is a variable worth isolating before you conclude that older automatically means cheaper to carry.
Three Things Worth Confirming Before You Assume the Discount Transfers
A listing description that says "low property taxes" or "Mills Act eligible" is not the same as a recorded, active contract in good standing. Before you factor that number into your offer, it is worth confirming a few specifics directly rather than relying on the listing description alone.
First, ask for the actual recorded contract, not just a reference to the property's historic status.
Second, understand that the term is a rolling ten years, as the City of Long Beach's Mills Act information explains, and canceling it early is not free. The City of Ventura's Mills Act program materials describe a cancellation fee equal to 12.5 percent of the property's current fair market value for an owner who cancels a Mills Act contract.
Third, if your plan is to buy an older, non-enrolled home and apply for your own contract later, check the local application calendar first. Monterey County's Mills Act application materials say applications must be submitted before July 1 of the calendar year to be processed that year, and that residential properties valued above $3 million require an additional value cap exception request with its own justification. Given that Monterey and Carmel opened a fairness review on new applications in late 2023, it is worth asking the planning department directly whether that review has changed how new contracts are being considered before you build a tax assumption into your offer.
A Few Questions Worth Asking Directly
Does a Mills Act contract ever expire on its own? Not in the way a lease does. Contracts automatically renew each year, creating a rolling ten-year term.
If a home isn't in the Mills Act program now, can I apply after I buy it? Possibly, but eligibility depends on the property qualifying as historic under local, state, or national criteria, and on the city or county actively accepting new applications at the time you apply. That second condition is the one worth verifying given the recent local review.
Does the tax savings show up the same way every year? No. The savings tend to be largest in the years right after a purchase at current market price.
None of this makes a historic Monterey home a bad purchase. It makes the tax line on the listing sheet a fact to verify rather than a feature to assume. If you are weighing a century-old cottage in Old Town against something newer a few blocks away, the honest comparison accounts for what the contract actually guarantees, what it obligates you to maintain, and where the local policy conversation currently stands.
If you want a second set of eyes on a specific historic listing, or you are trying to figure out what a Mills Act contract on a property you're considering actually says, Boggs Team Realtors has walked Monterey buyers through exactly this kind of due diligence. Contact Peter to talk through what's recorded on a specific address before you factor any tax number into your offer.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
