Do you love the character of a Pasadena Craftsman or Midcentury home but worry about the cost of ownership? If you own or plan to buy a designated historic property, the Mills Act could meaningfully lower your annual property tax bill while helping you preserve what makes the home special. In this guide, you’ll learn what the Mills Act is, how Pasadena administers it, what savings to expect, and how a contract affects a future sale or loan. You’ll also get practical checklists for buyers and sellers so you can move forward with clarity. Let’s dive in.
Mills Act basics in California
The Mills Act is a California program that lets cities and counties enter into contracts with owners of qualified historic properties. In exchange for preserving and maintaining the home’s historic features, you may receive a reduction in property taxes.
Contracts are local. Your agreement is with the City of Pasadena and is then coordinated with Los Angeles County for tax assessment. Most contracts are written for an initial 10-year term and include automatic yearly renewal unless one party takes steps to end it according to the contract.
Tax savings typically arise because the County Assessor may use an income-based approach to determine the assessed value under a Mills Act contract. This method can produce a lower assessed value than a market-based approach. The exact outcome depends on the property and the County’s methodology.
Your obligations under the contract focus on preservation and maintenance. Expect to follow an approved maintenance plan, keep defining historic features intact, and obtain required permits and reviews before you make changes. Many jurisdictions look to the Secretary of the Interior’s Standards for Rehabilitation as a benchmark for appropriate work.
Who qualifies in Pasadena
Eligibility generally starts with designation. Your property typically must be a locally recognized historic resource, such as a City of Pasadena landmark or a contributing resource in a local historic district. Some jurisdictions accept state or federal designations, but local designation is commonly required.
Owner-occupied and income-producing properties can both qualify, subject to Pasadena’s rules. Certain property types may be limited by city policy, and the city may prioritize properties that deliver greater public benefit. Pasadena’s policies can include discretionary elements, so confirm current criteria with city staff.
If you are unsure about your home’s status, start by confirming local designation and whether your property is a contributing resource within a district.
How the Pasadena process works
Pasadena administers its Mills Act program through the Planning and Community Development Department with participation by historic preservation staff. Final approvals typically go to the Historic Preservation Commission and then to the City Council in public hearings.
You can expect a multi-step path:
- Preliminary conversation with preservation staff to assess eligibility and timing.
- Formal application with property photos, description of historic features, and proof of designation or eligibility.
- A proposed preservation and maintenance plan that outlines required work and ongoing upkeep. Estimates for deferred maintenance or planned rehabilitation may be requested.
- Historic Preservation Commission review at a public hearing, followed by City Council consideration.
- After approval, the contract is executed and recorded with the County Recorder. The Los Angeles County Assessor is notified so the tax bill reflects the contract.
From application to recordation, the process typically takes several months. Timing depends on the Commission and Council calendars and the completeness of your application.
What savings you might see
Savings vary by property and county practice. Many owners experience substantial reductions, often in the range of tens of percent of the prior tax bill. Real-world examples frequently show 30 to 60 percent or more, but every case is property-specific.
Here is a simple illustration. If your home is assessed at $1,000,000, your annual property tax might be around $11,000 at roughly 1.1 percent. Under a Mills Act income approach, the assessed value might calculate closer to $600,000, resulting in a lower annual bill and a sizable yearly savings. Your actual results depend on County rules and the Assessor’s methodology.
Because the income method relies on assumptions like rental value, expenses, and capitalization rate, you should ask the Los Angeles County Assessor for an estimate rather than rely on rough math. A qualified appraiser can also help model potential scenarios.
How a contract affects sales and loans
Mills Act contracts usually run with the land. When you sell, the contract and its obligations transfer to the buyer. A sale does not automatically trigger reassessment to full market value. The tax treatment remains under the contract terms unless it is later canceled or not renewed.
On the plus side, Mills Act status can increase market appeal for buyers who value lower carrying costs and preservation stewardship. It can be a strong point in your marketing if the home’s character is a draw.
There are tradeoffs. Preservation obligations and required design review can limit how and when you renovate. Some buyers or lenders may ask for extra documentation or clarity on what is allowed.
Most lenders are comfortable with Mills Act properties. Underwriting focuses on the actual tax bill, so lower taxes may reduce monthly escrow. Some lenders will ask for a copy of the recorded contract, confirmation of compliance, and an estimate of tax savings. It is wise to bring your lender into the conversation early.
Compliance and risks to weigh
You agree to preserve and maintain the property according to your approved plan. You also agree to obtain proper permits and historic review for changes. The City may require periodic reports or allow inspections to confirm compliance.
If you breach the contract, you may face enforcement actions. These can include requirements to correct violations, contract suspension or termination, and potential reassessment according to state and county rules. Consequences can be significant, so take the obligations seriously.
Key risks to consider include underestimating maintenance costs, assuming savings without a reliable estimate, and limiting your buyer pool due to preservation requirements. Balance lower taxes against the cost and responsibility of stewardship.
Due diligence checklists
If you plan to apply as an owner or seller
- Confirm your historic designation status or contributing resource status.
- Schedule an informal meeting with Pasadena historic preservation staff.
- Draft a realistic maintenance and preservation plan with costs and timelines.
- Request a preliminary tax savings estimate from the Los Angeles County Assessor.
- Plan for the public hearing process and align your timeline with Commission and Council calendars.
- Keep records of permits, past approvals, and any recent inspections.
If you are buying a Mills Act property
- Obtain the recorded Mills Act contract, including term and renewal language.
- Review the maintenance plan and any required or ongoing work.
- Ask for recent compliance reports or inspection letters if available.
- Get the current tax bill and, if needed, an Assessor statement showing how taxes are calculated under the Mills Act.
- Confirm with your lender and title company that the contract is recorded and in good standing.
- Understand any planned renovations that may trigger historic review.
- Discuss tax implications with a CPA or tax attorney so you know what to expect at sale.
Smart next steps in Pasadena
- Start with clarity on designation. If your home is not yet designated but appears eligible, talk with Pasadena preservation staff about options.
- Build your scope. Create a practical maintenance plan that preserves character-defining features and sets a schedule for deferred work.
- Verify the numbers. Ask the Los Angeles County Assessor for a Mills Act valuation estimate so you can model savings against maintenance obligations.
- Prepare the file. Assemble application forms, photographs, plans, and estimates early to keep review moving.
- Coordinate your team. Loop in your lender, CPA, and title company early if you are buying or selling a Mills Act property.
Whether you are stewarding a Greene and Greene Craftsman or a crisp Midcentury in the hills, the Mills Act can align your preservation goals with meaningful tax relief. If you want experienced guidance tailored to Pasadena’s process, request a private market consultation with Chelby Crawford. You will get calm, detail-forward advice that protects your interests and your home’s story.
FAQs
What is the Mills Act and how does it reduce taxes?
- It is a California program that allows local governments to contract with owners of qualified historic properties, lowering assessed value via an income-based approach in exchange for preservation and maintenance obligations.
Who qualifies for a Mills Act contract in Pasadena?
- Properties that are locally designated historic resources, such as landmarks or contributing resources in local districts, subject to Pasadena’s program rules and priorities.
How long does the Pasadena Mills Act process take?
- Several months is common, depending on application completeness and the Historic Preservation Commission and City Council hearing schedules.
Do Mills Act contracts transfer to a new buyer?
- Yes. Contracts generally run with the land, so obligations and tax treatment continue for the buyer unless the contract is later canceled or not renewed.
Will my lender finance a Mills Act property?
- Most lenders will, though some may request the recorded contract, compliance confirmation, and a tax estimate to finalize underwriting and escrow calculations.
What happens if you breach a Mills Act contract?
- The city can pursue enforcement, which may include correcting violations, contract suspension or termination, and potential reassessment under state and county rules.
Can you combine Mills Act with other incentives?
- Sometimes. Other programs may complement Mills Act benefits, but many federal rehabilitation tax credits apply only to income-producing properties, so verify eligibility first.
