Understanding Mello Roos

What Exactly Is Mello-Roos? 

Many prospective homebuyers in California are becoming increasingly aware of the term Mello-Roos when looking to purchase new and used homes. For those that are unfamiliar, Mello-Roos is simply a special tax assessed to homeowners in a community as repayment for bonds used to fund the infrastructure within their community. To home buyers, Mello-Roos often carries a negative connotation, one where the monthly payment for a home will be significantly more than one in a non Mello-Roos community. But is this a fair assessment? We will attempt to answer this question in order to educate any potential homebuyers about Mello-Roos.

Advantages of a Mello-Roos District to Home Buyers

• New schools, parks, recreation centers, etc can be built and funded using the revenue generated from the Mello-Roos income.
• More housing inventory will be created when undeveloped locations are built up.
• Generally speaking, low crime rates and highly desirable new schools are common in Mello-Roos communities.

Disadvantages of a Mello-Roos District to Home Buyers

• Cost of housing may be increased because of the tax, possibly limiting the amount of prospective buyers when it comes time for resale.
• Maintenance of the improvements could be more costly than anticipated.

Quick Mello-Roos Q & A Q: Where Is Mello-Roos Most Commonly Found?
A: In Orange County, CA most cities with new construction will have at least one community with Mello-Roos; however, the southern portion of Orange County is where it is most prevalent. Likely cities might include: Irvine, Mission Viejo, Aliso Viejo, Tustin, Laguna Hills, Rancho Santa Margarita, Coto De Caza, and San Juan Capistrano. In Los Angeles County you will find Mello Roos in Playa Vista and in Northern LA County in place like Stevenson Ranch.

Q: What Year Homes Have Mello-Roos?
A: Almost always, Mello-Roos is found in areas with newer neighborhoods and subdivisions built between 1994 and the present.

Q: How Long Does Mello-Roos Typically Last?
A: The length of the Mello-Roos tax varies from subdivision to subdivision. Fifteen years from the original build date is about average. The payment very rarely extends beyond 30 years or is shorter than 7 years.

Q: How Much Is It Typically?
A: Depending on the year of construction, it can range anywhere from $25 to over $300 per month; the actual tax is usually collected annually or semi-annually.

by Todd Foust and Charmaine Ngo of Realty Times.