Blake Matheson walked a real estate agent down the hallway of Casa Boronda in the fall of 2022, pointing out where the adobe floor slopes slightly downhill even though the door frames somehow stayed level. The house, the oldest private residence in Monterey, was built in 1817 by José Manuel Boronda on four acres granted to him for military service, and Matheson's family had owned it since 2008. He listed it that November for $3.75 million. It sold that February for $3.3 million.
The buyer wasn't just purchasing an adobe with a good story. They were purchasing one of roughly 60 properties in the city of Monterey carrying a Mills Act contract, the state program that trades a property tax reduction for a binding commitment to maintain a historic building's character. That number, 60, is the actual story here, more than the sale price or the house's age. It's a number the city intentionally stopped growing in late 2023, and it changes what a Mills Act home is worth to a buyer who assumes the tax break is something you can simply apply for once you close.
What a Mills Act Contract Actually Does
The mechanics are simple enough. A property owner petitions the city to designate a home as historically significant, then signs a contract agreeing to preserve and maintain it. In exchange, the Monterey County Assessor recalculates the property's taxable value using an income-capitalization method instead of a comparable-sales approach, which on an appreciating coastal property usually means a meaningfully lower tax bill. The contract runs for a minimum ten-year term and automatically renews every year on its anniversary, so in practice it never actually expires unless someone files formal notice of nonrenewal.
Here's the detail that matters at closing: the contract is tied to the property, not the person. When Casa Boronda sold, the Mills Act agreement didn't need to be renegotiated or reapplied for. It transferred with the deed, and the new owner inherited both the tax benefit and the maintenance obligations that come with it. The California Office of Historic Preservation confirms this is how the program works statewide: contracts bind all subsequent owners for as long as the agreement is in force.
That transferability is exactly why buyers get excited about Mills Act homes and exactly why the program has become a target for city councils rethinking their math.
The Freeze Nobody Mentions at the Open House
On November 7, 2023, the Monterey City Council voted 4-1 to impose a temporary moratorium on all new Mills Act applications. Councilmember Alan Haffa cast the lone dissenting vote. A month later, on December 5, the council voted 5-0 to extend that pause by ten and a half months while staff reviewed the ordinance.
The trigger, according to Monterey's community development director at the time, Kim Cole, wasn't concern about the historic homes themselves. It was concern about how the tax break was being used. Cole told Monterey County Now that the city had noticed a pattern of investor groups purchasing historic homes specifically for the tax savings, advertising the low property taxes as a selling point, making minor cosmetic improvements, then flipping the properties for profit. That's a different use case than the one the Mills Act was designed for in 1972, when the goal was keeping crumbling adobes and Victorians from being demolished outright. Cole said she planned to look into how Mills Act homes were being monetized, weighing the fairness question against the program's original preservation goals.
The council's stated goal was to use the pause to consider capping how many new contracts get approved each year, shortening contract terms, or limiting the assessed valuation eligible for reduction. What came out the other side of that review isn't something I can confirm with current public reporting, which is itself useful information for anyone house-hunting right now: don't assume the freeze has quietly lifted just because a listing calls a home "Mills Act eligible." Ask the city's Community Development Department, housed at Colton Hall, whether the specific property already carries a recorded contract, and don't take a seller's or agent's word for it.
Two Houses, One Closed List
Casa Boronda sits at the expensive end of what a Mills Act contract can attach to. But the program isn't reserved for oceanfront estates. A more modest example is the Ruth S. Rodefer House on Harrison Street in Old Monterey, a 1929 Monterey Colonial designed by architect Albert B. Coats and modeled on the city's historic Custom House. It carries its own Mills Act contract, and its owners get the same category of tax relief as the Boronda family did, just at a different price point and a different scale of home.
What both houses share is membership in a fixed list. Old Monterey and New Monterey have plenty of homes built before 1976, which is the general age threshold the city's historic zoning ordinance uses (a building must be at least 50 years old to qualify for H-1 or H-2 historic designation in the first place). Age alone doesn't get you into the Mills Act program. Designation does, and designation requires a city process that was, as of the 2023 vote, on pause for new applicants.
What This Means If You're Shopping Old or New Monterey
If a listing agent tells you a century-old bungalow near Cannery Row or Del Monte Beach is "Mills Act eligible," treat that phrase as a starting point for verification, not a settled fact. Eligible for historic designation and enrolled in an active Mills Act contract are two different things, and only the second one changes your tax bill. Confirm with the city whether the specific parcel has a recorded contract, and if it doesn't, don't build your offer price around tax savings that may not be available to apply for yet.
Also budget for the other side of the bargain. Any exterior alteration or demolition on a historically zoned property requires a Historic Permit from the city, and minor repairs still need sign-off confirming the work matches the Secretary of the Interior's preservation standards. That process protects the character that makes these homes desirable in the first place, but it's a real constraint if your plan involves a significant remodel.
For context on where these homes sit in the current market, Monterey's broader housing stock listed at a median of $1.29 million in September 2026, with homes typically spending around 107 days on the market before selling. Historic homes with an active Mills Act contract tend to move differently than that, since the buyer pool self-selects for people who specifically want the preservation obligations and the tax position that comes with them.
What This Means If You're Selling One of the 60
If your home already carries a Mills Act contract, that's a real asset, and it's worth disclosing clearly and early rather than treating it as a footnote. Buyers researching the program will find the same 2023 moratorium story you're reading now, and a seller who can speak plainly about the contract's terms, its renewal history, and the required maintenance reporting builds more trust than one who lets a buyer's agent discover it during due diligence.
It's also worth being straightforward about what the contract doesn't do. It doesn't transfer extra development rights, and it doesn't exempt the home from the Historic Permit process for future work. Framing the tax savings honestly, alongside the obligations, tends to attract buyers who actually want a historic home rather than buyers chasing a tax angle that may not survive contact with the city's review process.
A Few Direct Questions
Does a Mills Act contract automatically end when a house sells? No. It transfers to the new owner and continues on its existing renewal cycle, per the California Office of Historic Preservation's program rules.
Can I apply for a new Mills Act contract on a historic home in Monterey right now? As of the most recent confirmed council action, new applications were paused starting in November 2023 while the city reviewed the ordinance. Confirm current application status directly with Monterey's Community Development Department before assuming eligibility.
Does every old house in Old Monterey or New Monterey qualify? A building generally needs to be at least 50 years old to be considered for the city's H-1 or H-2 historic zoning, which is a separate step from actually holding a Mills Act contract. Many historic-looking homes in these neighborhoods are not enrolled in the program.
If you're weighing a historic Old Monterey property, whether it already carries a Mills Act contract or you're trying to figure out what's realistic to pursue, our team at David Lyng Real Estate works this market block by block and can help you separate what a listing implies from what the city will actually confirm. Contact us before you write an offer around a tax benefit that hasn't been verified.