Election 2020

Breaking Down the California Ballot Measures That Affect Real Estate and Housing

Here’s a look at what was on the ballot, how it is faring, and what it means
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Photo: Gabrielle Langdon

There usually isn’t much drama when it comes to how California votes each presidential election, but the Golden State more than makes up for it with a litany of ballot measures. The bulk of the attention on this year’s crop of 12 measures that appeared on the statewide ballots has hinged on Proposition 22, a highly contentious measure that saw Uber, Lyft, and other gig economy businesses spend $200 million to successfully maintain the right to keep their workers classified as independent contractors. However, there were multiple ballot measures with implications for how America’s biggest state handles real estate and housing. Here’s a rundown of all three, a look at where things stand, and what it all might mean.

Proposition 15

What was it?

Named the Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative, Prop 15 would have amended the state’s constitution to tax commercial and industrial properties based on their current market value rather than their purchase price. Properties associated with business owners with $3 million or less in holdings within the state would be exempt from the change.

In effect, the measure would have overwritten 1978’s infamous Proposition 13, which made all residential, commercial, and industrial properties taxed based on purchase price. The state’s fiscal office estimated that the measure would bring in between $8 and $12.5 billion in new tax revenue per year, much of which would help fund K-12 schools, community colleges, and local governments.

Who was for and against it?

Among the groups who came out in favor of Prop 15 were teachers unions and advocacy groups, such as the California Federation of Teachers, the California Teachers Association, and United Teachers Los Angeles. Governor Gavin Newsom himself voiced support for the ballot measure, calling it a “fair, phased-in, and long-overdue reform to state tax policy [that is] consistent with California’s progressive fiscal values,” citing its value in funding public schools and public safety.

On the other side of the issue was the California Chamber of Commerce, who described the measure as “riddled with flaws which will hurt all Californians” by harming small businesses (despite the $3 million exemption). Even though it would not have affected residential property tax values, the group also said the measure would exacerbate the state’s housing crisis, as they believe increased industrial and commercial property taxes would have a knock-on effect of discouraging new home construction.

How did Californians vote?

Currently, “No” has garnered 51.7%, though some outlets have described the race as too close to call as of Thursday afternoon. The office of California’s Secretary of State currently lists the results as unofficial.

What (might) happen next?

If results hold, it would mark a major win for holders of commercial and industrial real estate, who’d avoid paying a bigger share of taxes at a time where the future of certain categories of commercial real estate is already uncertain. For big businesses with nationwide footprints worried about the costs of their real estate assets, the potential failure of Prop 15 would come as a sure sigh of relief.

Simultaneously, however, the failure of Prop 15 would mark a blow for schools and local governments, who feel they’ve been on the losing end of the property tax system since Prop 13 passed in 1978. Their existing challenges may now be exacerbated by pandemic-induced budget cuts.

Proposition 19

What was it?

Proposition 19, also known as the Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment, relates to property taxes on a more individual level than Prop 15. A “yes” vote would make it easier for Californians to transfer the tax assessments on their properties to other homes within the state, allowing the property taxes of a previous home to be applied to a more expensive one with an upward adjustment. It would also allow those over 55, with severe disabilities, and the victims of natural disasters to transfer their tax assessment up to three times instead of just once.

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Perhaps more pertinently, the measure seeks to do away with the exemption from tax assessment when a property is transferred. Whereas California normally doesn’t redo the property tax assessment when children or grandchildren are transferred property, Prop 19 would make it so that secondary or rental properties would be assessed at their market value at the time of transfer. For primary residences, an upward adjustment could occur if the property is then sold for at least $1 million more than its taxable value.

Who was for and against it?

According to Yes on 19, the measure is supported by a diverse California Realtors Association–led coalition that includes senior and disability advocacy groups, firefighter organizations like the California Professional Firefighters, the California Nurses Association, the state’s chapter of the AFL-CIO, and many others. Broadly speaking, these groups support how it limits property taxes for seniors, those with disabilities, and wildfire victims, while closing tax loopholes associated with property transfers.

The “No” statement on the state’s official voting guide is credited to the Howard Jarvis Taxpayers Association, which describes itself as “the most influential taxpayer advocacy group in California.” They argue that the measure amounts to a tax increase on families.

How did Californians vote?

According to the secretary of state’s unofficial results, “Yes” currently leads by roughly 336,000 votes, though a final tally has yet to be certified.

What (might) happen next?

It’s hard to extrapolate any kind of nationwide implications for the measure. However, if results hold, it could eventually help establish new property tax precedents for older Americans and victims of natural disasters, two issues which could become more prominent as Baby Boomers continue to age and climate change confronts us with the threat of more home-destroying events.

Proposition 21

What was it?

Proposition 21, or the Local Rent Control Initiative, more or less does what its name says: It gives local governments greater authority to establish rent control on housing first occupied at least 15 years ago. If enacted, the measure would have replaced the Costa-Hawkins Rental Housing Act, which forbid the application of rent control on housing occupied after February 1, 1995, and on certain properties like town houses, condos, and single-family homes. Those types of properties are exempted from Prop 21 after a similar 2018 ballot initiative seeking a blanket repeal of Costa-Hawkins only garnered 41% of the vote.

The measure would have also partially undid a Costa-Hawkins loophole that allowed landlords to reset their rents to market rates after tenants of rent-controlled housing moved out. Such increases would be capped at 15% for the first three years after a rent-controlled tenant vacated the property if Prop 21 passed.

Who was for and against it?

Organizations who threw their support behind Prop 21 included the Sierra Club, the United Auto Workers, the California Democratic Party, the California Alliance for Retired Americans, Black Lives Matter LA, and others. Members of congress Bernie Sanders, Karen Bass, Maxine Waters, and Barbara Lee also endorsed the measure. Advocates note that it doesn’t require cities and counties to implement rent control, but merely gives them the authority to do so, while providing greater access to housing (which they argue is tied to better health outcomes) for Californians.

On the other side, Governor Newsom declared his opposition to the measure, saying “runs the all-too-real risk of discouraging availability of affordable housing in our state.” No on 21 argued that the initiative doesn’t fund affordable housing, leaves out specific provisions to reduce rents, and overlooks protections for seniors, veterans, and the disabled. Notably, many trades councils and unions in construction and related fields joined the governor in opposition.

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How did Californians vote?

While Props 15 and 19 have proven to close to call as of November 5, Californians decisively rejected Prop 21. Though the results are still technically unofficial, “No” leads by a rather insurmountable 2.25 million votes, and Yes on 21 has conceded that the measure failed.

What (might) happen next?

Given efforts in both 2018 and 2020 to undo Costa-Hawkins, it’s not inconceivable that a similar initiative could appear on the ballot again. For now, Yes on 21 argues that the campaign raised awareness for the nationwide need for rent control and housing equality. With Bernie Sanders making a housing guarantee a pillar of his primary presidential campaign, it’ll be interesting to see whether or not a potential Biden administration makes any sort of moves in that direction as a concession to the progressive wing of the party.

These propositions go to show just how much direct control Californians exert when it comes to setting policy for housing and real estate. With states across the country using direct ballot initiatives to legalize marijuana (New Jersey, South Dakota), raise the minimum wage (Florida), and institute paid family and medical leave (Colorado) in 2020, the sorts of issues Californians voted on could potentially have a national ripple effect within the next four years.?