Real Estate ballot propositions
by John M. Lee
There are two important real estate propositions on this year’s statewide November ballot that I would like to bring to your attention.
As I talk to people and clients every day in San Francisco, I have discovered one of the reasons why the home inventory is so low – it is because property owners do not feel like they can move. If they were to buy something else, their mortgage payments and property taxes would go up, depending on what they buy.
This especially affects seniors as they are most likely on a fixed income, with a low or no mortgage, and a low annual property tax payment. I see many of them living in a large home because the children have all moved out, but they are stuck there for economic reasons.
The state has passed laws in the past whereby if a senior 55 years of age or older can sell and purchase another property in the same county at, or lower, than the property they sold can transfer the property tax basis over to their new purchase (Prop. 60).
The same can be done within the state of California if the local governing board approves it (Prop. 90). This property tax basis transfer can only be used once per lifetime.
Proposition 5 on this November’s ballot, called the “property tax fairness initiative,” seeks to expand this concept by allowing the property tax basis transfer to any properties within California. If an owner purchases a home at a higher value, they will get a prorated transfer of their property taxes and the balance will be taxed at the prevailing rate. If Prop. 5 is approved by the voters, this will become law and the property owner, if 55 years or older, can do this multiple times as the need arises.
The proponents of the proposition argue that this will free up housing as seniors will see a way to sell their homes and move, thus freeing up homes and creating more inventory for others to purchase. This will allow seniors to have the freedom to downsize or move closer to family. These same benefits will also apply to the severely disabled and disaster victims, regardless of age.
During my career I have encountered many who have needed something like this, so I urge a “yes” vote on Prop. 5 on Nov. 6.
The other measure on the ballot is Proposition 10, titled the “affordable housing act,” which would repeal the Costa Hawkins Rental Housing Act, thus allowing local governments to impose more rent control measures on real estate.
The Costa Hawkins Act essentially has three components. First, rent control cannot apply to any single-family home; second, rent control cannot apply to any newly built housing completed on or after Feb. 1, 1995 (in San Francisco); and, third, there cannot be any vacancy control, meaning that when a tenant vacates a unit, the rent control laws cannot dictate or limit the amount of rent the property owner can charge a new tenant.
I understand the intent of this measure, which is to make rents more affordable for tenants, but the unintended consequences of more rent control laws stands to benefit tenants who are already in rent controlled units. It does nothing to help tenants who are new to the City or ones who need to find a different or larger place to live. In fact, it hurts them because with more stringent rent controls, more landlords will pull their properties off the rental market or use them for AirBnB, reducing the rental housing stock and driving rental prices up further.
Academic experts and studies have agreed that more rent control drives up rents, while discouraging new construction and reducing the availability of housing. Even the state’s legislative analyst said if Prop. 10 passes, the state would get fewer new units constructed and some rental housing will be taken off the market. In addition, the governmental fiscal impact can be up to hundreds of millions of dollars lost per year to the state.
I believe the existing laws are working and urge a “no” vote on Prop. 10.
Please take the time to study the ballot measures and attend political forums before voting on Nov. 6!
John M. Lee is a broker at Pacific Union and specializes in the Richmond and Sunset districts. For real estate questions, call (415) 465-0505 or email email@example.com.
Categories: Real Estate