Real Estate

Real Estate – John M. Lee

This November we have an exciting election on multiple levels. We get to decide if Donald Trump will get another four years or if Joe Biden will become our next president. There are multiple real estate related measures on the state and local level. And in the west side of town, we get to elect a new supervisor for the Richmond District. I will be covering the important real estate issues and the top Richmond candidates in this column.

I read the ballot measures and their supporting and opposing arguments in the voter’s guide and this year found them to be quite humorous. It seems that everyone is distorting and interpreting the measures to fit their own political viewpoints. Maybe that should be obvious in politics, but this year the arguments are especially bad.

Prop. 15: Commonly known as the split roll tax, seeks to repeal part of the Prop. 13 protections of rising property taxes by separating how residential properties are assessed for the annual property taxes versus commercial/industrial properties. Currently, all properties are assessed upon sale, usually at the sale price and then taxes can increase by a maximum of 2% each year. 

Prop. 15 proposes keeping the assessment on residential properties the same while changing the assessment on commercial/industrial properties to a new reassessment every year, with a few exemptions. The net effect will be that the taxes on these properties will increase at a much higher and faster rate.

My take on this one is that this is not the time to increase taxes when so many small businesses are hurting. Many commercial leases are written such that any increase in property taxes are passed onto the tenants, and if passed, it will make doing business that much harder, leading to more closures. And though Prop. 15 specifically separates out residential properties, if passed, this will be a stepping stone to change how residential properties will be assessed in the future. I urge a “no” vote on Prop. 15.

Prop 19: This is a rewrite of Prop. 5 in 2018, which 60% of the voters were against. Prop. 19 seeks to allow homeowners who are over 55, severely disabled or whose homes were destroyed by wildfire or disaster to transfer their principal residence’s property tax basis over to a replacement residence of any value anywhere in the state. Currently, those eligible owners can purchase a residence at the same price or lower in the same county or in another county that has approved this rule to keep the same property tax basis. This can be used once per lifetime. 

Prop. 19 seeks to expand this rule so that it is applicable to all counties within the state of California. This was defeated in 2018 mainly because it would cause tax revenue in the state to decrease. So, this time around they are trying to pass this law by eliminating some tax breaks on inherited properties. Current rules allow properties to pass between parents and children – or grandparents to grandchildren if the grandchildren’s parents are deceased – without an increase in the property tax bill. Prop. 19 will change this so that inherited properties will get reassessed to market value unless the heirs use the property as their primary home or if the property is a farm. 

My belief is that if voters feel that it was a bad idea last time, the proponents of this are just adding in a feature to sway some of those voters to change their minds. I urge a “no” vote on Prop. 19.

Prop. 21: If this one sounds familiar too, it is because it is. Prop. 21 is another attempt to overturn the Costa-Hawkins Rental Housing Act by expanding a local government’s authority to enact stricter rent control on residential properties. It is a rewrite of Prop. 10, which voters overwhelmingly voted against in 2018. 

 Prop 21, if passed, will allow the local legislative body – in our case, the Board of Supervisors – to expand rent control to buildings built more than 15 years ago. Currently, rent control in San Francisco applies to buildings constructed before 1979 because that’s when the rent control ordinance was passed. They can also limit how much the landlords can charge when an existing tenant moves out. Currently landlords may raise the rent up to market rate.

Once again, if voters believed that these were bad ideas two years ago, and I know that times have changed, but I believe that with this pandemic upon us, rents are already going down and the market will correct itself. I urge a “no” vote on Prop 21.

Prop. I: Locally we have Prop I which seeks to double the transfer tax on properties that sell above $10 million. Every time there is a sale of a real estate property, the county collects a transfer tax. It is based on the sales price. The tax rate is a graduated scale ranging from .5% to 3%. 

The proposal is to double the tax for properties that sell between $10 million and 25 million from 2.75% to 5.5%, and properties that sell above $25 million from 3% to 6%. This tax is purely based on the sales price and does not depend on gains or losses. For example, if someone sells a $10 million property, currently they would pay $275,000 in transfer taxes. If passed, they would be paying $550,000. On a $25 million sale, they would currently pay $750,000, and, if passed, they would be paying $1.5 million.

I will never have to worry about this tax in my personal life, but doubling a tax on anyone – even though they might be wealthy – just because the Board of Supervisors decided to just does not seem right. I urge a “no” vote on Prop. I.

Supervisor D-1: In the Richmond District, we also get to vote on a new supervisor, because Supervisor Sandra Fewer decided not to run for reelection. The leading candidates are Marjan Philhour, David Lee and Connie Chan. Philhour is running as a moderate, Chan a progressive, and Lee in the middle. This will be a close race determined by ranked-choice voting. 

I think of the Richmond as more of a moderate district, but progressives have won the last few elections due to ranked-choice voting. Our current Board of Supervisors is extremely progressive, and I believe that the composition needs to change for a better San Francisco. If you like the way things are, vote for Chan. If you want change, vote for Philhour or Lee. I am voting Philhour as my first choice and Lee as my number two vote. 

We live in a great country and have the freedom to vote and voice our opinions. Whether you agree or disagree with my choices, I urge you all to vote this Nov. 3, or sooner with the mail-in ballot.

John M. Lee is a broker at Compass specializing in the Richmond and Sunset districts. For real estate questions, call him at (415) 465-0505 or email john.lee@compass.com.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s