State voters will have a say on housing policy this November, as voters once again look at their long, multipage ballots and wonder what they did wrong to be confronted with this. There are two state propositions that deserve our attention. One might do some marginal good for our tight real estate markets, and the other would do nothing to spur badly needed housing development.
PROPOSITION 5
This proposition addresses what is known as the portable real estate tax break; it would try to address one of the (many, but don’t get me started) problems with 1978’s Proposition 13, which taxed property based on the home’s purchase price and not what it would be worth today in the market. Yay — that meant people weren’t forced out of their homes by being unable to pay escalating taxes as the housing shortage boosted home prices to astronomical levels. Boo — that meant some folks who wanted to sell their home, such as older people looking to downsize once the kids were gone, were less likely to do so if they wanted to buy another home in the state. Not every retiree wants to move to Florida (too many bugs) or Arizona (too many Joe Arpaios).
Applying only to homeowners aged at least 55 or severely disabled, Proposition 5 is an attempt to compromise in a way that could benefit more people than just the retiree. CalMatters explains it thus: “Someone who buys a more expensive house would no longer be required to pay property taxes based on the full market price of the new home. . . . Instead, the new taxable amount would only increase by the difference in market price between the new and old home.”
Alex Creel, senior vice president of governmental affairs for the California Association of Realtors — which developed this prop — said the fear of whopping tax increases has meant that “almost three-quarters of homeowners 55 and older haven’t moved since 2000.”
Personally, I have moved way too much in my life; I look forward to remaining in my current home well into my dotage. But CAR and the California Chamber of Commerce both think this will result in more homes — in particular, larger homes that are in dire need these days by families — being put on the market. That additional turnover also creates transaction taxes to local municipalities.
Opponents, such as Assemblymember David Chiu and the California Teachers Association, say the measure will result in lower tax collection by local governments and thus less spending on schools.
PROPOSITION 10
Do you like rent control or do you hate it? If you’re a renter on limited resources clinging to your apartment in fear of being turned out by a big rent increase, then rent control is your key to remaining in the city. If you’re a landlord, chances are you hate it. In 1995, California passed the Costa-Hawkins Rental Housing Act, which limited local governments from imposing rent control on housing first occupied after Feb. 1, 1995, and housing defined as condominiums or townhouses. Costa-Hawkins also lets landlords raise rents to market rates when a tenant moves out.
A legislative attempt to repeal Costa-Hawkins failed earlier this year. So this is a voter initiative to do an end-run around Sacramento, and it’s wrapped in language about local control and, in the words of one Proposition 10 supporter, the need to have rent control because building more housing is “slow and expensive.”
Naturally, one option would have been to have an initiative that would have tried to speed up housing development, which in itself would also make it less expensive. The more housing, the less power any landlord has over the pricing market and the more options renters have.
Also, letting local governments spread rent control further will take that already “slow and expensive” development process and make it grind to a halt. San Francisco, ground zero for today’s housing crisis, is also one of the most left-wing cities in the state, so you can be sure this municipality will make use of its new powers if this proposition passes. Expect many of those people who have been planning to rent out “granny units” with the encouragement of City Hall in recent years to think twice about getting into the whole landlord business.
But, in a year in which Democrats are turbocharged to go to the polls and righteous indignation is the popular emotion, I expect Proposition 10 to pass.
MERGER FEVER
Last issue, we noted one of the recent acquisitions by Compass, a New York-based brokerage firm. In recent months, it bought Paragon Real Estate Group and Pacific Union International.
Now the mergers continue, as Saratoga-based Alain Pinel Realtors announced the acquisition last month of San Francisco’s Hill & Company, whose offices in Pacific Heights, Noe Valley, and the Marina will become Alain Pinel offices. Pinel, a regional giant that did $12.2 billion in sales in 2017, is retaining Hill & Company President Jay Costello and other top managers. Last year, Hill & Company did $545 million in sales.
