Real Estate Round-Up: Vote wisely
Last updated 10/16/2020 at 9:53am
Voter booklets are out. Ballots are out. It's time to get serious about the propositions on November's ballot. There are three that potentially impact real estate and your property values.
The first one is Proposition 15. It has a title that is very misleading. It makes you think that it is all about funding our schools. The revenue created, if Prop 15 were to pass, would largely go to the schools but at the cost of commercial property owners across the state.
It would change how commercial property tax is calculated. It would no longer re-value commercial property at the time of a sale, but every three years regardless if a transfer has occurred or not. A state appointed appraiser would be tasked with evaluating the current market value of every commercial property every three years.
Unlike the process for residential, it would probably not require that the appraiser visit the property or the similar comparable properties in the area. It would be a "drive-by" or data driven appraisal, similar to valuations done by syndicated sites that projects value based solely on data, not on the physical attributes or deficits of the property or the reality of the current economic status of the community.
Commercial property isn't just the warehouses or industrial facilities you might be thinking of. It includes retail, restaurants, and farmers/growers in the state. Any increase in property taxes will be passed on to you the consumer at an additional cost for the product created or provided by the commercial entity. This is a "lose" for you, the consumer.
There are other ways to support schools and they are called "school bond issues." Bond issues require the school district to state their need, state the advantages to supporting the bond, and then local residents vote to support or deny the bond issue. Local issues voted on by local voters. Makes a lot more sense.
Prop 19 is one I have written about for over two years. It originated as Prop 5. It had some flaws that I previously wrote about. It is now revamped with most of the same benefits of Prop 5, but incorporates protection for victims of wildfires, people with severe disabilities, and family farms.
The broadest application will be for homeowners over the age of 55 who want to sell their home and relocate within California. Those homeowners will be able to use their property tax transfer up to three times, anywhere within the state, with any value. The tax basis would be blended if the purchase of the new property is greater than the price of the sold property.
There is a provision within Prop 19 that has a potential tax impact on heirs who inherit property that choose to not make the property their primary residence. If the heir chooses to make the transferred property their primary residence, the property tax basis will remain with the property.
However, if the heir chooses to not use the inherited property as their primary residence, the property tax basis would be assessed to the current value. That heir receives the gifted property. The heir receives an updated property tax basis. The heir can choose to keep the property and rent it or sell it if they believe the property taxes are a greater burden than they can financially support.
This proposition has great support because it will generate hundreds of millions of annual funding for fire protection, local government and school districts, while helping the three identified groups move into the property that meets their needs.
Prop 21 would replace the Costa-Hawkins Rental Housing Act which was passed in 1995. Prior to the enactment of Costa-Hawkins, local governments were permitted to enact rent control provided that landlords would receive just and reasonable returns on their rental properties. Costa-Hawkins continued to allow local governments to use rent control, except on (a) housing that was first occupied after February 1, 1995, and (b) housing units with distinct titles, such as condos, townhouses and single-family homes.
The ballot measure would allow local governments to adopt rent control on housing units, except on (a) housing that was first occupied within the last 15 years and (b) units owned by natural persons who own no more than two housing units with separate titles, such as single-family homes, condos, and some duplexes, or subdivided interests, such as stock cooperatives and community apartment projects.
Under Costa-Hawkins, landlords are allowed to increase rent prices to market rates when a tenant moves out (a policy known as vacancy decontrol). The ballot measure would require local governments that adopt rent control to allow landlords to increase rental rates by 15% during the first three years following a vacancy.
The independent Legislative Analyst's Office notes that Prop 21 could result in a decline in property values which in turn will result in the potential loss of tax revenue. Prop 21 also could result in "tens of millions of dollars per year" in increased costs to local governments.
Propositions 15 will cost you. Proposition 21 will reduce the number of rental units available, which will hurt the very people it purports to support, renters. Prop 19 is a win. It will help seniors, the severely disabled, and natural disaster victims, while contributing financially to schools, fire protection and local governments. California is already one of the highest taxed states in the nation. Prop 15 and 21 will bring more taxes, Prop 19 will alleviate taxes for many. Vote wisely.
Kim Murphy can be reached at [email protected] or 760-415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.