Political Headwinds Mount for California Commercial Real Estate

Several major political issues will continue to haunt commercial real estate in California.  Although the California Apartment Association defeated the repeal of the  anti draconian rent control protections in Prop 10–rent control will continue to expand.

The ballot initiative to repeal prop 13 for commercial real estate will appear of the 2020 ballot.

San Francisco declared that special tax propositions that originate from petitions versus the legislature require only a simple majority versus the two thirds vote.  San Francisco passed several new taxes based on this interpretation. One such initiative raised the gross receipts tax from .25%  to 3.75% for most commercial property owners.  For many recent leveraged buyers, this tax could represent over 30% of their net income after debt service.  Ouch.  The Howard Jarvis Association filed suit that Prop 13 and Prop 218 require a 2/3 majority vote to raise taxes.  If Howard Jarvis loses–majority rule would radically increase special taxes all over California.  More about this below.

The political winds are calling for more radical versus gradual tax policy to solve issues of income inequality.  Expect several new tax measures on the 2020 ballot including a split tax roll initiative repealing prop 13 for commercial properties.

 

Source: SF unique in requiring only simple majority vote for tax measures – SFChronicle.com

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