While the focus in November is on the top of the ticket, Californians also face a long list of ballot measures. Here we focus on three major measures that impact California real estate: Propositions 15, 19 and 21.

Proposition 15: Split Roll Tax for Commercial/Industrial Properties. Proposition 15 would remove certain limitations established under Proposition 13 (passed in 1978) that place a 2 percent cap on increases to assessed property values. The proposed “split roll” would assess property taxes on certain commercial and industrial properties based on fair market value rather than purchase price. Commercial and industrial properties with a fair market value of $3 million or less would be exempt from Proposition 15 reassessment, but if an owner of such a property owns other commercial or industrial properties in California, those properties would also count against the $3 million limit for the exemption. The proposed split roll would not change the overall property tax rate, nor would it apply to residential or agricultural property.

Proposition 15 was placed on the ballot through signature collection. Supporters (including the California Teachers Association, the SEIU and the Chan Zuckerberg Initiative) say that Proposition 13 provided a significant tax break over a long period of time to businesses and that there are other priorities now for cities, counties and school districts. Opponents (including business and taxpayer associations) cite the significant new tax burden on businesses from this and other proposed local measures, particularly in light of the challenging economic climate and businesses leaving the state.

Proposition 19: Change Assessed Value Calculations for Residential Property. California law currently allows certain homeowners—such as those who are over age 55, severely disabled, or victims of wildfires or other natural disasters—to transfer their assessed property values to replacement residences intra-county, and to certain other counties that have adopted local ordinances allowing for reciprocity. Proposition 19 would expand the exemption to all replacement residences state-wide for these specified groups of homeowners. California law currently also allows exemptions from reassessment for two types of transfers between parents and children: (i) transfers of principal residences and (ii) transfers of up to $1 million worth of assessed value of other real property. Proposition 19 would limit the exemption available for (i) and eliminate it for (ii). It would allow a limited exemption from reassessment only for a transfer of a principal residence between parent and child where the property continues as the recipient’s principal residence. If the property value at the time of transfer exceeds the transferor’s assessed value by less than $1 million, the transfer would be exempt from reassessment. However, if the property value exceeds the transferor’s assessed value by $1 million or more, then the recipient’s assessed value would be the current value of the property less $1 million.

This measure was placed on the ballot by the State Legislature. Supporters (including realtors and firefighters associations) say that Proposition 19 will incentivize seniors to downsize and free up new housing inventory and flatten wealth inequality, and that limiting property tax exemptions will provide important funds to local governments, state firefighting and other uses. Opponents (including taxpayer associations) claim that Proposition 19 is driven by realtors who are focused on increased commissions, and cite the new property tax laws as unduly burdensome.

Proposition 21: Expansion of Local Residential Rent Control. Proposition 21 is one of several measures proposed in recent years by the voters and in the Legislature to expand local rights to enact residential rent control. State law currently limits local rent control laws by exempting single-family housing units with separate, alienable title (such as condos, townhouses and single-family homes) and newly constructed housing completed on or after February 1, 1995. It also allows landlords to reset rent after a tenant vacates. For tenants in place, the Tenant Protection Act of 2019 limits annual rent increases statewide for most rental housing that is more than 15 years old, to the lesser of (i) 5 percent plus inflation, or (ii) 10 percent, excluding single-family housing units (unless the owner is a real estate investment trust, corporation, or LLC with a corporate member).

Proposition 21 would expand local rights to enact rent control by allowing local governments to: (1) enact rent control on all housing units except (a) housing first occupied within the last 15 years, and (b) homes owned by natural persons who own no more than two single-family housing units; and (2) prohibit landlords from raising rental prices by more than 15 percent cumulatively during the first three years following a vacancy.

Proposition 21 was placed on the ballot by signature collection. Supporters (including various tenant advocacy and social justice groups and the AIDS Healthcare Foundation) say that Proposition 21 would allow local control and allow cities to put measures in place to address the state’s homelessness and housing affordability crisis. Opponents (including the California Apartment Association and other real estate advocacy and investment groups) claim that it will constrain housing supply by creating a chilling effect on investment and will decrease tax revenues for city and state government.