In early 2017, I wrote a post about my hesitation, but ultimate need, to lace politics into an economic discussion in the wake of the 2016 presidential election. It was one of the most popular posts of the year on my blog!
There is another current issue that requires tip-toeing on a new political subject. Since the headlines surrounding the pending Supreme Court Nomination of Brett Kavanagh simultaneously touches on all of the main taboo topics (sex, religion & politics), I’m not going to touch any of that with a 10 foot pole!
Instead, there are state-level political issues on the upcoming ballot that have the potential to significantly influence our local real estate market. I feel fairly strongly about these matters, and hope that I can educate you of the issues, and incline you to vote “Yes on 5” and “No on 10” this November.
California is facing a housing crisis – and it’s getting worse. Put simply: there’s not enough homes. This is the largest single factor that has contributed to home prices nearly doubling in the last 6 years. Presently, too many potential homeowners and renters are simply priced out of the market. This November, two propositions meant to combat this crisis are on the ballot, and I believe one will make matters worse if passed. Together, we can take decisive action to protect home ownership and private property rights in California.
The first is Prop 5, an initiative that will allow seniors, the disabled and victims of natural disasters to move to a home better suited to their needs without facing drastically higher property taxes. It’s essentially an expansion of Propositions 60 & 90, current California laws that allow homeowners over 55 to move and avoid property tax reassessment. Here’s how Prop 5 will work:
- Seniors often live in homes that no longer meet their needs because their homes may be too big or too far from family. If these homeowners want to downsize or move closer to their children, they could face a doubling or tripling of their property taxes, or what’s being called a moving penalty.
- Proposition 5 provides appropriate relief by allowing those eligible the ability to transfer their current property tax base to the purchase of another home in any of California’s 58 counties. Current rules only allow seniors to transfer their tax base if they buy a less-expensive home in the same county, but Proposition 5 will make more folks and more situations eligible for this tax relief, resulting in more homes to be sold and available for purchase, particularly older, smaller, more affordable homes. The new property tax for that individual would be based on their original home’s assessment, in addition to an adjustment consisting of the difference in value between the sale price of the original home and the sale price of the new home.
- Proposition 5 would provide respect to seniors (many on fixed incomes), the disabled and disaster victims by allowing them the flexibility to move to a more suitable home. Right now, too many feel locked in place.
- This will help boost the housing inventory in existing neighborhoods as older homeowners move from their single-family homes that no longer meet their needs and free up housing for the next generation.
The other measure of concern on the November ballot is Prop 10, the so-called “Affordable Housing Act,” that would actually make the housing crisis worse by repealing the long-standing Costa-Hawkins Rental Housing Act, eventually allowing local governments to impose draconian rent control measures. While on the surface rent control may appear to be a way to reduce housing costs for lower-income residents, it ultimately will have the opposite impact.
Here’s why Californians should vote NO on Prop 10:
- Proposition 10 will reduce availability of affordable and middle-class housing. Academic experts from the University of Southern California, U.C. Berkeley and Stanford agree that it would drive up rents, while discouraging new construction and reduce the availability of affordable and middle-class housing. Even the state’s nonpartisan Legislative Analyst has found that passage of Proposition 10 would both discourage new construction and result in existing rental units being taken off the market, reducing availability of rental housing.
- Proposition 10 will increase the cost of existing housing. Proposition 10 will cause homeowners to sell or convert rental properties into other more profitable uses, such as short-term vacation listing services like Airbnb. That would increase the cost of existing housing and make it even harder for renters to find affordable housing.
- Proposition 10 will cost taxpayers hundreds of millions of dollars per year, reducing revenues available for education and public safety. The Legislative Analyst also said that Proposition 10 would likely reduce the value of rental properties and single-family homes, driving down local property tax revenues by up to hundreds of millions of dollars per year. Driving down home values will hurt middle-class families and will also reduce the funding available for vital services like schools, public safety, road repairs, education, and fire safety.
- Proposition 10 will eliminate homeowner protections. Proposition 10 repeals protections homeowners have enjoyed for over 20 years, and lets the government dictate pricing for privately owned single-family homes, controlling how much homeowners can charge to rent out their home – or even just a room.
- Proposition 10 might even lead to bureaucrats imposing oppressive surcharges when an owner takes a home off the rental market and chooses to occupy it.
Please vote YES on Prop 5 and NO on Prop 10 on November 6th. I’m happy to chat about these matters further in the weeks ahead. Either leave a comment here or give me a call.
For more information:
Prop 5: https://voteyesonprop5.com/
Prop 10: https://noprop10.org/
Matt Sundermier's Memos on Real Estate & on Life 