CRE On The Ballot: Here's How Measures Affecting The Industry Fared In California

California ballots in this year’s election included a veritable feast of propositions, measures and proposals for various rules and regulations that touch real estate, not to mention a close race for mayor of Los Angeles and a not-so-close race for governor.

With ballots in across most of the state, the races with an impact on CRE, both state wide and on the local level in the population centers of Northern and Southern California, have been decided.

Statewide

Proposition 30 - failed

This proposition would have taxed residents making $2M or more a year and used the proceeds to fund electric vehicle subsidies and charging infrastructure throughout the state. A number of big names in commercial real estate came out against the measure with their pocketbooks. 

Southern California

Los Angeles mayoral race - Karen Bass wins

Karen Bass beat out developer Rick Caruso for the top job in Los Angeles in a close race that was finally called more than a week after Election Day.

CRE industry members who spoke with Bisnow said that while they had hoped Caruso would win, they aren’t worried about Karen Bass as a mayor and are hopeful that she will work with stakeholders including the CRE community to address issues including homelessness and housing that matter to CRE and to the city broadly. 

Los Angeles Measure ULA - passed 

This measure adds a 4% to 5.5% tax on property transfers over $5M in Los Angeles. Commercial real estate as an industry came out against this measure. Industry professionals that spoke to Bisnow said additional taxes on these deals would ultimately be passed on to tenants in cases where the properties were rented out and that the additional cost would hamper business in the city even further. 

Los Angeles Proposition LH - passed 

Because of a Cold War-era addition to the state constitution passed in 1950, cities must get public approval before adding publicly funded low-income housing. The passage of this measure gives the city the green light to build or acquire up to 75,000 new public housing units with city funds. If the city were to secure funding for these units, they would likely partner with affordable housing developers to build them. Purchasing these buildings from property owners would also benefit commercial real estate owners. 

Santa Monica Measure RC - passed

This measure reduces the amount by which rent could be increased in rent-controlled units in the city of Santa Monica, from 6% annually to 3%, according to The Real Deal. 

Pasadena Measure H - passed

This measure would cap rent hikes allowed in rent-controlled apartments and institute new protections for renters in the city, according to LAist.

CRE typically doesn’t like additional regulations by local governments on how it can run its business, whether it’s governing how much they can charge in rent or how often they can raise the rents they charge. CRE watchers who spoke to Bisnow anticipated that these measures, like other rent control interventions, would discourage new entrants into the multifamily market in the region and make business harder for those already in it.

Northern California

South San Francisco Measure AA - passed

Passing by just over 2,000 votes, this measure allows the city of South San Francisco to develop and acquire affordable housing for low-income tenants, in total up to 1% of the existing units in the city, for an eight-year period. The ballot measure was proposed by the South San Francisco City Council and will not result in a tax increase according to the text of the measure. 

South San Francisco Measure DD - failed

A ballot measure aimed at taxing developed and proposed office parcels in South San Francisco at a rate of $2.50 per SF was shot down by voters. Revenue from the tax would have gone toward the funding of early learning and childcare programs for families in the South San Francisco Unified School District. 

South San Francisco Vice Mayor Buenaflor Nicolas told Bisnow that the people proposing the measure “have their hearts in the right place,” but expressed concern about its potential implementation.

“I just don’t think the city is ready or will be ready to implement it the way that it was written,” she said. 

San Francisco Propositions D and E - failed

Two competing affordable housing measures in San Francisco, Propositions D and E, were rejected by voters, with Prop D failing by just under 7,000 votes. Proposition E suffered a much larger margin of defeat, losing by over 20,000 votes.

Both proposals wanted to streamline the affordable housing development process, but ultimately disagreed on the best way to do it. Prop D was the beneficiary of heavy funding from tech industry leaders, dramatically outspending that of its city supervisor-backed Prop E competitor. 

San Francisco Proposition M - passed 

Voters approved a tax on owners of vacant residences in San Francisco, with the measure passing by just under 20,000 votes. The measure will levy a tax on units that sit vacant for 182 days or more in a calendar year, purporting to deter landlords from holding property vacant in order to get a better rental rate. 

The ultimate effectiveness of the measure has been debated, but an economic impact report of the measure suggested it could generate an additional $26M in revenue for the city. 

UPDATE, NOV. 16, 7:32 P.M. ET: This story has been updated with the results from the Los Angeles mayoral race.