A look into statewide ballot initiatives and local measures and how the results will impact landlords and property owners.
Statewide Ballot Initiatives
Proposition 15 - Property Taxes (Defeated)
Proposition 15 would have changed the way commercial and industrial properties would have been taxed in California relative to residential properties. Because Proposition 15 was defeated, all properties will continue to be taxed based on their purchase price, according to Proposition 13, passed in 1978.
Proposition 19 - Property Taxes (Passed)
Proposition 19 is another property tax initiative with a number of effects, mostly oriented around lowering tax burdens for seniors, disabled individuals, or persons with homes destroyed in wildfires for relocating their homes within California. However, it also eliminates a tax benefit for intra-family property transfers where a child or grandchild does not use the property as their principal residence. 75% of new revenue from the proposition would be used to reimburse counties to offset other tax losses from the proposition, and fund fire suppression services.
In brief, because Proposition 19 passed, it should now be easier for qualified individuals to move their homes around within California, but more costly for owners to pass homes to their children, if those children will not be living in that home.
Proposition 21 - Costa Hawkins Repeal (Defeated)
Proposition 21 would have almost completely rewritten the Costa-Hawkins Rental Housing Act, which permits landlords to set the rental value for single family homes, or when other residential units are vacated. Costa-Hawkins has been a major limitation on the authority of local rent control laws, and Proposition 21 would have narrowed the single family rent control exemption to owners with no more than 2 houses in California, and limited rent increases for vacant units to 15%, regardless of how much rent the prior tenant was paying. Because Proposition 21 was defeated, landlords will retain strong control over the rental values of single family homes, and will be able to set rents to market rates when tenants voluntarily vacate, or are evicted for cause.
Measure Z, City of Alameda – Housing Density (Defeated)
“Shall the measure amending the City Charter to repeal the prohibition against the building of multi-family housing in Alameda and amending the City Charter and the General Plan to repeal the citywide density limitation of one housing unit per 2,000 square feet of land be adopted?”
Measure Z would have loosened the housing density limits imposed by the charter for the City of Alameda. Although supported by local officials, including the mayor, because Measure Z failed, construction of multi-family homes will continue to be prohibited within the City of Alameda.
Measure MM, City of Berkeley – Strengthening Rent and Eviction Controls (Passed)
“Shall the measure amending the Rent Stabilization and Eviction for Good Cause Ordinance to: prohibit eviction of qualifying tenants for nonpayment of rent during state or local emergencies; authorize the Rent Stabilization Board to set registration fees for certain partially exempt units; and limit the Accessory Dwelling Unit exemption to owner-occupied properties with a single-family home and one accessory unit be adopted?”
Measure MM starts with some legislative housekeeping by clarifying and codifying that tenants cannot be evicted for withholding rent when such withholding is authorized by urgency legislation in response to an emergency. Measure MM also clarifies that the effects of urgency legislation are not limited in effect only to the time of a declared emergency, but can continue after the emergency is over.
Measure MM goes on to require single-family home rental properties to register with the rent board, but does not impose a rent ceiling upon those units. However, single family homes which had an owner-occupant for at least 365 days, who then rents the property for 24 months or less, shall not be required to register at all. This means that owner-occupants can rent their own homes for short periods without bothering to register so long as they do so infrequently and always return to reoccupy. Still, in either case, single-family homes remain exempt from rent control, even if registration with the rent board is required.
In addition, Measure MM rolls back an exemption to rent control recently created in 2018 by Measure Q, which exempted any owner-occupied property with accessory dwelling units (ADUs) from rent control. Measure MM now limits that exemption only to owner-occupied single-family homes with a single ADU, meaning that duplexes, triplexes, or any other owner-occupied multi-family housing with ADUs will not be exempt from rent control. Similarly, constructing multiple ADUs next to a single family home will also destroy the exemption for the whole property.
Any Berkeley property owner who was previously claiming rental property as exempt from rent control should immediately evaluate whether they are now obligated to register with the rent board and establish a new rent ceiling.
© 2020 by Fried & Williams LLP. All Rights Reserved. The information contained in this article is general in nature. For advice on any particular matter, please consult with our attorneys because the facts of your situation may be unique and the law changes from time to time