The Impact of Midterm Election Results on Real Estate
On Tuesday, November 6th, voters rejected two ballot initiatives that impacted real estate in Silicon Valley and beyond. Here is a look at the two propositions and what the “nay” vote means moving forward for the Bay Area housing market and homeowners living from Los Altos to Aptos.
Prop 5, known as the Property Tax Transfer Initiative, suggested amending the 40-year-old Proposition 13 “to allow homebuyers who are age 55 or older or severely disabled to transfer their tax assessments, with a possible adjustment, from their prior home to their new home, no matter (a) the new home’s market value; (b) the new home’s location in the state; or (c) the buyer’s number of moves.”
In 1986, voters passed Proposition 60, which amended Prop 13, allowing homeowners 55 years or over to transfer their property tax basis of their current home to a replacement home of equal or lesser value. The home was required to be located within the same county, and purchased within two years of selling the original home.
Proposition 13 was revised again in 1988 when voters passed Proposition 90. This initiative allowed eligible homeowners age 55 or older to transfer the property tax basis of their original home to a replacement home in one of nine participating counties in California.
The thought behind the current initiative was to make homeowners’ property tax basis even more portable than allowed by Props 60 and 90, opening it up to homes in all counties, at any price, and allowing homeowners to transfer their property tax value any number of times. The belief was that this would incentivize longterm residents and empty-nesters to downsize, making their larger homes available for younger families and making more wiggle room in California’s tight housing market.
Proposition 5 didn’t resonate with California voters and it was rejected by a 59% to 41% vote.
Rent control advocates stated this ballot measure would be a piece of the puzzle needed to solve California’s housing crisis by proposing to revoke the Costa-Hawkins Rental Housing Act. Revocation of the Act would allow cities to impose rental control and “Vacancy controls” on single family homes, condos, and housing built after 1995, both of which are currently prohibited by Costa-Hawkins.
This initiative was opposed 62% to 38%. Opponents believed that Prop 10 would have an even more adverse effect on housing by depressing the rental market and discouraging investors to build more rental units. This sentiment was echoed by the 2/3 rejection of the ballot measure by midterm election voters.
The defeat of Proposition 10 was louted by the Sacramento Bee as the “biggest win for the California real estate industry in 20 years” but the rent control war is far from over. There was strong support for Prop 10 from the Bay Area to Los Angeles County and there are already whispers of local measures being placed on the 2020 ballot.
Renters typically make up 30% of the voting population with 50% actually voting. This group tends to be less moved to vote than homeowners but their dynamic is in flux. Seen as a distinct voting collation, they have significant potential to impact future elections should they decide to come out in force to make their unique housing needs known.