Three Real Estate Initiatives on the California Ballot in 2020

In addition to the presidential, congressional and local elections this year, California voters will decide the fate of twelve state propositions, including three directly related to real estate.

Proposition 15 (Split Roll Initiative)

In 1978, California voters approved Proposition 13, which effectively assessed the value of all real properties at their 1976 value and restricted annual increases of assessed value to an inflation factor, not to exceed 2% per year. Proposition 13 further prohibits reassessment of a new base year value except in cases of (a) change in ownership, or (b) completion of new construction.

Proposition 15 would establish a “split roll,” distinguishing, for purposes of taxation, commercial real estate asset classes (with some exceptions) from all residential real estate asset classes (including single family and multifamily). Property used for both commercial and residential purposes will be reassessed proportional to its commercial use.

Basically, a “Yes” vote on Proposition 15 would require that commercial property be reassessed according to market value beginning in FY 2023 and every three years hereafter. 

Proposition 19 (Property Tax Breaks)

Currently, California homeowners age 55 and over, are permitted to to transfer their tax assessments within counties and to homes of equal or lesser market value. Additionally, the number of times that persons over 55 years old or with severe disabilities can transfer their existing tax assessments is one.

The California constitution also allows the existing tax assessments on inherited homes, including those not used as principal residences, to be transferred from parent to child or grandparent to grandchild.

Basically, a “Yes” vote on Proposition 19 would do the following:

Allow eligible homeowners to transfer their tax assessments anywhere within the state (not just the county) and allow tax assessments to be transferred to a more expensive home (not just cheaper ones) with an upward adjustment.

Increase the number of times that persons over 55 years old or with severe disabilities can transfer their tax assessments from one to three.

Require that inherited homes that are not used as principal residences, such as second homes or rentals, be reassessed at market value when transferred.

Allocate additional revenue or net savings resulting from the ballot measure to wildfire agencies and counties. 

Proposition 21 (The Rent Affordability Act)

In 1995, California state lawmakers passed the Costa-Hawkins Rental Housing Act to curb the power of cities and counties to enact their own rent control policies. Specifically, the Costa-Hawkins Act exempted properties built after February 1, 1995 from rent control. The act further exempted single-family homes and condominiums from local rent control polices. Lastly, Costa-Hawkins prohibits “vacancy control”, which restricts an owner’s ability to raise rents on new tenants.

If passed, Proposition 21 would do the following:

a) Allow local rent control measures to encompass properties built after February 1, 1995.

b) Allow cities and counties to implement rent control measures on single-family homes and condominiums (individuals who own no more than two homes would be exempt).

c) Limit an owner’s ability to raise rent on new tenants.