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DS News December 2020

DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.

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19 Journal AFFORDABLE HOUSING IMPACT: PROPERTY TAX STRUCK DOWN A referendum to change how California enacts property taxes, which some argued would address California's housing affordability issues, was defeated by the state's voters. Proposition 15 was designed to create a split-roll property tax system in California, with commercial properties being reassessed to market price every three years while residential property would continue to be taxed under 1978's Proposition 13. at Proposition restricts increases on assessments to no more than 2%. Owners with less than $3 million in total commercial property would be exempt from the initiative, scheduled to go into effect in 2020. Capital Public Radio in Sacramento forecast a voter rejection of Proposition 15 by a 52% to 48% margin. Supporters of Proposition 15 argued that increasing property taxes on commercial real estate would encourage the conversion of these properties into residential developments, thus alleviating the state's chronic housing affordability problems. Research by the Urban Institute determined that many commercial parcels in four major markets—Berkeley, Chula Vista, Fresno, and Los Angeles—were eligible to be converted from commercial or industrial use into homes. e Urban Institute study, lead-authored by Urban Institute Housing Finance Policy Center research analyst Sarah Strochak, concluded that "long-term incentives for owners and developers to build/convert to residential uses are much stronger than for municipalities to rezone under medium and high price appreciation scenarios." Furthermore, supporters of Proposition 15 argued that higher commercial property taxes could help fund public services, raising between $10.3 billion to $12.6 billion annually. e trade journal EdSource predicted that 40% of those funds would be used to finance operations at K-12 schools and California's community colleges. California Gov. Gavin Newsom and President-Elect Joe Biden supported Proposition 15 and the Chan Zuckerberg Initiative, the philanthropic organization funded by Facebook CEO Mark Zuckerberg and his wife, Dr. Priscilla Chan, donated $7.1 million to the campaign that promoted the referendum. However, commercial property owners were opposed to Proposition 15, arguing that it would force businesses to leave California. In contrast, companies that remained would have to pay higher leases and other real estate-related costs, including insurance and maintenance fees. e San Francisco Examiner reported opponents to the measure raised $30 million to sway voters. "It would punish everybody that owns real estate and every tenant that has to occupy real estate," said John Kilroy, CEO of Kilroy Realty Corp. in Los Angeles, at a trade conference in September. "It would be one of the most insidious taxes, particularly at a time of great economic uncertainty and recession."

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